Question from Alex: I’m turning 65 in June and going on Medicare Parts A and B. I understand that I also need to make a choice between a Supplement and Advantage Plan. What are the fundamental differences between the two that influence people to choose one over the other?

Answer: Before I begin, let me be very clear that nothing is more important to someone who’s going on Medicare for the first time than to get an honest, unbiased answer to this question and understand all the facts, differences, pros and cons, risks and rewards of Supplements versus Advantage Plans. 

Cost

Of course, everyone wants to know what each cost, which can often be the determining factor. Supplements are more expensive; Plan N, which we recommend most, now starts at $85 to $95/month for a 65-year-old, and all letter plans increase over time. Supplements aren’t always affordable, especially for those in their 70s, 80s, or 90s when rates become substantially higher. Advantage Plans, meanwhile, start at $0 and the most popular in Western Pennsylvania have an average premium in $25 per month range. Even when Supplements are affordable, many people who are healthy, and are betting they stay that way, see an opportunity to save a significant amount of money on premiums by going with an Advantage Plan. 

Out of pocket medical expenses

Remaining somewhat healthy is the key with Advantage Plans because they expose those who need more expensive care to thousands of dollars in bills each year.  The reason Supplements cost more is the exposure to bills is negligible. Plan N, which I quoted, has only three potential out of pocket costs for medical care: an annual $283 part B deductible, $20 for a physician’s office visit, and $50 at the Emergency Room. That’s it.  I usually use a diagnosis of cancer as an example to compare Supplements and Advantage Plans. Cancer patients may need scans and biopsies; a surgery or surgeries; chemo, radiation, or both; along with follow ups scans and/or biopsies. People on Supplement Plan N would not pay one penny in bills for any of those services once their deductible had been met. Those in the same situation who have Advantage Plans would almost certainly meet what is known as their annual Maximum Out of Pocket (MOOP), which now range from $4,000 to $9,250 on Western PA plans. The peace of mind knowing Supplements have very little out of pocket expense is one reason people choose them.

Extra benefits exclusive to Advantage Plans

A major contributor to the rising popularity of Advantage Plans over the past five years is the inclusion of ancillary benefits, or “extras” they provide that Original Medicare and Supplements do not. These can include thousands of dollars per year worth of goods and services such as comprehensive dental coverage, vision benefits, gym memberships, quarterly allowances to purchase over the counter (OTC) products, and more. 

Limited window to enroll in Supplements

Maybe the most important difference to be aware of, and one that absolutely needs to be considered, is that your initial choice of an Advantage Plan can be permanent. That’s because Supplement companies are only required to accept everyone who applies, regardless of their current health or prior medical history, within 6 months of going on Part B for the first time. This means that Alex has until the end of November to choose a Supplement without being discriminated against for his medical history. After November, to get one, he would have to go through, and pass, what is known as “Medical Underwriting.” This is the process where Supplement or life insurance companies review one’s current or previous medical history and conditions to determine if they want to issue them a policy. Those they consider a risk, are denied. It is especially important that people going on Medicare for the first time with pre-existing conditions understand this. In my experience, when this is explained to those who have diabetes with neuropathy or retinopathy, heart disease, auto immune disorders, Myeloma or Lymphoma, among other chronic conditions or diseases, they almost always choose a Supplement. Unfortunately, the time restrictions on getting a Supplement with no questions asked, and even the entire option of choosing one, often goes unexplained by Advantage Plan insurance companies or other Medicare agents. Although there is no regulation forcing companies or agents to provide both choices and disclose the limited window of buying a Supplement, in my opinion it’s a dereliction of duty not to. 

Here's an important related fact: Those who choose Supplements first can always move back to an Advantage Plan in the future because federal regulations don’t allow those companies to deny anyone with Medicare Parts A and B who applies. 

How claims are paid and care authorized

Other very important considerations that also may not be disclosed are the differences in how claims are approved and paid. With Supplements, Medicare is the primary insurer. They’re in charge and let the treating physicians make the determination of what is medically necessary. This means if your doctor orders an MRI, CT scan, or surgery for example, you can get those immediately without waiting for an insurance company to approve it. Medicare will then pay their share of the bill and coordinate with the Supplement company, who per regulation, has no choice but to reimburse the medical provider for the balance in a timely manner. This is personally my number one favorite thing about Supplements. When clients learn about it and discover Advantage Plans are not required to operate in the same way; that MRIs, CT scans, surgeries, physical therapy, injection and infusion therapy, as well as other services need prior authorizations by the insurance company, causing delays in getting care, this is most often when many make their mind up to go with a Supplement. 

One last item of importance is how access to doctors and hospitals differs between Supplements and Advantage Plans. Those with Supplements can use any provider in the country that accepts Medicare Assignment, which is basically every full-service hospital and virtually all doctors. Advantage Plans have networks that are generally regional and limit or eliminate access to providers outside of the region or state. In Western PA, although there is one company who offers a few select plans with a national network, many only offer local networks and may not provide access to both of our largest health care providers, UPMC and AHN. 

Don’t go it alone!

I’d like to remind everyone that the goal of this column and all others is to educate and provide general information. They are not meant as a substitute for an appointment with me or one of the other experienced and licensed agents of The Health Insurance Store. There is more to consider than what I highlighted today. Once people have a general understanding of the ins and outs of Medicare, Supplements, and Advantage Plans, there is still the task of choosing the right company and plan(s). This is very difficult to do on your own. Those we meet who have gone solo and purchased a plan online or directly through a company almost never get it right, often costing themselves thousands upon thousands of dollars. 

If you have any questions regarding this column or would like to make an appointment for a no cost consultation, give the office a call, 724-603-3403, or feel free to email me personally, Aaron@GetYourBestPlan.com.