“I’m 65 and pretty healthy, so I don’t need much coverage. Medicare Advantage monthly premiums can be free or really inexpensive and I don’t want to throw away money on insurance I don’t need.”

Nobody’s healthy forever. And the future is unforeseeable.

Medicare Advantage plans have been exploited by insurance companies that abuse the words “free” and “you deserve,” and “additional benefits.” These and similar phrases lead people—who are suddenly thrust into making a decision about Medicare—to believe that certain aspects of coverage—even entire plans—cost little or nothing. But the TOTAL cost of Medicare Advantage plans can be far more than the premiums may suggest.  

Premium v out-of-pocket costs

Though premiums for some plans can be very low, when you need healthcare, you’ll have to open your wallet pretty wide to cover out-of-pocket costs for low-priced Medicare Advantage plans. Out-of-pocket costs can be as high as $7,550* in-network, or more than $11,000* out-of-network. As high as those numbers are, Medicare Advantage is still better than Original Medicare (Plan A + Plan B), with no limits on out-of-pocket costs.

It’s important to note that all the various Medicare Advantage plans have to offer at least the same benefits as Medicare Parts A and B. Why? Private insurance companies are funded in part by the US Government for offering Medicare Advantage plans and enrolling people in them. To qualify for funding paid by the government to the insurance companies, these policies must conform to coverage standards determined by the Center for Medicare and Medicaid Services (CMS). But there are a lot of financial risks and coverage gaps with both Original Medicare (Parts A & B) and  Medicare Advantage plans (Part C) that can result in high out-of-pocket costs.  And these plans involve short term contracts, in many cases only one year. So you’ll have to review all the options again next year, which can be very confusing. 

The devil’s in the details

For example, one popular Medicare Advantage plan looks great on the surface. “Max” is very happy with his Medicare Advantage plan. “I can see any doctor I want and my premium is only $38/month. I had surgery last year and it cost me nothing.” While it’s true his plan will cover costs for providers within his network that accept Medicare, if the provider isn’t in the plan’s network, Max will pay out-of-network rates. For example, out-of-network labs, radiology and x-rays entaila 40% co-insurance payment**, inpatient hospital stays require 40% co-insurance. The out-of-pocket maximum on Max’s plan is $6,700 for out-of-network care. If he needs chemotherapy, he’ll pay 20% (in network) and 40% (out of network) for the cost of the drug, which can range between $1,000 and $12,000/mo. It’s common for situations to arise where the best care, labs, or drugs Max may need aren’t in his plan’s network. And some providers may “disappear” from networks overnight, such as one of the nation’s leading academic research clinics in Minnesota, which has recently been dropped from a prominent Medicare Advantage plan’s network. The learning here is that the devil is in the details. And the details change every year.

FOMO about those “Additional benefits you’re entitled to”

Dental, hearing, and vision plans drive demand for many Medicare Advantage plans. In some plans they’re included in the monthly premium. Sounds good, right? Well, take a look at the coverage of those plans and you’ll see that you can easily pay $2,000/year in premiums, coinsurance, and deductibles for a dental plan before it covers more than half of your care. Vision and hearing can have similar flaws. So, in the end, these “free additional benefits” aren’t worth much until you’ve shelled out a lot out-of-pocket. Many dentists and vision practitioners are beginning to offer private plans that rival Medicare options. Be sure to ask about free eye exams with a membership to your optometrist, dental discounts for joining a private plan, and audiology programs. Once you compare, you may decide to skip the Medicare route for these types of care.

What’s the alternative?

Medigap/Supplement plans are an alternative to Medicare Advantage plans and added on top of Original Medicare (Parts A and B). These plans are also offered by private insurance companies and are specifically designed to fill those gaps (thus “Medigap”). Medigap plans pay for some or all the deductibles and copays left by Original Medicare, except the low Part B deductible ($226 in 2023). Medicare Supplement plans are guaranteed renewable and won’t change coverage year to year, so you won’t have to review plans every year to be sure you’re covered or to see if you’re getting the best deal for your premium cost. 

Why is Medicare Advantage so popular when retirement is a long-term commitment? We keep asking the same question.

Contact ActivAge Medicare Advisors to schedule a FREE consultation. We’re Medicare specialists and licensed insurance agents who can guide you to the Medicare Supplement plan that fits your unique situation. Contact Freedom@activagemedicare.com Or call 941-567-6000

*Out-of-pocket maximums for select Medicare Advantage plans in the year 2022.

*Coinsurance is the percentage of costs you pay after you’ve met your deductible while a copay is a set rate you pay for prescriptions, doctor visits, and other types of care.