03 Jul Chocolate or Vanilla – How Do You Choose?
During the summer months of my childhood, Dad would take us to the local soda shop for ice cream. There were fewer flavors to choose from back then, so Dad would always ask, “Chocolate or vanilla?” My choice was easy because both were silky smooth and delicious. It was a win-win situation either way!
For individuals new to Medicare, choosing a “flavor” is not so easy. What’s the difference between a Medigap (Medicare Supplement) or Medicare Advantage Plan? What’s my “best” option?
First of all, most everyone should consider choosing either a Medigap or Medicare Advantage Plan because Original Medicare (Parts A & B) does not cover 100 percent of healthcare costs. Without an additional plan, individuals are responsible for the “coverage gaps” that may include deductibles, copays, and coinsurance. Paying for the coverage gaps in Original Medicare can be very expensive and potentially catastrophic for individuals without an additional plan.
Depending upon the plan type (A thru N), Medigap policies will pay for some, if not all, of the medically approved healthcare costs not covered by Original Medicare. Medigap policies offer healthcare coverage at any medical facility that accepts Medicare assignment. Individuals that pay monthly premiums minimize future costs when healthcare is needed. Premiums are lowest at age 65 and gradually increase as one gets older. Medigap insurance is generally guaranteed issue, regardless of pre-existing conditions, for those new to Medicare and is guaranteed renewable as long as monthly premiums are paid. Medigap Plans do not include prescription drug coverage, so plan to enroll in a separate Part D Prescription Drug Plan (PDP).
Most Medicare Advantage Plans include prescription drug coverage (MAPD) and are considered Part C of Medicare. MAPDs have low or no monthly premiums, but individuals pay incremental copays, coinsurance, and deductibles when healthcare is needed. Be aware that plan costs and benefits can differ by county. MAPDs can be HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Networks). Understanding the HMO/PPO concept and physician “In-Network” and “Out-of-Network” charges is important. MAPD plans provide the same benefits as Original Medicare and may offer additional benefits such as dental, vision, hearing, gym membership, and even transportation to approved medical appointments. For some, the plan’s prescription drug formulary may be the single most important factor to consider when choosing an MAPD plan. MAPD plans are also generally guaranteed issue and can be switched yearly during the Annual Election Period.
Individuals should consider their financial situation, risk tolerance, lifestyle, and healthcare needs when evaluating the cost/benefit differential between a Medigap Plan with separate prescription drug coverage and an MAPD plan. Paying monthly Medigap premiums may seem burdensome, but can become more economical when a catastrophic event or prolonged illness occurs. MAPD Plans on the other hand, can be a greater value for healthy individuals who want to save monthly premiums and pay for services as needed. Should an accident or unexpected illness arise, MAPD co-pays, co-insurance, and deductibles can accumulate, but there are maximum out-of-pocket cost limits that minimize financial risk.
A cost-effective Medicare strategy should be based upon one’s own health, lifestyle, and budget. An insurance professional who represents multiple insurance companies will provide valuable advice to meet individual and unique circumstances. Look for an established company with Certified Senior Advisors (CSA) who offer free consultations. It may not make your decision to choose between “chocolate or vanilla” any easier, but will certainly be a win-win situation either way!
Jeff Shell is an independent insurance broker specializing in Medicare, life, and health insurance products. Contact Jeff at The Health Insurance Shoppe, 336-763-0775 or Jeff@HealthShoppeNC.com.