This week’s questions from John
Aaron, can you explain to me the difference between a Supplement and an Advantage Plan? I just met with a broker who told me they both do the same thing. Reading your last article makes me question that statement. Also, how do I reach out to your company to set up a meeting with you?
Answer
Bad Agent Advice
Although I’m extremely disappointed a licensed agent would tell a Medicare beneficiary something so egregiously false, unfortunately it doesn’t surprise me. The Medicare insurance business is becoming increasingly crowded due to the huge number of people already on Medicare as well as the approximately 10,0000 per day who are applying for the first time. Commissions are also very generous, especially when it comes to Advantage Plans.
Many larger agencies’ strategy is to bring as many agents on board as possible, put them out on the street, and hope they sell a few policies. If they have 200 or more agents signing up 20 people a year, that works, and they may not care what types of plans are being sold or what seniors are being told to get those applications. The agency may help new agents pass their state exam, get their license and appointments, but often don’t train them. An agent who didn’t have what I consider to be the most important knowledge, the difference between Supplements and Advantage Plans, necessary to advise someone on Medicare properly, obviously had no training, or lied, and should not be selling insurance.
The Industry Can Be Greedy
That’s not the way we do things at The Heatlh Insurance Store. Industry wide, almost all health and Medicare agents are self-employed and work on a 1099 basis. Not ours. We pay them a salary to ensure they’re accountable for taking care of all current and prospective clients up to my expectations, as we’ve done since the doors opened in 2008. In addition, we choose new agents very carefully, don’t hire more than we have the business for, and prefer to promote from within, allowing our administrative staff the first opportunity to take any opening. And we have an extensive training process. It takes a minimum of six months for agents to study for and pass the state exam, receive one on one training, sit in on at least 25 to 50 appointments with a seasoned agent, and then conduct 5 to 10 appointments while being observed by myself or our or longest tenured agents before we allow them to consult current or potential clients on their own. All appointments take place in our offices, which allows agents to lean on colleagues who have combined for decades of experience with health and Medicare insurance, in case questions arise they’re not 100% sure how to answer. If you choose to utilize the no cost services we offer, sound and honest advice as well as a commitment to providing the best possible customer service experience are assured.
Advantage Plans vs Supplements
Now on to the differences between Advantage Plans and Supplements.
Supplements, aka Medigap, are secondary insurance and designed to cover the “gaps’ in Medicare, namely the $1,556 Part A hospital deductible and the 20% of Part B services. Those with Supplements pay little or no medical bills for Medicare covered services. Because they provide such comprehensive coverage, they’re generally more expensive than Advantage Plans and start at $75 to $85 per month for a 65-year-old. They don’t come with prescription coverage so that needs to be added at a cost of $7 to $25 per month. Supplements get more expensive as one ages and those who live into their 90’s may have premiums upwards of $300/month or more.
Medicare Advantage Plans (MA), aka Part C, are NOT secondary to Medicare. They pay in place of Medicare. Instead of Medicare paying a portion of a beneficiary’s medical bills, what they do is pay an approved private insurance company about $10,000 per year to take on the burden of becoming that person’s one and only insurance company, providing them with a benefit package, and paying all claims minus the insured’s cost sharing. Because MA companies are receiving $10,000/year from a third party, in this case the federal government, they’re less expensive. Plans we recommend our clients consider cost from $0 to just under $40 per month and include Part D prescription coverage. Those on Advantage Plans are subject to co-pays or coinsurance for virtually all services. For example, co-pays for bloodwork, X-rays, specialist visits, and the emergency room run on average from $10 to $90, respectively. Outpatient surgeries, MRI’s, CT scans, and ambulance rides from $175 to $300. Hospitalizations range from $250 to $1,800. Chemo, radiation, other infused or injected drugs, and Skilled Nursing can result in paying up to what is known as one’s annual Maximum Out of Pocket (MOOP) between $4,000 and $7,550, depending on the plan. The MOOP represents the most money one can be billed annually, not including prescription expenses.
