Medicare Simplified

Medicare Advantage vs. Medicare Supplements

by Bill Haynor

Part III in a three-part series

Last month, I discussed the parts of Original Medicare coverage and costs associated with them. As I mentioned, this is typically the point where most seniors – and many non-Medicare insurance brokers – realize it’s a headache to deal with all the information presented, and may be tempted to throw in the towel once they’re enrolled in Part A and B and leave it there. But there may be gaps in coverage that could significantly and negatively impact an individual’s quality of life, both from a financial and health perspective. Speaking from my own experience, it’s crucial to consider going a step further by signing up for a Medicare Advantage or Medicare Supplement Insurance plan. We’ll discuss both here.

Medicare Advantage

A Medicare Advantage Plan is one that is offered by a private company that contracts with Medicare to provide individuals with all of their Part A and Part B benefits, and most offer some form of prescription drug coverage. They can be administered by Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Private Fee-for-Service Plans, Special Needs Plans and Medicare Medical Savings Account Plans that follow rules established by the federal government.

With these options, Medicare pays a fixed monthly amount for an enrollee’s care to the organization administrating the plan. But not every plan is alike. Each Medicare Advantage Plan can charge different out-of-pocket costs to individuals and have different rules for how someone gets services, such as if you can be referred to an out-of-network specialist or not. What’s more, the Medicare Advantage Plan administrators can change the rules each year.

One item to note. While most Medicare Advantage Plans offer prescription drug coverage, some may not. In these instances, seniors must choose between an independent drug plan under Part D and Medicare Advantage. Advise your clients to double check before doing so. If they discover that they are in a Medicare Advantage Plan that does not include drug coverage but still join a Medicare Prescription Drug Plan, they will be disenrolled from their Medicare Advantage Plan and returned to Original Medicare.

Perhaps the most important issue for an agent selling or advising on Medicare Advantage plans is the regulatory requirements put out by the Center for Medicare & Medicare Services (CMS) around certification and marketing, which you must fully comply with or risk disciplinary action, including the possibility of losing your license.

Medicare Supplement

Otherwise known as Medigap, these insurance policies are sold by private companies to help seniors pay some of the health care costs that Original Medicare doesn’t cover, like co-payments, co-insurance and deductibles. Some offerings also provide coverage for services that aren’t covered by Original Medicare, such as medical care when traveling outside the U.S.

Medicare Supplemental policies generally don’t cover long-term care, vision or dental care, hearing aids, eyeglasses or private-duty nursing. Plans as of 2006 also aren’t allowed to include prescription drugs, requiring individuals to enroll in a Part D prescription program. However, they are generally guaranteed renewable even if a senior has health problems. This means the insurance company can’t cancel their Medigap policy as long as they pay the premium.

There are several other advantages of Medicare Supplemental policies. Here are just a few:

• Medicare Supplement policies require no physical exam. Many policies can also be approved in a matter of days so the barriers to getting one are often small.
• Medicare Supplement policies are portable. A Supplement policy enables the customer to take their policy to any provider – be they doctor, clinic or hospital – that accepts Medicare. It gives seniors the freedom to determine which medical practitioner will provide them the best care for their specific needs, without restriction to a limited-area provider network.
• Medicare Supplement policies travel with the individual. Policies are not only portable by provider, but also by geography. Coverage is valid in any state, and some even go so far as to cover individuals who are traveling overseas. This can be a key selling point as more and more seniors spend their retirement years jet-setting around the U.S. and the globe.
• Medicare Supplement policies can prevent an unexpected personal financial crisis. There will be some seniors that believe their net worth and prudent financial investments will help them cover any unexpected out-of-pocket costs. That may be true – for now. I can tell you first hand, though, that circumstances can change quickly. I was a very healthy 70-year-old, a daily runner, tennis player, golfer and swimmer. Seemingly overnight, I began to experience health issues. Over a period of two years I had arthroscopic surgery on my left knee for a torn meniscus, double hernia surgery, cataract surgery on my left eye, open heart surgery for four blocked arteries and a torn mitral valve and, finally, surgery for a ruptured appendix. The total cost was close to $600,000 and my out of pocket costs would have been close to $120,000 if it weren’t for my Medicare Supplement policy, which covered it all. Brokers who can paint such a scenario with prospects may turn their “no” into a continued discussion.
• Medicare Supplement paperwork can often times be completed in 30 minutes or less. There’s typically no exhaustive application process to wade an individual through, so there’s little pain and aggravation in getting set up.Anyone watching the news will notice the steady increase in Medicare Supplement policy purchases. It’s understandable given the concern that out-of-pocket costs appear to be rising and the uncertainty of where they will level off – if at all. Insurance agents are getting more seniors inquiring about such offerings. The key for these brokers is in how to close these deals before a rival does.

Many agents will dive into the specific coverage and cost options, but that’s not where to start the conversation with a prospective policyholder. Confusion still reigns in the customer’s mind about their Medicare options. The best option may be to find a national partner that can handle these inquiries and turn your attention to the Life Insurance market. Doing so will still require a general understanding of what Medicare is, its history and the various plans and policies that fall under the federal program. Hopefully we’ve been able to address most of that in this three part series. If not, call us on it. It’s our passion to assist seniors and fellow agents alike in this growing and, often complicated, health insurance matter. For the 10,000 additional seniors that turn 65 each day, it can also be life changing.

VIEW: History of Medicare  infographic

Read PART I here

Read PART II here