Medicare is basic health insurance for almost all Americans over 65 years of age, in addition to long-term Social Security Disability recipients and certain other limited groups of people.  It is usually a companion to the Social Security or Railroad Retirement benefit.  It is an insurance program, administered by the Federal government’s Centers for Medicare and Medicaid Services (CMS), not assistance for those of low income like Medicaid.  Medicare is not means-tested and should not be; it is equally available to the rich and the poor and that is one of its strengths.

There are two alternate ways to receive the benefits of the program; the consequences of the choice to go with one or the other are significant. You should consider their decision to go one way or the other very carefully.

Original or fee-for-service.

  1. Part A:

Hospital, SNF, Hospice,
Home Health Care (No premium)

  1. Part B:

Medical services including physician
( Monthly Premium)

  1. Part D:

Voluntary enrollment in private Prescription Drug Plans (PDPs) offering prescription drug coverage only (Premium varies by PDP)

B. “Medicare Advantage,” formerly “Medicare+Choice.”  Also known as Medicare Part C.

Medicare Advantage includes mainly managed care plans such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), but other managed care plans such as Provider Sponsored Organizations (PSOs) and other accounts and plans such as Medicare Savings Accounts (MSAs) and Private Fee-for-Service Plans (PFFS) are within the Advantage ambit, even though not always readily available.

Medicare Advantage also includes Specialized Medicare Advantage Plans for Special Needs Individuals.

This summary focuses on the more widely available HMO and PPO Medicare Advantage Plans.

Enrollees usually continue to pay Part B premiums plus, usually, an additional premium.  However, some Medicare Advantage Plans offer “reduced” Part B premiums as a benefit or a zero premium option.  The HMO or PPO must cover all services covered by Original Medicare, but there are various plans, coverages, co-pays and premiums within and among each of the Medicare Advantage Organizations’ offerings.

Most Medicare Advantage HMOs and PPOs include Part D prescription drug coverage, often with several prescription coverage options and varying premiums, and are known as MA-PDs.

Comparison between Original and Medicare Advantage plans:

A. Original fee-for-service has historically left several major health care needs completely uncovered, a lack which is seldom remedied by Medigap insurance:

  1. Long Term Skilled Nursing Home Care.
  2. Dental Care.
  3. Vision Care and Glasses.
  4. Custodial Care, except through the Hospice election.

Medicare Advantage HMOs and PPOs may and do offer some of these services as supplemental benefits.

B. In addition to non-covered services, Original Medicare leaves unpaid deductibles and co-insurance.  These gaps are significant, usually requiring the purchase of a Medigap (Medicare supplement) policy from a private insurer.  These policies are becoming prohibitively expensive for many people. See, www.medicare.gov/find-a-plan for the cost of policies available in your locality and individual situation.

  1. Exception: If you have retiree coverage through a former employer, you would usually not have a buy a Medigap policy and would probably want to stay with Original Medicare, unless your only option as a retiree is an Advantage plan.  In general, it is to your advantage to stick with an employer plan, even if paying the premiums.  This would be especially true if the employer’s plan for retirees includes Part D “creditable” prescription drug coverage.  Benefits and premiums are almost always better than with a policy you could buy on your own.  BUT, many companies are cutting out or back on those benefits, or attempting to force retirees into Medicare Advantage plans, so you might in the future have to choose between Original Medicare and a Medicare Advantage HMO or PPO.It is important to note, as an aside, that those covered under retiree plans should not decline Medicare Part B:

a. Almost all retiree plans pay claims as if the insured is enrolled in Part B, even if she is not.

b. Even if the plan does not currently require Part B enrollment, it might require it in the future.

c. Premium surcharge of 10% per year for delayed enrollment in Part B, but even more serious is possible liability for large uncovered hospital and doctor bills.

Only exception: if you are retired and covered under your non-retired spouse’s Employer Group Health Plan, you can delay enrollment in Part B.  But remember, within 8 months of the end of spouse’s employment or coverage, you must enroll in Part B or suffer premium surcharge and possible liability for medical bills.  I have seen so many people forget to enroll In Part B after, for instance, a working spouse’s death or a divorce, that unless your client is really in desperate need of the monthly Medicare Part B premium, I would recommend signing up for Part B even if your working spouse’s health insurance is primary.

  1. Exception: Working or spouse working, Medicare usually secondary to employer-provided health insurance and your client likely does not have to buy a Medigap policy.
  1. Exception:  Anyone who is eligible for Medicaid or is a Qualified Medicare Beneficiary (QMB) should, in my opinion, stay in Original Medicare and does not have to buy a Medigap policy.

Medicare Advantage HMOs and PPOs fill in these gaps In Original Medicare to some extent, but many charge premiums, which tend to increase each year.  Co-pays on these plans are also going up, especially for services such as hospital and nursing home care and durable medical equipment, in an attempt to force more costly patients out of managed care.  In most cases, however, it costs less to sign up for a Medicare Advantage HMO or PPO than to pay for a Medigap policy.  Again, visit www.medicare.gov for an individualized up-to-date listing of the premiums and co-pays for local Medicare Advantage HMOs, PPOs, and other plans.  Note that, in addition to the HMO and PPO premiums, Medicare Advantage enrollees must usually continue to pay the monthly Medicare Part B premium.

Next week:  Part 2—Continuing Comparison of Original Medicare and Medicare Advantage.

This summary, and next week’s continuation, show the complexity and far-reaching impact of decisions concerning your Medicare coverage options.  LSED recommends you obtain individual expert advice on your options from someone other than an insurance company representative.  This would include local Offices for the Aging or Department of Senior Services health insurance counselors, and attorneys specializing in Elder Law and Health Insurance advice.

William W. Berry
LSED Attorney
September 18, 2015

The above is for informational purposes only and does not constitute an attorney-client relationship, nor is it legal advice.

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