Choosing a path: Your options in Medicare coverage.
So you've enrolled in Medicare Part A (hospital coverage) and Part B (medical coverage.) But there is still work to be done!
Before we move ahead, it is important to understand what Parts A and B cover, and what they do not. For example, Parts A and B (also called "Original Medicare") do not cover prescription drugs. Plus, there are hospital and medical deductibles you will have to pay before coverage begins. Original Medicare only covers 80% of your Part B costs, so you will have to cover the remaining 20%. And it's very important to note that Original Medicare does not have an "out of pocket maximum," meaning there is no limit to your financial liability if you have a health emergency and your costs exceed the thresholds of what Original Medicare will cover.
For these reasons and more, many Medicare-eligible individuals choose to augment with extra coverage that either 1) supplements Original Medicare via an insurance policy that will cover the costs that Original Medicare does not, or 2) replaces their Original Medicare coverage with a Medicare Advantage plan (offered specifically to Medicare beneficiaries by private insurance companies under contract with the Federal Government.) Medicare Advantage plans are also called "Medicare Part C."
You cannot choose both a supplement insurance policy and a Medicare Advantage plan. They don't work together, so your choice regarding how to proceed is an "either/or" proposition. And there are fundamental differences in how they work.
Medicare Supplement Insurance: A closer look
Supplement policies are available based on the state where you live, and fill in the gaps left by Original Medicare. For this reason, they are often called "Medigap" policies. These policies pay your Part A deductibles, and the 20% not covered by Original Medicare. Supplement policies in Minnesota can come in a range of premium costs, but by law they offer the same benefits regardless of which insurance company you choose. You can, in most cases, expect to spend around $200 per month for your supplement.
There are some restrictions and limitations with supplement policies. First off, outside of your initial period of eligibility (which is the six months after you enroll in Medicare Part B), you will usually have to go through medical underwriting in order to enroll. Additionally, your supplement is designed to help alleviate financial surprises in case of sickness or medical emergency, without a focus on prevention or extra services. So things like vision, dental, hearing aids and wellness programs are not covered.
One important characteristic of supplement policies is that there are few restrictions on which doctors, hospitals and specialists a patient may visit. Generally speaking, you will receive your policy benefits regardless of where you go for care, so long as the provider you see accepts Medicare. Additionally, while your premiums might change each year, your benefits will stay the same for as long as you have your policy.
Importantly, Medicare supplement policies do not include prescription drug coverage. If you choose to enhance your Original Medicare with a supplement, you will need to enroll in a stand-alone prescription drug plan as well. The average premium for a drug plan in Minnesota is around $30.
Medicare Advantage plans (Part C)—Managed care.
Unlike Supplement policies, Medicare Advantage plans cover many preventative and whole-body wellness services in addition to coverage for sickness and injury. The underlying principle of managed care is that you will take care of yourself if you have coverage to do so, and as a result your medical bills will be lower in the long run. Managed care is the foundation of Medicare Advantage plans.
Medicare Advantage plans are available to you based on the county where you live, and operate under contract with the Federal government to take over your Medicare coverage. Medicare Advantage plans are required by law to provide you at least the same level of coverage as you would have with Original Medicare, plus many offer additional wellness services such as vision, dental, hearing, and general fitness.
Medicare Advantage plans also include prescription drug coverage, all under one monthly premium, and those premiums are significantly lower than Supplement policies. Some counties even have $0 premium plan options available. But unlike Medicare supplement policies, you will have some out-of-pocket cost sharing with a Medicare Advantage plan. You will sometimes pay a flat copay or a percentage of the cost, depending on what type of service you receive. Medicare Advantage plans offer the security of annual “out of pocket maximums” so that you know your financial worst-case scenario should something unexpected happen with your health. There is no medical qualifying for Medicare Advantage plans, regardless of when you enroll.
Which one is right for you?
In summary, Medicare supplement policies and Medicare Advantage plans do not work together. You must choose one or the other type of plan to fill in the coverage gaps left by Original Medicare. But there is no "one right answer" for every person. In order to choose, you'll want to determine how important all of the following considerations are to you:
Cost predictability: Although they have higher premiums, Medicare supplement insurance policies generally cover the costs your Original Medicare does not. What you pay for healthcare, therefore, is almost completely in premium payments, which are more predictable and easy to budget. Medicare Advantage plans have lower premiums, but you will experience some level of cost sharing, which will vary based on the plan you choose. (Medicare Advantage plans have "out of pocket maximums" so you can understand your annual financial liability in the worst case scenario.) NOTE: whether you enroll in a supplement or a Medicare Advantage plan, you will continue to pay your Medicare Part B premium, usually out of your Social Security benefit.
Extra benefits: Supplement policies do not cover extra benefits. In order to get them, you'll have to buy separate policies or memberships and take on those extra monthly costs. Medicare Advantage plans offer extra benefits for things not covered under Original Medicare, such as dental and vision services coverage, plus hearing aids. They also include gym memberships, wellness services and even "Over the Counter" benefits.
Freedom: Supplements offer a great deal of freedom in choosing doctors and hospitals, and do not require you to seek care within a network. Medicare Advantage plans streamline health care under one umbrella of providers who can manage your total health, but provide less flexibility in choosing where that care is received.
Drug coverage: Medicare supplement policies do not include prescription drug coverage, which must be purchased as a separate policy and at an additional premium. Medicare Advantage plans usually include prescription drug coverage.
Qualifying: Supplement policies require medical underwriting unless you purchase them during a limited period when you are first eligible. Medicare Advantage plans do not require any medical qualifying.
Benefit consistency: Medicare supplement premiums may and likely will change at the start of each year, but policy benefits do not. Medicare Advantage plans may have changes in both premiums and benefits every year.
In conclusion, deciding whether to add a supplement policy or to enroll in a Medicare Advantage plan instead is a very personal decision. There is no "right" answer. Talking to a licensed, independent insurance agent who specializes in Medicare can be helpful as you assess the advantages of each type of coverage within the framework of your own needs. And then, after you choose a path, they can help you find a plan. Best of all, their services are offered at no cost to you. Time to choose your path!