Differences between supplements and Advantage plans

Question from Diane: Even after following the Ask the Medicare Specialist Facebook Group for a couple of months, I'm still not sure I understand all the differences between Supplements and Advantage Plans. Can you explain it in more detail please?

Answer: There's nothing more important for people who are currently on Medicare, or those who are soon to be enrolling for the first time, than understanding all the differences between the two choices that limit the out of pocket costs associated with the gaps in Medicare; Supplements and Advantage Plans.

In order to make a wise decision, getting educated first on how Original Medicare Part A and B work on their own is extremely important.

Original Medicare Part A and B Coverage Explained

Medicare Part A, Hospital coverage, is provided at no cost. Part A pays all but $1,736 for any hospital stay that lasts from 1 to 60 days. Hospitalizations longer than 60 days result in a bill of $434 per day from days 61-90, and $868 per day from days 91-150.

Part B, Medical coverage, has a cost of $202.90/month and covers outpatient procedures and services such as: doctor visits; testing like blood work, MRIs and CT scans; Durable Medical Equipment such as oxygen, diabetic supplies, and wheelchairs; outpatient surgeries; chemotherapy, radiation or other infused and injected drugs; ambulance services; Emergency Room visits; etc. Part B pays 80% of the cost for these services, putting the Medicare beneficiary on the hook for the other 20%.

Original Medicare does not cover prescription drugs!

Supplements versus Advantage Plans; how they work with Medicare, differences, pros, and cons

Supplements are also known as Medigap policies, which is the perfect name because it describes exactly what they're designed to do, cover the "gaps" in Medicare; all the Part A hospital charges as well as the 20% Medicare Part B doesn't pay. Supplements are secondary to Medicare and those who have them show two cards at a doctor, hospital, or lab; their Original Medicare card as well as the one issued by the Supplement company.

Advantage Plans HMOs and PPOs are not secondary to Medicare! They're a choice people have to allow a private insurance company pay in place of Medicare. Those who choose an Advantage Plan do not show their red, white, and blue Original Medicare card at a doctor, hospital, or lab. In fact, it can be stored with other important documents because once an HMO or PPO Advantage Plan is chosen, Medicare no longer covers any medical services. Instead, Medicare pays the private insurance company one chooses (approximately $14,000 per year per person enrolled) to "take over," so to speak. In return, the insurance company becomes the sole entity responsible to provide benefits and pay all covered claims. This is why those on Advantage Plans show only the card issued from the company they chose at a doctor, hospital, or lab. Please be advised that choosing an Advantage Plan does not eliminate the $202.90 Medicare Part B premium. It is still required to be paid.

Premiums and Out of Pocket Medical Costs

Supplements are highly federally regulated to protect consumers and are labeled with letters A through N. There are only 9 choices in plans for anyone who turned 65 after January 1st 2020. The most popular plans, G and N, limit out of pocket medical costs to a bare minimum which makes them very simple and easy to understand. Because benefits never change over time, Supplements offer peace of mind knowing there can never be expensive medical bills both now and in the future.

Due to this great coverage with very limited out of pocket costs, premiums are more expensive. Plan N, which is the Supplement letter we recommend most, starts at $85 to $110 per month for a 65-year-old. G starts between $130 to $170/month. One of the negatives of Supplements is premiums increase with age and it's not uncommon for those 80 years or older to be paying $300 to $500/month.

One of the biggest attractions and benefits of Advantage Plans is they cost less, as little as $0 per month, with the most popular in Western Pennsylvania averaging around $25. Those who stay relatively healthy can literally save as much as $10,000 in premiums over a 5 to 10 year period. However, there is much more out of pocket exposure to medical bills, and almost all services have co-pays. Some are very small; $0 for a PCP office visit, $10 for blood work, $20 for an X-ray, and $30 for a specialist visit. MRIs, CT scans, and outpatient surgeries generally have co-pays from $150 to $300, while bills for hospitalizations, chemo, radiation, injection or infusion therapy, or a lengthy Skilled Nursing stay can be thousands of dollars. In comparison, all these services are no cost with Supplements G and N once a small deductible has been met.

Access to Doctors and Hospitals

Supplements, regardless of company that sells them, are good at any provider in the United States who accepts Medicare Assignment. Every full-service hospital in the country accepts Medicare as do virtually all physicians. So, not only do those who go the Supplement route get access to their local physicians and health systems, in the event of a rare disease or serious form of cancer, for example, treatment can be provided at world class facilities such as MD Anderson Cancer Center, Mayo Clinic, Cleveland Clinic, Johns Hopkins, and more. The freedom to use any doctor or hospital in the country at no additional cost is a benefit many people value and is almost a must for those who travel a lot or have second homes.

