The ABC’s of Choosing a Medicare Plan
Chris Weiler, Guilford Insurance
Are you new to Medicare? There are many Medicare plans to choose from. Sometimes it’s hard to know where to begin but choosing a Medicare plan does not have to be confusing. This article will provide a basic overview of the components of a Medicare plan, and outline some of the pros and cons of different plan options.
The reader should understand that because our agency is located in Guilford, CT, we primarily represent plans that are available in Connecticut. Plan benefits vary by state and county, and some of these benefits may not be available in your location. The carriers we currently represent are United Healthcare, Aetna, Anthem, ConnectiCare, Humana, and Cigna.
The two primary components of Medicare are Part A, and Part B
–Part A is sometimes called “hospital insurance” and covers some of the costs associated with inpatient stays at hospitals, skilled nursing facilities, hospice, etc. There is no cost for Part A for most people, provided you or your spouse have been legally living in the USA for at least ten years and have been paying taxes.
–Part B covers medical expenses associated with outpatient services such as doctors’ visits, lab tests, MRIs, etc. There is usually a monthly premium for Part B. In 2024, the standard premium for part B is $174.70/month. The premium can be higher for individuals making more than $103,000/year, or couples making more than $206,000/year. This Part B premium is unavoidable unless you qualify for extra help from the Department of Social Services due to low income.
Coverage Gaps: While Parts A and B cover a wide range of services, there are gaps in coverage. Medical coinsurance payments can be significant. Even with Part B in place, the consumer is responsible for coinsurance of 20% for any medical bill. This can become prohibitively expensive if one is diagnosed with a serious illness. In fact, in a 2023 article, USA Today reported that 60% of bankruptcies in the US are related to medical debt.[1] In addition, prescription drugs, dental care and vision care are not covered by Medicare.
How to Fill the Gaps: There are two ways to insure against these gaps in coverage. One option is called a Medicare Supplement or “Medigap” plan. The other option is a Medicare Advantage Plan. The two structures are mutually exclusive, meaning that the consumer must choose either original Medicare with a supplement and a Part D (prescription drug) plan, or a Medicare Advantage plan. You cannot mix and match components of both.
1) Original Medicare: With an Original Medicare plan, parts A and B are administered by the Department of Health and Human Services. To fill the gaps in coverage the consumer also purchases a supplemental plan, or “Medigap” plan from an insurance provider. The consumer may also purchase a Part D plan for prescription drug coverage. In this scenario, the consumer will pay three separate monthly premiums for Part B, the supplement plan, and the Part D prescription drug plan.
What are some of the pros and cons of an Original Medicare plan? One of the biggest advantages of an original Medicare plan is that the consumer can see any doctor in the U.S. who accepts Medicare. Also, if one purchases one of the more comprehensive supplement plans, for example a Plan G, there will be minimal (or no) copayments, or coinsurance requirements during the year. The downside of an original Medicare structure is that in addition to paying the Part B premium, the consumer will also have to pay premiums for the supplemental plan, and the Part D prescription drug plan. Also, with an original Medicare plan, the insured will not enjoy the extra benefits that Medicare Advantage Plans may offer such as gym memberships, dental and/or vision coverage.
2) Medicare Advantage Plans: What is a Medicare Advantage, or “Part C” plan? Most Medicare Advantage plans combine Part A, Part B, and Part D prescription coverage under one umbrella. Under this scenario, the Department of Health and Human Services outsources the management of your Medicare plan to an insurance company. In 2024, the government will directly pay the insurance company approximately $1,000/month to manage your plan.[2] Since the government is directly paying the insurer $1,000/month, many of these plans are offered to the consumer for a $0 monthly premium, and a $0 deductible.
What are some of the pros and cons of a Medicare Advantage, or Part C plan? One of the advantages of a Medicare Advantage plan is the fact that they are offered to the consumer at a low, or $0 premium since the government is compensating the insurance carriers directly. Depending on which plan you choose, you may save in premiums each year versus the premiums associated with a supplement plan and a Part D plan. Another reason for the growing popularity of Medicare Advantage plans is that many offer additional benefits such as a gym membership, dental coverage, and/or vision/hearing coverage. These additional benefits are not offered in the original Medicare plan.
