Posted by Bill Sandweg.
More and more eligible Americans are signing up for Medicare Advantage plans. And why not? Celebrity spokespeople promise low to no premiums and benefits not available under traditional Medicare. It sounds almost too good to be true. “Get the benefits you are entitled to. Call now and an insurance specialist will take your call and explain this wonderful offer to you.” Of course, as you should know by now, there is no such thing as a free lunch.
First, just a quick reminder of how Medicare Advantage works. The companies that participate in the Medicare Advantage market are usually existing health insurance companies. Pretty much all the big names in health insurance offer Medicare Advantage plans. The federal government pays these companies a fixed amount per year to care for each eligible person they sign up. The amount depends in part on a number of factors, including location of the enrollee. The company is required by law to provide coverage for certain services. Any money it does not spend caring for the enrollee, it gets to keep.
Clearly, there is an incentive for the company to keep its costs low. This usually involves limitations on enrollees that they do not face in traditional Medicare. In traditional Medicare, the enrollee can see almost any doctor or go to any hospital they choose. They can see a specialist without getting permission first. Things are quite different for the Medicare Advantage enrollee.
One of the most common forms of controlling costs is to set up a network of doctors and hospitals, who have agreed to give the Medicare Advantage company favorable rates. Enrollees are required to go to doctors and hospitals who are “in network” or pay extra. In some places, the networks may be large with lots of options from which to choose, but in other locations there may be few choices available. Suffice it to say, you may have to change doctors from time to time as the company changes its network of providers.
Another common way of controlling costs is to require prior permission before any significant medical treatment. Permission may be slow to arrive or may not arrive at all. It is a frequent complaint against Medicare Advantage companies that they often deny needed care and force their enrollees to either file an appeal or to go without needed care. Some hospital chains have decided not to accept the enrollees of certain Medicare Advantage plans because of high rates of denials and slow payment of bills. Some doctor groups are similarly refusing to accept some Medicare Advantage patients.
These limitations may not be very important to you, if you are still relatively healthy when you sign up for a Medicare Advantage plan. You don’t need a lot of medical care so these restrictions don’t interfere with the care you need or at least don’t interfere much. It is when you get sicker and need significant care that these restrictions really start to bite.
Well, “OK”, you say, “I can always switch over to traditional Medicare, if I get sick and start having problems getting the care I need.” Not so fast. This is where the Medicare Advantage trap gets in your way. Yes, once every year, during the open enrollment period, you can either change Medicare Advantage plans or leave Medicare Advantage altogether and sign up with traditional Medicare. Traditional Medicare must take you and cannot charge you extra premiums because you are now sick with a major health problem. So far, so good.
The problem is that traditional Medicare does not cover all of your care. It has co-pays and deductibles. Enrollees are expected to pay 20% of the cost of their treatment after reaching a certain point. For that reason, most people signing up for traditional Medicare, also sign up for a “Medigap” policy that covers these co-pays. If you sign up for a Medigap policy when you first sign up for traditional Medicare, the Medigap insurance company cannot charge you extra because you are sick or have a major medical condition. This is not the case, however, if you are coming to traditional Medicare from a Medicare Advantage plan. If you are coming from a Medicare Advantage plan, the Medigap insurer can take your health status into account and, if you have a major medical condition, you can expect to pay extra for the Medigap insurance. For many people, the extra charge is too much and they can’t afford to leave the Medicare Advantage plans. They may switch to another Medicare Advantage plan, but they will never be able to afford to switch to traditional Medicare, regardless of how problematic Medicare Advantage is proving to be.
As I have written before, Medicare Advantage may be the best option for you, but look before you leap. There are substantial trade offs that you must make in order to receive the benefits they promise you. There is no free lunch and you may find yourself trapped in Medicare Advantage when you get really sick. Take your time and be careful when making your initial choices. They may end up being life-long choices.