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January 2016  Volume 9, Number 1        


Wise Choices — Medicare vs. Medicare Advantage

Seniors aged 65 and above automatically qualify and get signed up for Medicare hospitalization coverage, or Part A. Along with Part B, which covers doctor bills and other medical expenses, Parts A and B comprise Original Medicare. Is this your best option?

If you have paid 10 years of Social Security taxes, you qualify for standard Medicare options, namely:

  1. Part A — which covers a portion of your hospitalization expenses, and
  2. Part B — which covers a portion of your doctor bills and other medical expenses, including lab tests and certain preventive screenings.

Part A is free; you must pay for Part B coverage. Together, Parts A and B comprise Original Medicare, the government-provided health plan for seniors.

Original Medicare has limitations, which you can overcome by either buying an additional Part D (drug coverage) policy and a Medicare Supplement (Medigap plan) or a Part C (Medicare Advantage) plan. Medicare Advantage plans, sold by private insurers, must cover the basic Medicare services. However, many plans cover more services. Read on to learn more.

Do You Need Coverage for Vision, Dental and Nursing Care?

Original Medicare does not cover your out-of-pocket spending for dental, vision or assisted living facilities (long-term care). Certain Medicare Advantage plans do cover these expenses.

Do You Want to Avoid Coinsurance Charges?

Original Medicare has 20 percent coinsurance charges, meaning you must pay 20 percent of costs for any covered service. There is no cap on these charges. Medicare Advantage plans offer multiple cost structures for coinsurance and copayments. Some plans also charge you co-payments, which are fixed charges you’ll pay each time you use a covered service, such as $25 per office visit. Usually plans with copayments offer you the tradeoff of lower monthly premiums.

Do You Need Coverage for Prescription Drugs?

Original Medicare does not cover prescription drugs unless you buy the additional Part D coverage. Most Medicare Advantage plans (commonly referred to as Part C) offer drug coverage options. However, in some cases, your monthly premium may increase compared to the amount you’d pay for Part D.

Are You Looking for a Cost-Effective Alternative to Medigap?

Medicare supplement plans, also known as Medigap plans, can help you minimize out of pocket expenses with Original Medicare. Plans vary, but can cover deductibles and coinsurance for Original Medicare. However, when you add the cost of premiums for Medicare Part B (Part A is free for qualifying seniors), Part D prescription drug coverage and a Medicare supplement, some Medicare Advantage plans will be more cost effective.

How Much Flexibility Do You Need for Out-of-Network Visits?

With Original Medicare, you can use any medical provider who accepts Medicare payments and visit any specialist without prior authorization from a primary care doctor.

Medicare Advantage plans can often offer more generous benefits because they control your provider choice. Most use either a designated HMO (health maintenance organization) or a PPO (preferred provider organization). An HMO plan may require you to see a primary care doctor before seeing a specialist. A PPO plan will usually let you see a specialist without a prior referral, but that will likely cost you more.

Do You Want to Limit Your Out-Of-Pocket Spending?

Original Medicare does not put an annual limit on your out-of-pocket spending. You simply continue paying a portion of the cost of services as you use them.

Medicare Advantage plans, by law, limit the out-of-pocket costs you pay every year. This varies by plan type, but can be no more than $10,000 per year.

Once you hit that limit, the Part C policy will pay for all covered expenses. Take this into account while tabulating your average annual out-of-pocket medical costs. If your annual medical spending does not reach the out-of-pocket cap, Original Medicare might work well for you.

Are You Covered By Your Employer or an Employer-Sponsored Plan?

If you are over age 65 but have employer-sponsored health insurance through your own employer or your spouse’s, you do not need to enroll in Medicare Part B or Part D. (You can enroll later, without penalty, as long as you enroll within the special enrollment period that occurs after your employer-sponsored coverage ends.) You’ll still be automatically enrolled in Part A, which covers hospitalization expenses.

If the employer has more than 20 employees, the employer’s health plan will become your primary payer for any hospitalization claims. This means the employer plan will pay any claims first, and your Medicare coverage will kick in only after the employer plan pays out its limits.

Smaller businesses do not have to provide Medicare-eligible employees with the same health benefits that they provide younger employees. Your employer can require you to enroll in Medicare Parts A and B. If an employer with fewer than 20 employees does continue your coverage and you also enroll in at least one part of Medicare, Medicare will become the primary payer, and the group health plan will become the secondary payer.

All Medicare Advantage plans are rated for their quality, accessibility, and customer satisfaction on a scale of one to five by the federal government. Plans with higher rating (three stars or more) are additionally funded by the government. This national ranking system can help you narrow down your options. For further assistance, please call us.


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In this issue:

This Just In...

When to Buy an Annuity…or Not

Wise Choices — Medicare vs. Medicare Advantage

Your Step-by-Step Guide to Personal Financial Planning in Your 40s

Annuities 101


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