Tue, Jul 17, 2018

Medigap Vs. Medicare Advantage: Which Is Better?

Medicare.gov will give you hundreds of pages of explanation, but luckily, the basics of the program aren’t difficult to grasp. However, the devil is in the details.

Like any massive insurance enterprise, Medicare is confusing. Medicare.gov will give you hundreds of pages of explanation, but luckily, the basics of the program aren’t difficult to grasp. However, the devil is in the details.

Medicare has four basic parts – A, B, C and D. If you’re unfamiliar with how they work, read Medicare 101: Do You Need All 4 Parts? Taken together, Parts A (hospital care), B (doctors, medical procedures, equipment) and D (prescription drugs) provide basic coverage for Americans 65 and older. What’s relevant for this article is what these parts don’t cover – deductibles, co-pays and other medical expenses that could wipe out your savings should you become seriously ill. That’s where Part C comes in. Also known as Medicare Advantage, it’s one of two ways to protect against the potential high cost of an accident or illness. Here’s what could happen.

You Have to Plug the Holes

Let’s say you have only Parts A, B and D. Here’s what the holes or “gaps” in coverage could do to your budget if you were admitted to the hospital for, say, heart surgery, and complications required you to have a long hospital stay followed by needing regular medication after it:

At the hospital: Because of the Part A deductible, you’d pay the first $1,340. After 60 days, you will start paying a portion of each day’s cost.

For doctors and medical procedures (Part B) at the hospital and at home: You would pay 20% of all costs after meeting your $183 deductible. Unlike many other health insurance policies, there is no cap or maximum out-of-pocket amount on what you could owe.

Because of how Part D works, you could pay as much as 72% of the cost of some of your prescription drugs if you need enough medication to push you into the notorious doughnut hole: when Part D’s full prescription-drug coverage runs out after you’ve spent $3,750, until your medication costs exceed $5,000 per year. Although you’ll pay no more than 35% of the price for the brand-name drug in 2018, 85% of the price—what you pay plus the 50% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap.

These coverage gaps mean that a particularly bad health year could leave you with tens of thousands of dollars in hospital bills. That’s why most people purchase Medicare supplement insurance – also called Medigap – or enroll in Part C, a Medicare Advantage Health Plan. Both options are offered by private insurance companies. They do, however, have to follow Medicare guidelines in what they are allowed to sell.

for them can vary, however, so it’s worth shopping around. Joseph Graves, insurance agent and Founder of Many people enroll in Plan F, the most expensive choice, because it covers nearly all the gaps. A person with Plan F coverage will have few or no out-of-pocket expenses.

Medigap policies will cover you whenever you see any doctor or facility that takes Medicare. If the doctor or facility does not accept Medicare patients, a Medicare Supplement or Advantage Plan won’t cover any of those costs, even though they are private insurance policies.

Which is Better for You?

It is illegal for an insurance company to sell you both a Medicare Advantage and a Medigap policy. Three things to consider before choosing which one to get:

Cost: Medigap coverage usually has a higher monthly premium, but could result in lower out-of-pocket expenses than some Medicare Advantage plans. Medicare Advantage plans, on the other hand, generally cost less and cover more services, which can be the better option for your budget. However, if you are a senior with ongoing health issues, you may be faced with numerous Medicare Advantage copays that could really cost you thousands of dollars in out of pocket expenses. Advantage Plan costs are less predictable, depending on your current health status. And as most seniors have experienced, when it comes to your health, you never know what could happen.

Choice: Medicare Advantage plans generally limit you to the doctors and facilities within the HMO or PPO, and may or may not cover any out-of-network care. Traditional Medicare and Medigap policies cover you if you go to any doctor or facility that accepts Medicare. If you require particular specialists or hospitals, check to see whether they are covered by the plan you select. Another thing to consider is that once you are enrolled in a Medicare Supplement or Advantage Plan, you can’t make a change to that plan until the following Open Enrollment period (October 15 - December 7) of each year, unless there are special disenrollment qualifications.

Lifestyle: Medicare Advantage plans often only operate with a certain region. If you’re a snowbird living in more than one state throughout the year, traditional Medicare plus Medigap is probably a better choice than an Advantage plan. This may also be true if you travel frequently: Some Medigap plans provide coverage when traveling outside of the United States and cover you in all 50 states; Advantage plans generally do not.

Bottom Line: Figuring out the Medicare plan that’s most appropriate for your needs is probably not a do-it-yourself activity. Once you understand the basics of Medicare, get some help. Contact the friendly staff at FirstCommunity at 256-532-2783. Their licensed agents will be happy to walk you through your choices and answer any questions you may have. Or visit the website at firstcomm.org.

Back To The Blog Page