Monday, April 8, 2013

Choosing Between Original Medicare and Medicare Advantage

Should I enroll in Original Medicare or should I choose a Medicare Advantage Plan?  As I reached age 65 I had to make that complicated decision. This post will discuss the reasons I decided to go with Original Medicare. 

I knew that I was blessed to have a choice. Before 1965 (when Medicare was enacted) a majority of American seniors had no health insurance. And those who were insured typically paid high premiums for limited coverage. Now, over 97% of Medicare eligible seniors have coverage. And whatever choice I made my health insurance costs were going to be substantially reduced because of Medicare. 

But, should I enroll in Original Medicare or choose a Medicare Advantage plan. These are two distinct pathways to coverage, and my initial choice might have long-lasting implications. 

Option 1: Original Medicare

With Original Medicare I get basic coverage for both inpatient (Part A) and outpatient and doctor (Part B) health care. In many ways it is wonderful coverage. I can go to any health provider that accepts Medicare – referrals are not required. 

But Original Medicare is not set up to pay for all of the cost of Medicare covered services. There are premiums and deductibles and co-payments that have been built into the system. 

For example, Part A has a $1,184 deductible (in 2013) if I become a hospital inpatient. And Part B services are subject to a 20% co-insurance requirement. I don’t want to have to pay that. And Original Medicare alone does not generally cover prescription drugs, routine eye and dental care, hearing aids, and long term care. 
Many people with Original Medicare purchase a supplement insurance (Medigap) policy and a Part D (drug) policy to help cover some of these uncovered expenses and services. Some add dental, vision, and/or long term care insurance. But they have to pay for that extra coverage. 

The costs vary with the policies they choose but just adding Medigap and drug coverage can easily cost hundreds of dollars each month. 

Option 2: A Medicare Advantage Plan 

Medicare Advantage Plans (sometimes referred to as Medicare Plan C) are an alternative to Original Medicare. They are offered by private insurance companies like United Health Care and Humana that contract with Medicare to provide Part A and Part B benefits. 

There are many different models of Medicare Advantage Plans including Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans. 

Advantage plans offer services that are at least equal to those offered by Original Medicare Parts A and B. Medicare services are covered through the Advantage Plan and aren't paid for under Original Medicare. 

In addition, Advantage Plans offer additional benefits, such as covering the Part B deductible and prescription drugs. Benefits may include dental, vision, and wellness programs. The benefits vary with the Plan and may change from year to year. 

In order to encourage the development of Advantage Plans, the government pays them more than it pays out for beneficiaries under Original Medicare. This means Advantage Plans can provide a combination of extra benefits and premiums at less out of pocket cost to beneficiaries than they would pay under Original Medicare. 

Advantage Plans also seek to control costs by providing “managed care” through a network of providers. While having your care “managed” can be helpful in some ways, these cost controls do have the effect of limiting beneficiary choices of services and providers.   
Why I Chose Original Medicare

When it came time, I chose to enroll in Original Medicare rather than a Medicare Advantage plan. Here are my reasons.

-        I know I am paying more for Original Medicare but it is worth it to me to avoid the various restrictions that an Advantage plan would impose. I want the freedom to go to any doctor I choose without having to ask permission. If I want to go to Johns Hopkins or the Mayo Clinic I don’t want to be told “no.”  Unlike Advantage Plans, Original Medicare does not restrict my choice of Medicare providers. 

-        I can always switch to a Medicare Advantage plan later, during the yearly annual enrollment periods. By law, Advantage plans have to accept me. But it is not so easy to go the other way – to switch from an Advantage plan to Original Medicare. While I could switch to Original Medicare Parts A and B without problem, it might be difficult to get a Medigap policy. When you first sign up for Medicare Part B there is a guaranteed enrollment period during which Medigap plans have to accept you without underwriting. Later there is no guarantee (unless you encounter a “trigger” event). So I might not be able to get Medigap insurance later, or the cost might be very high.    
-        My wife and I spend a lot of time visiting her 91 year old mother who lives out of state. If I need medical care during one of these visits, I would likely be “out of network” for my Pennsylvania based Advantage plan. I like the reassurance that no matter where I am in the US I can get medical care without having to worry about networks and such.

In choosing between Original Medicare and an Advantage Plan we need to evaluate our own individual circumstances and comfort levels. I’ve chosen to pay more to go with Original Medicare supplemented by Medigap and Plan D coverage because I can afford it and it is important to me to retain more choices and options. And I travel a lot. 

But this is not one size fits all. To make a good choice you need to understand the complicated differences between the options. It makes sense to get some help from an objective third party. 

Where to get Help

One source of that objective assistance is your State Health Insurance Assistance Program, or SHIP. This is a national program that offers one-on-one counseling and assistance to people with Medicare and their families. You can find a SHIP in your state at this link:

In Pennsylvania SHIP services are provided the APPRISE Health Insurance Counseling and Assistance Program which is administered by the Pennsylvania Department of Aging. Local counseling services are provided through local sponsorship in 52 Area Agencies on Aging. There are more than 400 APPRISE volunteers statewide who provide free counseling.   

The APPRISE Program operates a toll-free telephone system with call centers in 11 AAAs throughout the state.  The state-wide hot line number is 800-783-7067.   

In Pennsylvania you can also call or visit your local Area Agency on Aging to arrange for a one-on-one meeting with an APPRISE counselor in your community.

For More Information

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