Original Medicare or Medicare Advantage – Which is Right for You?
Author: Lane Keating
Medicare presents you with a mind-boggling array of decisions that could have serious repercussions on both your health and well-being and your finances.
There are no easy answers. Premium costs often depend on where you live, how old you are, and your sex. And because premiums are due every month, you have to select coverage you can comfortably afford.
Here are some things to consider when choosing coverage:
- How well does the plan you are considering cover the services you are likely to need?
- If you have employment-related coverage, be sure to talk to the benefits administrator to see how that coverage works with Medicare.
- Costs like premiums, deductibles, co-payments and more. Is there a yearly limit on what you could pay for out-of-pocket medical costs?
- Doctors and hospitals. Do your doctors accept the coverage you are considering? Do you have to select providers from a network? Do you need referrals for specialists?
- Prescription drugs. Will you need Part D or do you already have prescription coverage? What will your drugs cost under each plan? Are your drugs covered under the plan’s formulary?
- Quality of care. Have Medicare and other people with Medicare rated your health and drug plans for care and services. See the annual Medicare & You issued by the Federal Government for ratings.
- Convenience. Where are the doctor’s offices? What are the hours? Which pharmacies can you use? Is your local hospital in your network? Can you get your prescriptions by mail?
- Travel. Will the plan you choose cover you if you travel to another state or outside the US?
If you opt for original Medicare, you should seriously consider adding a Medicare Supplement Policy (Medigap) and Part D coverage if you take prescription drugs. Part A has no monthly premium for most people, but Part B is $134 per person per month. (All Medicare policies are individual. There is no family coverage). Together, A and B cover about 80% of the cost of your care, but 20% will be an out-of-pocket expense unless you have a comprehensive Medigap policy.
Here’s an example. Suppose you develop a serious health condition like a heart condition requiring open heart surgery. Your care could run to hundreds of thousands of dollars. If you were to run up a hospital bill of $500,000 in a single year, your share would be $100,000 if you only had parts A and B. If you had a Medicare Supplement Policy Plan F, your out-of-pocket would be $0. A typical Plan F policy runs around $200 a month, depending on your location, age, and sex - or $2400 a year.
If you take a lot of medication for a chronic health condition like diabetes or high blood pressure, you should consider adding a Part D or drug coverage plan. These vary in cost depending on the drugs covered. Some plans have annual deductibles and co-pays. There is also the “donut hole” to be considered, a coverage gap that begins after you have spent a certain amount for covered drugs.
Medicare A and B provide no coverage for dental, vision, or skilled nursing care.
Medicare Advantage is significantly cheaper and most plans provide a wider range of coverage including prescription drugs, dental, vision, and other benefits.
The disadvantages include: narrower networks of providers, high out-of-network costs, and an annual out-of-pocket limit of around $6700 to $10,000 or more out of network in most cases. Once you reach the limit, you pay nothing for covered services. Each plan can have a different limit – and the limit can change every year. However, you can’t buy a Supplemental Insurance Plan or Medigap policy to pay your out-of-pocket expenses under Medicare Advantage.
The cost of a Medicare Advantage Plan is usually covered by your Part B premium of $134 a month for most people. If your plan covers drugs, the drug coverage often costs a little more.
If you are in excellent health and don’t take many prescription drugs, a Medicare Advantage plan could be for you. If you have a chronic condition like heart disease of diabetes – or you have a family history of catastrophic illnesses, you will be better served by Original Medicare with Supplemental Insurance and a drug plan. This combination will cost 2 -3 time more per year, but you will be protected by financial hardship brought on by high out-of-pocket medical expenses.
If you travel often – either in the US or abroad – pay particular attention to the coverage offered by the plans you are considering. If you plan to spend a month or more away from home in a warmer location, you should probably stick with Original Medicare, because it provides coverage everywhere in the US and its territories as long as the doctor or hospital accepts Medicare.
If you are traveling abroad, Medicare does not provide coverage outside of the US including on cruise ships. Medicare drug plans do not cover drugs purchased outside the US. Some Medigap policies provide limited coverage overseas. Medicare Advantage coverage outside the US depends on the plan. Some offer emergency care coverage, others don’t. To be safe, you should purchase emergency coverage when traveling abroad. Prices vary considerably depending your age, what is covered, and how long you will be away.