Choosing a Medigap policy or Medicare Advantage Plan

When it comes to covering the costs of Medicare, seniors have a few choices to help with payment. Two options are Medigap policies, which are easy and affordable to combine with Original Medicare, and Medicare Advantage Plans.

Medigap policy
When you sign up for Original Medicare, there are some costs that are associated. Part A does not charge a premium, though Part B – which includes doctor visits and screenings – does come with its own premium, co-payments, coinsurance and deductible. Medicare considers these expenses to be “gaps” in coverage. These additional costs are often affordable for most seniors, but some might need the help of supplemental insurance to pay for their healthcare. That is where Medigap policies come in.

These supplemental policies are bought by Medicare beneficiaries through private companies to cover the costs associated with Original Medicare. These costs do not cover expenses from a prescription drug plan or Medicare Advantage Plan. Generally, those who are covered under a Medicare Advantage Plan are not eligible for a Medigap policy.

How it works
Once you are signed up for a Medigap policy, Medicare will cover its share of your healthcare expenses before the Medigap benefits will kick in and pay its share. These policies must be clearly identified as Medicare supplemental insurance. Policies are standardized and classified by letters A through N. Because these policies are offered by private insurance companies, classified policies must come with a standard set of benefits. This means that every policy classified must offer the same benefits and are easily comparable between insurance companies.

What is covered
Medigap policies are used to cover the costs associated with Original Medicare. This does not include long-term care, though you can purchase additional supplemental insurance to cover this. Medigap also does not cover vision and dental care, hearing aids and private nurses. A person cannot buy a Medigap policy if they have Medicaid or a Medicare Advantage Plan. There are some restrictions that insurance companies can place on seniors with pre-existing health conditions, including refusing to pay for coverage for up to six months. Coverage related to other healthcare costs are not allowed to be refused or delayed.

Medicare Advantage Plans
Medicare Advantage Plans are more inclusive and not considered supplemental insurance. Sometimes referred to as Part C, Medicare Advantage Plans are offered by private insurance companies, similar to Medigap policies.

What is covered
Medicare Advantage Plans cover services related to Part A and Part B. Depending on the policy, other benefits may also be covered. Prescription drug plans are typically a part of Medicare Advantage Plans, providing seniors with coverage for the expenses of their medicines. Plans cover network doctors and physicians, but seniors may need to pay more for out-of-network doctors.

There are six types of Medicare Advantage Plans:

  • Health Maintenance Organization (HMO) – Seniors can only receive coverage for doctors that are in network except in the case of emergencies. Prescription drugs are also covered under most HMOs. Patients need to get a referral from their primary care doctor to see a specialist and be receive benefits.
  • HMO Point-of-Service Plan (HMOPOSP) – Similar to HMOs, this plan allows a person to see out-of-network doctors and providers, but at a higher cost.
  • Preferred Provider Organization (PPO) – Seniors under this plan don’t need to have primary care doctors, and in-network doctors and hospitals generally cost less.
  • Special Needs Plan (SNP) – These plans are limited to persons with certain diseases or conditions with tailored healthcare coverage for specialists and services.
  • Private Fee-for-Service (PFFS) – PFFS plans will sometimes cover prescription drugs, but if no coverage is provided beneficiaries can purchase a Medicare prescription drug plan. Seniors under PFFS can see any doctor that accepts Medicare Advantage Plans.
  • Medicare Medical Savings Account (MSA) – MSAs combine a health plan with a high deductible and a bank account, where Medicare deposits a limited amount of funds a beneficiary can use to pay for their health services.

What does it cost?
Medicare Advantage Plans have an additional premium that is separate from Part B expenses. Enrolled seniors still need to pay coinsurance, copayments and deductibles, but the cost will vary from plan to plan.

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Pete Blasi