Advantage Plans HMOs and PPOs have networks that are usually regional and not all providers will be accessible. With HMOs, services will not be covered outside the network with the exception those provided at an Emergency Room. PPOs provide the opportunity to get care outside the network. However, out of network providers are under no obligation to accept PPOs and some, such as the Mayo Clinic, have a policy not to see patients who are out of network. If an out of network provider does agree to accept an Advantage Plan, with many PPOs there's a much higher cost, possibly thousands of dollars, for out of network care. In addition, networks can change and a trend that's happening throughout the county is health systems and doctors who were in network one year, may not be the following due to reimbursement disputes or insurance companies cancelling contracts.

How Medical Care is Approved and Paid

How care is approved and paid is much different between Supplements and Advantage Plans. It's something that isn't often discussed, but when explained, it's the number one reason people choose Supplements over Advantage Plans.

Supplement insurance companies have no say in what is covered nor can they deny or delay medical services. This is because Medicare is the primary insurer and "in charge." Medicare doesn't require prior authorizations to get testing, surgeries, or other procedures such as infusion or injection therapy. Medicare allows treating physicians to decide what is medically necessary for their patients, which allows care to be immediately accessed upon doctors' orders.

Advantage Plan insurance companies, on the other hand, require prior authorizations for MRIs, CT scans, surgeries, Physical Therapy, infusion or injection therapy. This causes delays in getting some types of care and although not very common, companies may deny claims or force the insured to get physical or injection therapy prior to approving MRIs, CT scans, or surgery, making wait times even longer.

Prescription Drug Coverage

Those who choose Supplements need to buy a separate policy for prescription drugs known as Stand Alone Part D. The plans that 90% of our Supplement clients have cost between $6 and $20 per month, however, some have premiums over $100. The lower cost plans all have a $615 deductible on Tier 3 through 5 drugs which can be burdensome.

Meanwhile, almost all Advantage Plans include Part D drug coverage with some plans providing a lower or $0 deductible for Tier 3 through 5 drugs which can be result in significant savings on the annual cost of prescriptions versus a Stand Alone Part D policy.

Dental and Vision coverage

Most Advantage Plans provide ancillary benefits or "extras," such as dental, vision, and hearing benefits, a free gym membership, and Over the Counter Allowances that can be very generous and valuable. The inclusion of these "extras" has been a huge factor in the growth and popularity of Advantage Plans over the last 5 to 6 years.

Neither Original Medicare nor Supplements offer any of the above ancillary benefits.

Risks

I don't consider there to be any risks with Supplements other than premiums will go up significantly over time. However, when and if a Supplement becomes unaffordable, one can always move to an Advantage Plan without restrictions. Changing from an Advantage Plan to a Supplement, on the other hand, might not be possible. This is because in most states the only time acceptance into a Supplement is guaranteed is when you're new to Medicare and the 6 to 12 months following the initial Medicare Part B effective date. After that, Supplements can discriminate on who they accept based on current and previous health and medical conditions.

Healthy people love Advantage Plans because they of the potential for large premium savings, the value of all the "extras," and common services like primary care visits, blood work, and generic medications cost little to nothing. However, when people get sick and receive expensive bills, or have care delayed waiting on authorizations, they often call us wanting to leave their HMO or PPO. The problem is when going through treatment, or after being diagnosed with a serious medical condition, it's virtually impossible to get approved for a Supplement. This is seldom explained by agents or Advantage Plan company representatives and is the biggest risk of choosing an HMO or PPO in my opinion.

In addition, benefits on Advantage Plans can change year to year. This means co-pays and other out of pocket costs can increase and the ancillary benefits, "extras," such as dental and OTC allowances can be reduced or eliminated.

Commissions

Supplement commissions are much less than Advantage Plans. To put it in perspective, if we sell a Supplement to a 65-year-old and he or she lives to be 90, we will be paid around $2,000 in total commissions. Meanwhile on an Advantage Plan, based on current commissions, that figure reaches almost $10,000. Unfortunately, this huge gap often encourages agents to push Advantage Plans almost exclusively and without explaining the risks. Many never even mention Supplements as an option or gloss them over as "only for sick people," which is simply false. Advantage Plans are a great choice for many, but not everyone.

Summary

I want to make it very clear that Advantage Plans are a crucial part of the country's Medicare program as a choice for seniors. We have over 4,000 clients on HMOs and PPOs. But people need to be aware of the risks and currently there are no regulations to ensure those are always disclosed.

Ask the Medicare Specialist and other content on the Facebook Group are not meant as a substitution for a consultation with one of our licensed and experienced agents at The Health Insurance Store. There is still much more to consider before making a decision than what I've covered here. After deciding which route you want to go, Supplement or Advantage, choosing the right company and plan is vital because one's initial decision can have ramifications that last a lifetime

In addition, once a client, you receive our outstanding services which include help correcting erroneous bills, support if there are ever claim delays or denials, assistance in finding cost savings for expensive prescription drugs or assistance if there's a medication not covered, and anything even remotely related to your policy.

With questions or to make an appointment for a no cost consultation give us a call, 724-603-3403 or email me personally, [email protected].