Which is Right for You?
- Why it’s important to know your Medicare plan options
- An overview of Medicare Advantage Plans (“MAP”) – Bundled Plans
- An overview of Medicare Supplement Plans (“MSP”) – A La Carte
- Comparing the differences in the plans
First a Note About Investments
But first, a quick note regarding investments given recent market volatility. Both the Nasdaq (-12% from the peak on September 2nd) and S&P (-9% from the peak on September 2nd) are reaching into correction territory and bond yields are doing absolutely nothing (10yr Treasury is at 0.67%). This week we trimmed back our core holdings to within targets and we have increased our allocation to utilities and gold. We believe that both these changes to the portfolio should help stabilize risk adjusted returns on your portfolio.
Now… Onto Medicare
Whether you are eligible for Medicare and trying to decide which Medicare plans are right for you, or you are already enrolled in a Medicare plan but not sure if it is the best choice, it is important to understand the plans available and the pros and cons of each. A perfect example is understanding the differences between Medicare Supplement Plans (MSPs) and Medicare Advantage Plans (MAPs). Plans change every year and the plan that you started with may not be addressing your current needs. But it is hard to compare plans, and you want to make sure you are comparing apples to apples.
At a high level, Medicare Advantage plans are bundled plans; while MSPs, or Medigap plans as they are also known, are comprised of a number of plans that need to be purchased individually to create a coverage option that best suits your needs (i.e. MSPs take an a la carte approach to selecting your Medicare coverage). Additionally, if you have TRIcare there are specific MSPs that cover expenses which TRIcare will not cover, help with the deductibles, and limit total out of pocket expenses.
Medicare Advantage Plans (“MAP”) – Bundled Plans
Medicare Advantage Plans, sometimes called “Part C” are an all-in-one alternative to Original Medicare. They are offered by private companies approved by Medicare. These bundled plans include Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance), and usually Medicare prescription drug (Part D). Medicare Advantage plans cover all of Medicare services plus offer additional benefits such as vision, hearing and dental coverage for additional cost.
To be clear you will still have to pay for Parts A and B however the benefits are paid by the insurance company not the government plan. Think of it like an all in one bundle. Medicare pays a fixed amount for your care each month to the private insurance company which in turn manages the payments for care. Each plan can charge different out-of-pocket costs. Medicare Advantage plans are structured as in-network or out-of-network, very similar to an HMO or PPO. If you are considering a Medicare Advantage plan, it is important to understand if your doctors are part of the network/service area of the plan. There have been times where specialists will go in/out of network.
What you pay in a MAP depends on several factors including types of coverage. We can help you understand how these factors apply to you and how they may affect the cost of the plan, as there are many options.
Medicare Supplement Plans (“MSP”) – A La Carte
MSPs, or Medigap policies, are insurance policies that help supplement Original Medicare. There are 10 different MSPs, each offering a different level of benefits. Like MAPS, they are also sold by private insurance companies. MSP policies can help pay for some of the remaining health care costs that Original Medicare doesn’t pay such as copayments, coinsurance, and deductibles. It is important to note that MSP policies generally do not cover long-term care (like non-skilled care you get in a nursing home), vision or dental care, hearing aids, eyeglasses, or private-duty nursing. In addition, you will need to purchase a prescription plan (Part D). Within Part D prescriptions can fall into different tiers like generic vs specialty and your copay can vary.
It is important to understand that although MSP benefits are standardized, the policy cost can be different as each insurance company sets the premiums for its MSP policies. The way insurance companies set the price affects how much you pay now and in the future. MSPs can be priced or “rated” in 3 ways: 1. Community-rated, 2. Issue-age-rated, or 3. Attained-age-rated. The best time to buy a MSP is during your Medigap Open Enrollment Period. This period lasts for 6 months and begins on the first day of the month in which you are, 65 or older and enrolled in Medicare Part B. You will generally get better prices and more choices at that time.
MSPs vs MAPs
It is important to note that you cannot have both an MSP and an MAP at the same time and therefore must choose a plan. Fundamentally, the difference can be summarized by understanding that MAPs are a way to get your Medicare benefits along with additional benefits, while an MSP provides benefits in addition to those you receive from Medicare.
The following chart displays the way each plan handles specific situations.
Medicare Advantage vs Medicare Supplement Comparison Chart
When making the decision on whether to choose a MAP vs. Original Medicare with a prescription drug plan (Part D) and an MSP, one should consider cost, coverage and availability. If cost and coverage are about the same make sure that availability of medical services fits your lifestyle. Here are some examples to consider:
- Mary lives in San Diego. She travels out of state several months to New York each year to visit her children and grandchildren. Medical services with a Medicare Advantage plan would only be covered as in network in the San Diego area. If she needs non-emergency medical care outside her network i.e. in New York, she may incur additional costs for out of network services. Although these costs are more, they are not astronomical. Since she intends on traveling frequently after COVID to visit her grandchildren, Original Medicare with an MSP and prescription drug plan may be a better choice for Mary.
- Tim lives in San Diego. He travels but no longer than 20 days at a time and maybe once or twice a year. He is looking to have a bundle solution that includes dental and hearing coverage. He also has a membership at the local gym that is covered by his Medicare Advantage plan. Having an all in one solution can lower cost and make it easier to navigate the benefits.
Give serious consideration to all of these factors when you decide whether to choose a MAP or Original Medicare with an MSP and prescription drug plan. Each year these plans change, your health will change and there are updates, for example United Healthcare has added Walgreens to the prescription plan.
If you are Medicare eligible, please note that annual enrollment starts October 15. We can help you review your plan and other plans available, so you can choose the plan that is right for you.