Medicare Supplemental Coverage with Original Medicare or Medicare Advantage?
Besides death and taxes, Americans age 64 and older can also count on a countless number of advertisements for Medicare supplemental insurance and Medicare Advantage.
The ads do a fantastic job of convincing people they need the insurance, but leave many scratching their heads when it comes to knowing exactly what’s included and how the plans really differ.
Let’s start with a few facts that have surprised our clients about why they need the advertised coverage:
- While you may pay $0 for Part A premiums, Part A never covers 100% of hospital, skilled nursing, or hospice costs. You’ll be required to pay a deductible, and in most cases, copays and co-insurance too.
- Part A covers a specified number of days. After that, you’re responsible for 100% of the bill.
- Part B pays for approximately 80% of Part B costs. After your deductible is paid, you typically pay the remaining 20%.
- Medicare only covers vision, dental and hearing care when medically necessary.
- There is no out-of-pocket maximum.
The lack of an out-of-pocket maximum is the key reason Americans often purchase Medicare supplemental insurance (also known as Medigap) or replace Parts A and B with a Medicare Advantage (Part C) plan. Without supplemental or Medicare Advantage coverage, one major medical event or many minor ones could eat deep into the retirement savings you worked decades to accumulate.
So which is better — Medicare Parts A, B, and D, plus supplemental coverage, OR a Medicare Advantage plan?
While both options mitigate all or part of your deductibles, copays, and coinsurance, and can limit what you’ll pay out of pocket, we recommend our clients elect the former (Parts A, B, and D with supplemental) for these reasons:
- After enrolling in Medicare Part B, you have six months to enroll in a supplemental plan. During that six-month time frame, you have guaranteed issue rights, meaning you can buy any supplemental plan offered in your state without being subject to higher premiums based on your medical history and current health.
- Parts A, B and D, and supplemental plans are guaranteed renewable as long as you pay your premiums.
- Parts A and B cover you anywhere in the U.S.
- To make supplemental plans easier to compare, Medigap policies must offer the same basic benefits.
We don’t advise Medicare Advantage (MA) for our clients because:
- While the price of MA premiums may be attractive, providers can increase premiums at their leisure. Additionally, you may still have to pay Part B premiums in addition to your MA premiums. Note some providers will advertise MA premiums are “free”. They’re likely referring to the fact they can deduct your premiums from your Social Security payments. In other words, you’re still paying for your MA premiums.
- MA providers don’t have to renew your policy.
- If you initially choose Medicare Advantage and then want to switch to Medicare Part B with a supplemental plan, you may no longer have guaranteed issue rights. In other words, you may be subject to medical underwriting, and providers can limit your plans, deny coverage, or require higher premiums.
- Unlike Medigap plans, MA plans usually require policyholders to use doctors and hospitals in their networks that are typically geographically limited.
- MA plans are not standardized. Read the fine print carefully.
You don’t have to navigate Medicare and retirement planning on your own. The Arnold & Mote Wealth Management team is ready to answer your questions and help you achieve your financial goals! Get started by .
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