Medicare Advantage Plans are federally regulated to cover everything Original Medicare A and B does, and as good or better than Original Medicare. Again, what one is billed for those services is the difference between MA and Supplements. Another, however, is how services and claims are approved. Supplement insurance companies have zero say in what’s covered and paid for. That’s up to Medicare, who allows the patient’s treating physician to decide what’s medically necessary, which is the best thing about Supplements in my opinion. No prior authorizations are necessary, which means If your doctor wants an MRI or surgery performed, they can be done that same day. If he or she wants a patient to stay an extra day or two in the hospital, it happens without any interference from an insurance company. That’s not the case with MA plans. Authorizations or approvals are necessary to get an MRI, CT scan, outpatient surgery, home health care, Skilled Nursing, among other services. Many people have been through situations where they’ve been told they can’t get an MRI or CT scan until they’ve had physical or injection therapy first. Patients can also be told their insurance company isn’t going to pay for additional days in the hospital. Is it common? No. Does it happen? Absolutely. In fact, there was an article in the April 28th edition of the New York Times about the concerning number of denials of medical services by MA companies. I need to add that in the event this happens to our clients, we get involved and rarely have an appeal denied when we put on our advocate hat.
Yet another variable of the two types of Medicare plans is access to doctors and hospitals. Supplements allow utilization of almost every doctor and every full-service non-VA hospital in the country at no additional cost. MA Plans are either HMOs or PPOs, and except for a small handful, have local networks. HMO plans will not pay for services, with the exception of emergencies, at an out of network doctor or facility. You can use out of network providers with a PPO. However, they are not required to accept the plan, apart from an emergency, and the cost of using out of network services can cost literally thousands to tens of thousands more than those provided in network.
Why Choose an Advantage Plan?
Some folks, at this point, may be wondering why anyone would choose an Advantage Plan. It’s the value they offer in terms of premiums compared to Supplements, plus all the extras, known as ancillary benefits. People find that dealing with a couple of the cons or risks of MA plans are worth taking. In fact, 50% of all those on Medicare plans, around 30 million, have MA Plans. Wisely chosen plans, every calendar year, provide as much as: $3,000 in comprehensive dental that covers cleanings, X-rays, fillings, periodontal, crowns, root canals, and even dentures; $5,000 for hearing aids; $400 a year for glasses; $480 in Over-the-Counter (OTC) allowances for the purchase of everyday items such as vitamins, pain relievers, cough, cold, and flu remedies, and pretty much anything you can walk into a drug store or grocery store and buy off the shelf; $400 on a pre-paid debit card that can be used to pay co-pays for many services; a free gym membership; and more. It is amazing just how generous these benefits have become in the last few years. I estimate those who receive just a minimum amount of dental benefits, go to the gym, and maximize the other benefits listed above are getting approximately $1,800 per year in goods and services. Add that to the savings in premiums versus a Supplement and it’s not a mystery why 50% of people on Medicare choose Advantage Plans. Please be advised that not all plans provide all these services or as much dollar amount.
One other important fact. Supplements are regulated to keep benefits the same as long as the policy remains in effect. The plan we recommend most is N and the only three bills one can ever receive for Medicare covered services is an annual, one-time deductible of $233, $20 for a physician’s office visit- be that with a PCP or specialist, and $50 for a trip to the Emergency Room. Those co-pays can never be increased, nor can there ever be any new co-pays introduced. The only thing that can be changed is the deductible, which is set by Medicare. It increases, on average, by about $10 per year.
Advantage Plans can change benefits year to year. However, with the increased reimbursement MA companies have received in the past few years, the changes for the most part have been positive. Premiums have actually decreased on the most popular plans, co-pays have been reduced, and the free stuff, as I like to call ancillary benefits, has become amazingly good as I already mentioned. However, if reimbursement levels are returned to those of five years ago, it’s almost a certainty we will see the generous dental, vision, and OTC benefits reduced or eliminated. It’s also likely premiums and co-pays will go back to previous levels before the boom in payments to the insurance companies.
Which brings us to the biggest risk of Advantage Plans. Once enrolled, it may become impossible or unaffordable to move to a Supplement. That’s because Supplements can discriminate on who they accept a year after one’s 65th birthday or six months past an original Part B effective date. Unlike the ACA (Obamacare) plans, Supplements can deny an application based on current or previous health conditions. Advantage Plans, on the other hand, are required to accept everyone who has Medicare Parts A and B. That means one can always go from Supplement to MA, but not necessarily vice versa.
Thank you!
If you have any questions or concerns regarding this column topic, or would like to make an appointment for a no-cost consultation, please feel free to give us a call – we would be happy to help. I’d like to remind everyone that I do a live call-in talk show called Medicare A to Z every 1st and 3rd Monday of the month on WMBS Uniontown, 590AM and 101.1FM, from 1 to 3 PM. You can listen in on their website, wmbs590.com.
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We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.