Ask the Advisor: October 2019

Ask the Advisor: October 2019

Can You Explain the Pros and Cons of Switching to a Medicare Advantage Plan?

Q: A new Medicare Advantage plan is available in my area and the premiums are extremely low.  It would save me a lot of money this year, so I’m thinking about dropping my Medigap and Part D plan to enroll in the new Medicare Advantage Plan during the fall Open Enrollment period.  Can you explain the pros and cons of doing this?

A:  A growing number of Medicare beneficiaries are choosing to receive their coverage through private Medicare Advantage plans, rather than traditional Medicare with a Medigap supplement and Part D plan.  The choice requires careful evaluation of costs and an understanding of how the prospective Medicare Advantage works, because once you give up your Medigap plan, you probably won’t be able to get another one, or if you do, you could be charged significantly more.  No matter what you decide, you will still be required to pay the Part B premium.

Under traditional Medicare, most people need to buy a supplemental Medigap policy to cover Medicare’s considerable out-of-pocket costs, and need to enroll in a private Part D plan for drug coverage.  Medicare Advantage plans receive a lump-sum from Medicare to provide enrollees with all Medicare Part A and Part B benefits and usually have lower premiums than Medigap insurance.  Many of the plans also provide drug coverage and are popular for providing a range of additional services that Medicare doesn’t cover, such as discounts on eyeglasses or dental care.  The most critical differences between Medigap and Medicare Advantage plans are in the out-of-pocket costs required (especially if you have a chronic condition, or require hospitalization) and, access to doctors and other healthcare providers.

There are several types of Medicare Advantage plans, and not all are available in all areas.  Many are health maintenance organizations (HMOs), but there are also preferred provider organizations (PPO) and special needs plans, among others.  Under traditional Medicare with a Medigap plan, you may go to any doctor who accepts Medicare (about 90% of doctors do).  But in a Medicare Advantage HMO plan you need to use network healthcare providers in order to get coverage.  If you are treated by non-network providers, you would be responsible for 100% of the out-of-pocket costs, and Medicare would not cover the cost of the claim.  If the plan is a PPO, however, you would have greater flexibility to go out of network, but you would pay higher co-pays or co-insurance.  Before selecting any Medicare Advantage plan, check the lists of network doctors, hospitals and other providers!  It is not unheard of for Medicare Advantage plans to market to people who live a good distance from the nearest in network health care provider.

Under traditional Medicare with Medigap, you have greater freedom to select providers and to travel and still get coverage.  Medigap is the better choice for people who divide their time between homes in two different states, or who like to travel outside the U.S.  Several Medigap plans cover foreign travel emergencies.  On the other hand under many Medicare Advantage plans, you would need to follow your plan rules to get in-network care and would be more limited to specific geographic areas.  If you join a Medicare HMO and then have a medical emergency in other part of the country where your plan does not operate (such as Alaska which has no Medicare Advantage plans) you would foot 100% of the medical bill.

As you have experienced, one of the biggest appeals of Medicare Advantage plans are low, or sometimes no, premiums.  However, you would still have deductibles to satisfy and co-payments for most, if not every service.  In addition, plans are allowed to charge you an out-of-pocket maximum up to $6,700 in 2019, an amount that varies and tends to grow each year.  Under Medigap, your premiums are higher and, depending on the policy, can increase annually.  On the other hand, covered out-of-pocket costs are minimal to nothing.  Medicare Advantage is more affordable when you are healthy, but can cost significantly more per year if you require a lot of healthcare services.

Before making such a major decision, we strongly recommend that you get free, one-on-one counseling from your State Health Insurance Program (SHIP) Medicare Counselor.  Your counselor can help you compare plans to ensure that the choice you’re considering is right for you.  Many local area agencies on aging or senior centers host counseling programs.  To find a program near you check the SHIP Locator here: