How Can Medicare Advantage Provide Coverage at Such a Low Cost?
Most seniors wonder how Medicare Advantage plans can provide a significant range of coverage at such a low cost, especially if they’ve been paying traditional MediGap/Medicare supplement premiums. When the federal government began Medicare Advantage (Medicare Part C), it required that private companies offering these policies become approved by the government prior to providing these services.
The Medicare program is paid for by the federal government and taxes paid on income. The federal government remits a fee to Medicare Advantage carriers to administer and dispense Medicare benefits on a per member per month (PMPM) basis. The carrier then utilizes the PMPM fee from the government to provide your Medicare benefits, equal or greater than benefits provided by original Medicare. The end result is that premiums can be very cheap or even get down to $0. However, you must continue to pay your Part B premiums to be enrolled in a Medicare Advantage policy, just as you’d pay original Medicare premiums.
Let’s consider how traditional Medicare and Medicare Advantage plans compare for the same coverage. You need to understand the costs of each policy in terms of monthly premium and range of coverage, as well as what you’ll be required to pay out of pocket, before determining which kind of policy is appropriate for your long-term needs.
The range of coverage provided by Medicare is expected to cover the most basic of health needs and is usually good for seniors who don’t have major health issues or other rare or unique complications. Medicare Part A is also known as “hospital insurance” and pays for hospital visits and some home healthcare. Medicare Part B covers the day-to-day physician and medical bills plus preventive care and some tests and screenings.
While traditional Medicare pays for basic coverage, you may need to think about some additional coverage to meet those issues it can’t pay for. Two options you can utilize to complement traditional Medicare’s coverage include:
Prescription Drug Coverage (Medicare Part D): When traditional Medicare first started, we didn’t have the same selections available or the same costs associated with today’s prescription drugs. As prescription drugs became more a part of senior’s daily lives and became more expensive, the government introduced Medicare Part D to provide prescription drug coverage to people on Medicare. If you take lots of prescription drugs and would like them covered, youmust enroll in a Medicare Prescription Drug Coverage plan.
MediGap (Medicare Supplemental Insurance): MediGap plans grew out of the same need stated above: enrollees had healthcare needs that weren’t covered by the traditional Medicare plans. The coverage and costs of MediGap plans vary widely, depending on the coverage provided. You can learn more about MediGap plans by going to our Medicare Supplemental Insurance page.
Medicare Advantage Plans
In an attempt to help manage health care costs, provide a more valuable plan, and offer people more selections for managing their long-term health care, the government created Medicare Part C, or Medicare Advantage. Plans offered through Medicare Advantage supply all the benefits of traditional Medicare, plus they can provide other benefits like prescription drug coverage, fitness benefits, and vision and hearing coverage. You need to investigate the individual plan benefits and associated costs before making a coverage decision. But if you prefer all your plan benefits in one package, Medicare Advantage might be the best selection for you.
Costs and Cost-Sharing
Like any other product or service, the real issue at hand is how much help you can afford. No matter which type of Medicare plan you opt for, you’re required to assist with the costs of the plan. As you decide your spending plan, there are two major items you need to consider:
- Premiums – your monthly payment to participate in the benefits of your policy
- Deductibles – your out-of-pocket costs for health care coverage (Once you reach your deductible, your policy will proceed to help pay for some of your health care costs.).
In traditional Medicare, premiums and deductibles are set amounts that tend to fluctuate only according to the cost of medical care where you live. Medicare Advantage plan premiums and deductibles can fluctuate significantly, depending on the specific policy. Other instruments Medicare plans and other forms of insurance use to help manage your healthcare costs are:
- Copays – the amount you pay every time you use a service
- Coinsurance – the amount you pay for your health care costs and what the policy pays. (For example, you might be responsible for 20% of your costs, and the policy would pay the remaining 80%.)
Part A copays begin only after a specified number of days you’ve spent in the hospital. Part B copays and coinsurance amounts are determined by Medicare, so they’re typically the same for everyone. A few Medicare Advantage plans don’t insist on a copay, and some have a high copay. Similarly, some policies will use coinsurance and some will not.
Value = Getting the Most for Your Premium
All too often when folks select a healthcare policy, they look at only dollars and cents and forget about value. While in the beginning it may look as though you’re saving money, later, you may see that the additional benefits that go with a more-expensive plan would have saved you money. Some plans may offer too much value, and you may not use the additional benefits. At that point, scaling back may be appropriate. Ultimately, we want to make sure you get the most for your healthcare dollar.
Contact Sun Coast Legacy Advisors today. We’re eager to assess the advantages and disadvantages of these policies with you and help you pick the plan suitable for your healthcare needs.