I’ve been writing about Medicare for years, so I wasn’t particularly affronted when, not long after my 64th birthday, I started receiving advertising circulars about Medicare, Medicare Advantage, and supplemental plans. I did what I tell my clients and readers to do: I recycled them without a second look.
The catch is that it still leaves you the imperative of determining your best Medicare options. Whether you are newly enrolled or have been enrolled in Medicare for years, you do need to understand the system.
Your first and most important decision is determining whether to expand your Medicare coverage either through Medicare Advantage (Part C) or Medigap (supplemental Medicare). The best source to begin with is the Official Guide to Medicare.
I recommend carefully reading the first nine pages (up to the Index of Topics) and Sections 4 and 5, describing Medicare Advantage and Medigap. This year’s guide also includes information on COVID-19. Write down your questions and then move through the entire guide chronologically or by researching your questions through the index.
Why is it such a puzzle? Medicare’s arcane nature stems from its being cobbled together over the last 55 years and ten federal administrations. When approved by President Lyndon Johnson in 1965, it included only Part A (Hospital Insurance) and Part B (Medical Insurance) coverage.
In the 1980s, supplemental private insurance in the form of Medigap plans began to be offered. These Medigap plans covered some of the deductibles and copays. The plans currently available in most states are A, B, D, G, K, L, M and N. Each plan offers a different level of coverage.
Two other plans, C and F, are no longer available to new enrollees.
In 2003, Medicare Advantage (also called Medicare Part C) was offered as an entirely different way to access the Medicare system. MA providers take over your Medicare coverage, providing more services then original Medicare with the tradeoff of limiting your choice of medical providers.
Whereas the focus of Medigap is covering the “gap” of deductibles and co-pays, MA’s focus is providing additional services such as vision and dental at a lower price.
HMOs save money by contracting with healthcare providers who agree to provide standardized services for standardized prices. Like an HMO enrollee, a Medicare Advantage enrollee who seeks services outside of the network will pay all or a substantial portion of the cost of services.
A Medigap enrollee, similar to a PPO enrollee, generally does not have this limitation.
Whether this difference and others are important depend on where you live and the services you may need during your lifetime. More importantly, your decision to move away from original Medicare (with or without Medigap) to Medicare Advantage is a one-way street with very limited opportunities to turn around.
You may choose Medicare Advantage and then decide you want to move back to original Medicare: this is straightforward when you transition within the first 12 months. Other reasons you can switch to Medigap are if your MA provider leaves town or is found not to have upheld their promises.
In most other instances, your choice to switch to Medigap after Medicare Advantage means Medigap can limit the plans they offer you or not cover pre-existing conditions for a period of time.
If these tidbits have generated more questions than answers, then you’re ahead of the game. My next column will outline basic issues of Part D drug, and then provide some tips for choosing a plan. Meanwhile, check out the official guide.
— Karen Telleen-Lawton serves seniors and pre-seniors as the principal of Decisive Path Fee-Only Financial Advisory in Santa Barbara. You can reach her with your financial planning questions at [email protected]. Click here to read previous columns. The opinions expressed are her own.