Ask the Medicare Specialist

Question from Heather: I have a friend who claims not only does he have a Medicare Advantage Plan for $0, but he also gets a sizeable portion of his Medicare Part B premium refunded to him. How is that possible? If it's true, should I be on one of those plans?

Answer: There are indeed plans that have no premium and also provide a Part B premium reduction, sometimes referred to as a "Part B Giveback."

How is it possible? Once enrolled in an Advantage Plan, instead of paying any portion of the costs for covered Part A and B services, Medicare actually pays an approved health insurance company around $12,000 per year for each person they enroll. In turn the insurance company agrees to take on the responsibility of providing a health insurance benefit package and paying all covered claims, minus the insured's agreed to out-of-pocket costs such as deductibles, co-pays, and coinsurance (a percentage of the entire billable amount).

The insurance companies don't need to charge any premium. They're making a profit from the $12,000 per enrollee they get from the Federal Government. The low premiums, "Social Security giveback," along with ancillary benefits or "extras" which can be generous and valuable, are enticements that attract new members. The combination of them has made HMOs and PPOs extremely popular.

However, in Western PA, the plans that offer the largest Part B refunds don't come with Part D prescription drug coverage. They're generally designed for people who can get "creditable" drug coverage elsewhere, most commonly through the VA or PACE. These plans work very well for these folks and save them over $1,000 per year in Part B premiums while offering some of the best medical and ancillary benefits packages on the Advantage Plan market. We often recommend them to Veterans who get all their meds through the VA and those who have Full PACE.

Let me be very clear here. If you don't have VA, PACE or another prescription insurance plan, DO NOT ENROLL IN ONE OF THESE PLANS WITHOUT DRUG COVERAGE BECAUSE YOU CURRENTLY TAKE GENERICS THAT COST JUST A FEW DOLLARS WITHOUT INSURANCE! It's a terrible mistake. Good Rx, Cost Plus, and $4 prescription programs aren't a substitute for Part D insurance! We've met too many people who thought they didn't need drug coverage and then were prescribed oral chemo or other medications that cost thousands of dollars per month and found themselves in an absolutely horrible situation, left to pay full price with no way to get an Advantage Plan or Part D that covers drugs until January 1st of the following year.

So, should Heather be on one of these plans? Not if she doesn't have PACE, VA, or another drug policy that is as good or better than Medicare's Part D benchmarks and considered "creditable."

There are a select few $0 premium plans that offer the "Social Security giveback" that do have Part D drug coverage. However, the out-of-pocket expenses can be drastically different. I'll never forget the client who called an 800-phone number she saw advertised on TV and got talked into one of these plans without getting any other details. Not long after enrolling she had a pacemaker replaced that would have cost her just $225 on the low-cost HMO we had advised her to choose. The plan she was convinced was better by a scoundrel in California had a 20% coinsurance for outpatient surgeries and her bill ended up over $5,000!

I'd like to add, Heather and others aren't always best on $0 premium Advantage Plans with drug coverage. In fact, we advise very few of our Advantage Plan clients who don't have PACE or VA to choose one because they often have co-pays for hospital stays that can be $1,000 to $2,000 for a stay of four to six days or longer. Plans with small premiums generally have a per stay hospital co-pay that are much less expensive and usually provide better overall.

I'd also like to remind everyone that no one should leave a Supplement for an Advantage Plan until they sit down with one of The Health Insurance Store's experienced agents and learn about all the differences. Lower premiums don't always result in lower overall out of pocket expenses and when one leaves a Supplement, it can be permanent.

I need to remind readers that the columns are not meant as a substitution for a one-on-one consultation with a licensed agent, nor are they written to sway your decision in enrolling in an Advantage Plan versus a Supplement or as an endorsement of any particular Advantage Plan or company.

If you have any questions regarding this column, any other Medicare related topic, or would like to set up an appointment, give us a call or email me personally. [email protected].