Medicare Supplement versus Advantage Plans
It's not just about the monthly premium
It used to be pretty simple in the world of Medicare. You had traditional Medicare and supplements. Medicare HMO's cane on the scene in the 80s and for a while, they did a good job of containing health care costs albeit with restrictions in terms of which doctors you could see and how your care was managed. The lower rates provided an offset to this more restrictive type of coverage and we now had two options to address the inherent holes in traditional Medicare. Medical costs continued to rise at a faster and faster clip and the HMO's found it difficult to keep pace at a low or no cost means of health insurance. We then had the newest entry in the Medicare supplement insurance ring..Advantage Plans.
Advantage plans are the resurrected HMO model plans but with a renewed lifeline and better financial underpinning. Let's first break down how traditional Medicare supplement and Advantage plans work with Medicare and then we can compare them against each other in regards the beneficiary. We know what Medicare covers and more importantly what it doesn't cover. Traditional Medicare supplement plans aim to fill in the holes of Traditional Medicare including the deductibles (depending on plan chosen), co-insurance, and various other holes. Keep in mind that Medicare ultimately determines if something is covered and the supplement follows suit. For example, if a certain medical benefit is not covered by Medicare, the supplement will not pay for it either. So, Medicare supplements work as wrap-around plans to Traditional Medicare and you keep the same flexibility in terms of . What about Advantage plans?
Advantage plans are all together different. First, they are no or low cost insurance plans. That's the main reason most people go the Advantage route. They are also going to be more restrictive in terms of access to care as expected with the HMO type model that they generally follow. You generally have primary care doctors or medical groups through which, care is managed. Some Advantage plans may offer more flexibility in terms of referring yourself out but offer a more limited (loosely translated as less expensive) network to operate within when compared with Medicare supplemental insurance plans. Advantage plans may offer more benefits than just core Medicare benefits as well. So how are Advantage plans able to this and more importantly, what's the best choice for people shopping the market?
An interesting question is why the new Advantage plans are able to flourish where the old HMO's failed? Two reason. First, there is more Federal funding of the Advantage plans on a per capita basis. Secondly, there's more back-end exposure to the beneficiary (you) and this is critical to really making a good decision. You can't just look at the premium. For example. An F plan Medigap policy might run a 65 year old $125/monthly. An Advantage plan might be $25monthly. Looking at that, the Advantage plan looks...advantageous but you have to look at the back end. If you have large health bills in a calendar year, the F plan will likely result in very little if no expense out of your pocket. The Advantage plan may have a deductible or out of pocket maximum in the 1000's of dollars range. The question is this...is it a good wager or bet to assume more risk for larger medical bills in your 60's, 70's and beyond? We're hoping that question answers itself but just in case... a person's health care costs double with every decades of a person's life and 90% of a person's health care costs are generally incurred in the last 12 months of life. The odds of Advantage plans working out for you over the long haul (and we are making a decision for multiple years into the future) are not in your favor. They're in the carrier's favor but many people just see the cheap premium at age 65 and jump not seeing the large financial drop just over the edge.