What is the downside of a Medicare Advantage plan? When the consumer enrolls in a Medicare Advantage plan, his choice of medical providers will be limited to the providers in the plan’s PPO, or HMO network. While many PPOs offer very large, nationwide networks, the consumer will have less flexibility when choosing a provider than he would have with an original Medicare plan. Another downside for the Medicare Advantage plan is that the consumer will be subject to some level of copayments and coinsurance for certain services such as hospital stays, ambulance rides, etc. These out-of-pocket medical expenses are generally capped in the range of $5,900- $6,700 per year in CT, depending on the plan. The consumer might end up hitting this cap if he experiences a number of negative health issues in any given year. It’s possible that he might spend more on such copayments in a given year than he would have spent on premiums for a supplement plan and a Part D plan with an original Medicare plan.[3]
Connecticut is a great state for Medicare! In CT, consumers are free to switch from a Medicare Advantage plan to an original Medicare plan, or vice versa, in any given year without medical underwriting. So, when you are choosing which direction to take, you are only choosing the plan that will suit you best for the next twelve months. You do not have to speculate about which plan might be the best fit in 20 years. For example, let’s assume a consumer enrolls in a Medicare Advantage plan because of the additional benefits, $0 premium, and $0 deductible. If that individual is then diagnosed with a serious illness, he may choose to limit his annual out of pocket expenses by switching to an original Medicare plan. In CT he can switch to original Medicare during the Annual Enrollment Period (Oct. 15-Dec.7), or during the Open Enrollment Period (Jan. 1-March 31). He cannot be denied coverage, or the ability to switch plans due to his decline in health. Furthermore, when a consumer enrolls in an Advantage plan, he will have the ability to switch to an original Medicare plan at any time during the first 12 months.
In some states, a consumer wishing to switch from an Advantage plan to an original Medicare plan may be denied due to health issues. That is not the case in CT. Denial of coverage due to medical underwriting is not permitted in CT.
The Bottom Line: There are two approaches to covering the gaps in your Medicare coverage: The first is The Original Medicare structure which includes Part A, Part B, a supplement plan, and a Part D prescription plan. The second is a Medicare Advantage plan, which combines Part A, Part B, and (in most cases) Part D into one plan. We do not recommend one approach over the other. There are pros and cons to each approach and there are multiple issues to consider when considering which plan is right for you.
Hopefully this article has provided you with a general overview of your Medicare options, but this is in no way intended to be a comprehensive guide. Seek professional guidance. Brokers are compensated by the insurance providers so it will cost you nothing to work with a professional.
Disclaimers:
We do not offer every plan available in your area. Currently we represent 7 organizations which offer 96 products in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options. General Benefits – Not all plans offer these benefits. Benefits may vary by carrier and location. Limitations and exclusions may apply. SEP – Enrollment in a plan may be limited to certain times of the year unless you qualify for a Special Enrollment Period, or you are in your Medicare Initial Enrollment Period.
Federal Contracting Statement: Plans are insured or covered by a Medicare Advantage organization with a Medicare contract and/or a Medicare-approved Part D sponsor. Enrollment in the plan depends on the plan’s contract renewal with Medicare.”
This is a solicitation for insurance. Not affiliated with the U. S. government or federal Medicare program.
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[1] USA Today, “Can Medical Bankruptcy Help with Medical Bills,” Hanna Horvath/Jenn Jones, 11/13/2023.
[2] Commonwealthfund.org,”Medicare Advantage: A Policy Primer,” 1/31/2024
[3] For example in 2024, in network out of pocket expenses for UnitedHealthcare plan CT-0005 (PPO) plan are capped at $6,300/year. In network out of pocket expenses for Aetna Medicare Discover Plan (PPO) are capped at $5,900/year. In network out of pocket expenses for Aetna Medicare Essential Elite Plan (PPO) are capped at $6,700/year.
