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Identifying the Medicare Advantage plans that meet your needs

Medicare Advantage plans are usually the lowest-cost option for people who don’t have employer supplemental coverage. In 2013 more than one-half of the people enrolled in Advantage plans have no premiums for their medical and drug coverage. Their only costs will be for co-payments, co-insurance and in some cases deductibles. Also, preventive tests and screenings are covered 100% by Medicare. If someone is in good health, uses relatively few medical services and does not take expensive drugs, his or her costs should be low.

When someone enrolls in an Advantage plan, the plan replaces Medicare’s coverage for as long as he or she is enrolled in that plan. Medicare pays Advantage plans a certain amount for each enrollee, and the rules require that the plans cover the same benefits that traditional Medicare does. But plans can have different cost-sharing than Medicare’s, as long as their overall benefits are as good. In addition, some plans cover services such as routine dental and vision care that Medicare does not cover.

More than one-half of Advantage plans are HMO’s, where the coverage is for services provided by the plan’s networks. Before seeing specialists, patients usually must get referrals from their primary care physicians (emergencies are exceptions). Other types of Advantage plans include Preferred Provider Organizations (PPO’s), Private Fee-for-Service (PFFS) plans, Special Needs Plans, and Medicare cost plans.

Advantage chart

Most Advantage plans include prescription drug coverage. When people enroll in Advantage plans that include drug coverage, they need to make sure that the plans do not have high costs for the prescriptions they take.

Before you enroll in an Advantage plan, you should know the answers to the following questions:

  • are your doctors in the plan’s network?
  • does the plan have an adequate provider network?
  • does the plan have low costs for the prescription drugs that you take?
  • does the plan have a low out-of-pocket limit?
  • does the plan have good quality ratings by Medicare?

Using Medicare's Plan Finder to Compare Advantage Plans

This file has step-by-step instructions for using the Medicare web site to find the Advantage plans that are available in your zip code. If you want to see Advantage plans’ costs for the prescription drugs you take, do not use these instructions. Instead, follow the instructions under “Using Medicare’s Prescription Drug Plan Finder” on the Part D Plans web page.

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Managing Medicare’s Costs

  • Healthy people can save money with less comprehensive Medigap plans

    When people first enroll In Part A and Part B of Medicare, they have a one-time opportunity to purchase a Medigap policy without having to disclose pre-existing conditions. But this opportunity goes away after six months.

    There are only four states where the six- month rule does not apply — Connecticut, Maine, Massachusetts, and New York. In the other 46 states, when people have health problems, even minor ones, they may be charged higher premiums if they try to get a Medigap policy after their first six months of enrollment in Part A and Part B. And if they have serious health issues, they will be denied coverage.

    That’s why people in poor health who do not have employer retiree coverage will almost always get Medigap policies when they first enroll in Medicare – it may be their only chance. Those in good health, on the other hand, may enroll in Advantage plans to save money. And in so doing, they accept the risk — probably small — that they will not be able to get a Medigap policy later.

    Except for their high costs, Medigap policies are the optimal coverage for older retirees who do not have employer plans. The most attractive feature of Medigap policies is that they do not have networks and are accepted by all Medicare providers. As people age, the flexibility in the choice of doctors and other providers can become increasingly important, with older retirees more likely to see several specialists.

    In contrast to Medigap policies, Advantage plans have provider networks. And as people age and use more medical services, there may not be a plan network that includes all their doctors or that includes an advanced treatment center. But if people with Medigap policies develop serious illnesses and want to go to the Mayo Clinic, Johns Hopkins or other large state-of-the-art clinic, they will be covered.

    While it’s true that Advantage PPO plans include some coverage for out-of-network services, patients’ costs may rise sharply when they go outside the network. Most Advantage PPO plans charge between 30% and 50% of the cost of out-of-network office visits and treatments. On top of that, many Advantage PPO have out-of-pocket limits as high as $10,000 when out-of-network services are included.

    Another selling point for Medigap policies is that insurance companies do not make the coverage decisions. Instead Medicare, which has been compared to an overly permissive grandparent, determines whether a treatment or procedure will be covered. And if Medicare covers it, the Medigap policy is required to cover it, up to the policy limits.

    With Advantage plans, though, insurance companies do make many coverage decisions. Although they are required to cover the same services as traditional Medicare, Advantage plans are more likely to restrict coverage in various ways, especially for expensive treatments.

    The dilemma for many new retirees, then, is whether to get a high-priced Medigap policy or to enroll in an Advantage plan and assume the slight risk of not being able to switch to a Medigap policy later when they may need it.

    A middle path for someone in good health is to get a less expensive, less comprehensive Medigap plan that nevertheless has good benefits. Of the ten Medigap plans, there are three that have substantially lower premiums and that cover all of Medicare’s services except for the Part A and Part B deductibles. The tradeoff is that these plans all have higher out-of-pocket risks than the comprehensive plans.

    When comparing Medigap plans, it’s helpful to remember that Medicare is the first or primary payer and covers most of the costs. The Medigap policy is secondary or supplemental coverage, and depending on the plan, it pays some, all, or none of the remaining balance. As an example, Medicare pays 80% of the cost for most medical treatments, and a Medigap plan will pay for some or all of the 20% balance. Since Medicare picks up most of the tab, the risk in the less comprehensive plans is smaller than people may initially realize.

    In the chart below, these three plans are compared with the standard Plan F, which is the most expensive Medigap plan.

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