- May 21, 2020
Today’s topic is all about the advantages of Medicare Advantage plans. Medicare Advantage Plans are one of three options you have when you go on Medicare. We will briefly look at each of these three options, then focus on the benefits of choosing an Advantage Plan. Let’s get started.
Three Medicare Options
When you go on Medicare, you only have three options. Number one, you can choose to stay in the Original Medicare A & B system. When you go this route, Medicare is going to be the first payor, and you’ll be responsible to take care of anything they don’t cover (coverage gaps). The second option is to stay in original Medicare A & B but add a supplemental plan to help cover those gaps so you’re not financially responsible for what Medicare doesn’t cover. The third option is to get on a Medicare Advantage plan, also called a replacement plan.
What is an Advantage Plan?
Medicare Advantage plans are called replacement plans because they replace original Medicare A and B. What does this mean? Instead of Medicare paying first and you (or a supplemental plan) picking up the rest of the tab, everything is handled directly by the private Advantage plan insurance company.
Here’s how it works: Medicare writes the private Advantage plan insurance company a check each month for your coverage. So when you need insurance coverage, you’ll pay a certain amount of co-pays, and the private Advantage company will cover the rest of the balance, thanks to those monthly Medicare checks they received.
The Benefits of Medicare Advantage Plans VS Original Medicare Only
Now, let's look at the benefits of going with the Advantage plan versus staying on original Medicare. There is actually only one primary benefit, and that is this: If you choose to stay in original Medicare A and B only, you are responsible to cover any gaps Medicare doesn’t take care of. And the bad news is, the sky’s the limit.
In other words, there is no limit to your potential out of pocket costs, so it can be very risky. If you go with an Advantage plan, on the other hand, there is always an annual max out of pocket set each year, so once you hit that amount, you won’t be responsible for any more out of pocket expenses.
The Advantage plan’s max out of pocket amount varies depending on where you live, but they usually are in the $3,500 to $10,000 range. Now, that's still a lot of money, but it’s nothing compared to the potential risk of paying an unlimited amount for gaps in original Medicare.
The Benefits of Advantage Plans VS a Supplemental Plan
There are three main advantages to choosing an Advantage plan over a Supplemental plan.
If you go with a Supplemental plan, you'll have to pay a monthly premium. Why? Simply because you're transferring the risk of all those medicare coverage gaps to the Supplemental company. They’re not going to cover these gaps for free, so they require you to pay a premium. Now, the premium amount varies based on your age, gender, tobacco status, and where you live. But on average, you're going to pay about $150 a month for your Supplemental plan premiums.
In contrast, if you go with an Advantage plan, you will either pay very low (usually under $30) or zero monthly premiums. How can Advantage plans offer such low premiums? The short answer is co-pays. Instead of relying on monthly premiums, the Advantage plan waits until you need care, then asks you to pay a certain amount of copays for your care. Once you’ve paid these co-pays, they will cover the rest of the balance. Advantage plans are more of a pay-as-you-go coverage.
Another benefit that comes with Advantage plans is embedded drug plans. If you go with a Supplemental plan, you’ll have to purchase a separate drug plan. Usually these cost around $30/month. However, if you choose an Advantage plan, the prescription drug plan is included as part of your coverage, so there’s no extra cost.
The final benefit of going with an Advantage plan over a Supplemental plan are the perks. Advantage plans tend to throw in several extra perks like dental, vision, hearing, and gym memberships. While these perks aren’t usually full-coverage, they do make the Advantage plans more attractive and marketable.
Typically, the vision perk covers a preventive eye exam and includes some credit towards eyewear. The dental typically provides you with about $1,000/year of coverage. And the gym membership gives you free access to a network of facilities like the YMCA and community centers.
You can get these perks with a Supplemental plan, but you’ll have to pay a separate premium. With Advantage plans, the perks are just part of the package.
Let’s review. If you decide to stay on original Medicare only, you are responsible to cover all coverage gaps out of your own pocket. This is a very risky move and could end up costing you lots of money. You can also decide to stay on original Medicare but get extra coverage in the form of a Supplemental plan. If you go this route, you will pay monthly premiums, but you won’t have to worry about any of those coverage gaps.
Finally, there’s the Advantage plan. The benefits of going with an Advantage plan include low to zero monthly premiums, embedded drug plans, and extra perks, plus the peace of mind knowing you won’t have to pay an unlimited amount out of your own pocket for Medicare coverage gaps.
Although Supplemental plans provide better coverage with fewer co-pays to worry about, Advantage plans are great options for many people. For example, if your budget is tight and you can’t afford the premiums that come with a Supplemental plan, the Advantage plan is probably your best option.
We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.
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