What is the difference between Medicare Supplements and Medicare Advantage … and why should you care?

by Michael on February 14, 2013

in Medicare

A person entering Medicare may elect to have Original Medicare and a Medicare Supplement Plan (also called MediGap Insurance) from a private insurance company OR they can elect to have Medicare Advantage Plan which is administered by a private insurance company.

Many may wonder if there is any difference. In a word, YES. I would put the word “major” in front, as in: Major Differences.

Part of the difficulty in explaining this is that Medicare Advantage Programs differ greatly depending on where you live. Usually these differences are by County, but can even be by Zip Code within a County.

Change your address, change your plan.

Is this explained to people when they enroll? Well if you mean …

  • Is it included in all the gooblygook in all the papers given them? Well then the answer is Yes.
  • But is it explained in 30 or 60 second ads on TV? Obviously not.
  • If a person responds to one of those ads on TV, do they explain all the choices available, including what other companies are doing? Uh … how should I put this? I think anyone who asks the question knows the answer.
  • Is it explained where people understand what they are buying? In my opinion – NO. I based this opinion on what people tell me or ask me after buying this type of plan.

One thing a person should consider about Medicare Advantage Plans is that you must examine whether you want to be required to at least consider changing plans every year. Why is this? Because providers can (and often do) change their plans every single year. And you have to examine the materials they send you to see if this is the case and whether or not you need to change plans. And in actuality, many millions of Seniors simply had no choice. They had to change because their plan was one of the many that carriers withdraw each year.

Is this something you really want to do?

If you live in a rural area, the types of Medicare Advantage Plans (PFFS) approved in those counties, physicians can treat your neighbor but refuse you. Or treat you one time and refuse the next. (Don’t get mad at the doctor though, he is running a business and rightfully expects to earn a profit).

Why is all these regulations and provisions in these planes? Why so much confusion in these Medicare Advantage Plans?

In a word: Design.

Did you know that the government pays the Insurance Companies to administer these plans and the amount they pay changes? And that the changes have not been as you might suspect, but actually they have been reduced considerably since the inception of the plan (all at the same time that Medical Costs have gone up and up and up)?

  • When Medicare Advantage Plans first came out, they were touted as the next best thing since White Bread (and we all know what they now say about white bread, right?) Similarly, if an Insurance Company receives one figure when the plan is designed and then later gets about half that amount, something is going to change.

It is only logical that if you change how much an insurance company gets from one income stream, this has to be made up from another income stream or the expense paid must be reduced.  Right? Well the law requires these plans to equal original medicare overall, but this does not mean that what you pay is structured the same. So then, how does a plan change to meet all the legal requirements and adjust to the lower income stream?

Three ways: 1) what they pay the providers (doctors and hospitals), 2) what the consumer pays for the plan, and 3) cost sharing (that is a fancy way of saying how much you have to pay the provider before they pay the provider).

Most plans change the cost sharing every year. The amount of this “cost sharing” many would not consider small. And it keeps getting larger and larger and larger. Remember that word “Design”.

What about Medicare Supplements?

  • Are they different than Medicare Advantage Plans?
  • Yes. Quite a bit different, in fact. 

If you buy the right supplement, there is no cost sharing. Between what Medicare Pays and what the Insurance Company pays, you pay zero, zilch, you pay nothing for all Medicare Covered expenses. It’s all covered 100%.

These plans are proven. They have been working successfully for many years. They are not the dream child of people in Washington trying to hammer out the next big deal for insurance (a word I sincerely and truthfully doubt many could even define).

  • The plans just work – they work because they are designed properly.
  • They work because they are easy to understand.
  • They work because physicians know what they are accepting and know what they will be paid.

You are probably thinking that these plans are very expensive. Actually, I think you will find that is not the case. In fact, I have found many pay more for the Union Retirement Plans (and their coverage is much less).  [People on Union Retirement Plans take note. You really ought to compare. You might be pleasantly surprised.]

Do these plans go up in price? Well I can think of nothing that does not go up in today’s economy, so I would answer yes. But this is primarily only due to the changes in the Medicare Deductible and co-pays each year and the increases have been modest for many years now. And they do not always even go up. The trends I have seen amount to either no increase (I actually have seen some decreases) or about $5 per month.

  • And if a consumer wishes to save monthly premium, there are options to have some cost sharing, slashing your premium considerably. I must point out that this “cost sharing” is very modest compared to any Medicare Advantage Plans I’ve seen.  However, before selecting this option, I do recommend you talk to me and get more information.

The best thing is – you can move, you can travel, you can change companies (in CA you are guaranteed acceptance into another Companies plans on your birthday month) while maintaining the same benefits. But this is not something you must consider each year. And I have only ever known of a few examples of people actually doing this, all for their own unique reasons. It just is not usually needed.

There is a word for that also, it’s called Freedom.

If you’d like to know more, go to mpmyers.com and click on my Medicare Tab.

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