How to decide between
original Medicare or an Advantage plan
by
Phil Moeller | January 16, 2019
In his latest answer
to a reader question, columnist Phil Moeller takes on what might be the most
fundamental question about Medicare: How do you weight your Medicare plan
choices?
Moeller is the author
of Get What’s Yours
for Medicare: Maximize Your Coverage, Minimize Your Costs and
the co-author of the updated edition of The New York Times
bestseller How to Get
What’s Yours: The Revised Secrets to Maxing Out Your Social Security.
Got a question of
your own about Medicare or Social Security? Send it to askphil@considerable.com.
The biggest decision
Question: Which is more
advantageous for economic reasons: a Medicare Advantage plan or original
Medicare with supplemental plans?
Phil Moeller: This short question
gets to the heart of how you should choose the best Medicare coverage.
I hate answers that
provide six reasons in favor of Medicare
Advantage and six reasons in favor of Original
Medicare. I will give you reasons on both sides. But I think the
answer to this question increasingly favors Medicare Advantage, and its edge is
growing.
Here’s how my
thinking breaks down.
Staying original
Original Medicare,
along with a Part D
prescription drug plan and a Medicare
supplement plan (also known as Medigap), can expose you to the
smallest risk that you will have to dig deeply into your own pocket to pay for
your medical expenses.
The primary reason is
that the Medigap plans that you can buy will pay all of the covered expenses
that original Medicare does not pay (With Part B medical coverage, you’re
generally responsible for 20% of the costs.)
The up-front cost of
all this coverage—Original Medicare (Parts A and B), a Part D drug plan, and
Medigap—is much more expensive than a Medicare Advantage plan.
My wife and I, for
example, each pay more than $1,500 a year for our letter G Medigap plans. This
is on top of what we pay for Part B, whose standard premium in 2019 is $135.50 a
month, or about $1,625 a year.
We also pay for a
Part D drug plan. Those premiums vary a lot from plan to plan, but the national
average Part D premium is $33.19 a month, or nearly $400 a year.
Add it all up, and
I’m laying out more than $3,500 a year before I even file a claim.
If I do need medical
care, however, I will face little additional in the way of out-of-pocket costs
for covered care.
The most important
word in that last sentence is “covered.” Original Medicare does not cover most
dental, vision, or hearing needs. It also does not cover non-medical long-term
care expenses in your home or in a nursing home.
So even complete
coverage through Original Medicare plans does not pay for all of your health
needs.
The price advantage
Compared with my
$3,500 in premiums for my package of original Medicare policies, the typical
Medicare Advantage plan has a monthly premium of about $40 this year and
includes Part D coverage.
Add it all up, and I’m laying out more
than $3,500 a year before I even file a claim.
Further, nearly half
of all Medicare Advantage enrollees are in plans that charge no premium
whatsoever.
Many of these plans
also provide limited dental, vision, and hearing coverage, which original
Medicare is not allowed to cover. (I have a separate dental plan that charges
me about $750 a year in premiums.)
Plus Advantage plans
limit your out-of-pocket medical expenses to $6,700 in 2019 (Original Medicare
has no such cap.)
Why drugs don’t break
the tie
With Original
Medicare, if I take expensive drugs I could be on the hook for a lot of money,
even with a Part D plan.
People with Part D
coverage through a Medicare Advantage plan are in the same boat, so potential
drug costs really don’t come into play in comparing original Medicare and
Medicare Advantage.
What makes all the
difference
The giant difference
between original Medicare and Medicare Advantage is that people with original
Medicare can get care from any doctor or hospital in the country that accepts
Medicare.
Medicare Advantage
plans have provider networks and may deny coverage by providers outside the
network, or charge more for it. They also usually cover only care provided in
or near your home market.
With few medical
claims, you will come out ahead with Medicare Advantage plans. This may not be
the case for people with multiple chronic medical conditions who require lots
of care.
But even there,
someone who likes the doctors and hospitals in their Medicare Advantage plan’s
provider network might still come out ahead. For others with heavy health care
needs, the package of original Medicare will work better for them.
Why the balance is
shifting
If you are still
reading, you might recall that I said at the outset that the edge for Medicare
Advantage plans was growing. That’s because of new laws and
rules that permitted these plans to begin this year to cover
non-medical expenses.
With heavy health care needs, the
package of original Medicare will work better.
Examples include
transportation to medical appointments, a couple of weeks of meals delivered to
your home when you’ve recently been released from hospitals, and home safety
devices such as bathroom grab bars.
Few Medicare
Advantage plans are covering such non-medical items this year, but more will do
so in 2020 and beyond. Original Medicare is not allowed to cover these items
now, but of course this could change. Until it does, Medicare Advantage has,
well, an advantage.
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