Decoding health insurance options can be daunting for people age 65 and over. Those who have paid 10 years of Social Security taxes qualify for Medicare at age 65; they are automatically signed up if they are receiving Social Security payments unless they take steps to opt out. Standard Medicare comes in two parts: A and B. Part A covers a portion of hospitalization expenses, and Part B applies to doctor bills and other medical expenses like lab tests and some preventive screenings.
But some seniors may find better value in Medicare Part C, or Medicare Advantage. Such plans are run by private insurance companies but regulated by the government, and must offer coverage that's comparable to original Medicare parts A and B. Most also include prescription drug coverage, which for seniors who keep original Medicare is an optional add-on, called Part D.
Some Medicare Advantage plans cost nothing more per month than original Medicare, while others come with a higher monthly premium. (Any additional premium is added to what you would otherwise pay for Medicare Part B—about $105 per month in 2013, which for most people is automatically deducted from their Social Security checks.) Medicare Advantage plans are similar to private insurance that self-employed individuals buy on the open market, in that they have different monthly premiums, copays, coinsurance, and out-of-pocket limits. The tradeoff for a lower premium (or none) could be higher copays or coinsurance.
Whether or not a Medicare Advantage plan costs more, it could be better or worse for you than original Medicare. Consumers have to carefully review the details of each plan and make a clear-eyed appraisal of their circumstances, including their health, budget, and tolerance for financial risk.
You may want to get Medicare Advantage instead of original Medicare if....
- You take prescription drugs. As stated, original Medicare doesn't cover prescriptions unless you pay extra to add Part D coverage. (The average monthly cost of Part D will be $40 in 2013.) By contrast, about 82 percent of Medicare Advantage plans include drug coverage, according to the Kaiser Family Foundation, a nonprofit, nonpartisan research institute. In some cases your monthly premium will exceed the amount you'd pay for part D. The federal government, and brokers like PlanPrescriber.com, have online tools where you can check how much you'll pay for the drugs you need. (U.S. News & World Report has a revenue-generating agreement with eHealthInsurance, which owns PlanPrescriber.com.)
- You want a cap on your out-of-pocket health spending. Original Medicare has no out-of-pocket maximum. You keep paying a portion of the cost of services as you use them. Medicare Advantage plans, by law, have a out-of-pocket maximum of no more than $6,700 per year. Once you hit that limit, the plan pays for all covered expenses. In 2013, 48 percent of Medicare Advantage plans have a $3,400 cap or less, according to the Kaiser foundation. Keep in mind you might not hit that cap: average out-of-pocket Medicare spending was $2,536 in 2006, or about $3,000 in today's dollars, according to the latest analysis by Kaiser.
- You want an alternative to enhancing your Medicare coverage with private "Medigap" (Medicare Supplement) insurance. Medigap plans cover or help cover certain deductibles, coinsurance and out-of-pocket costs of original Medicare. Some Medicare Advantage plans, but certainly not all, will be more cost-effective than adding Medigap coverage to original Medicare. Scrutinize the plan details if this is your reason for considering Medicare Advantage.
- You want an alternative to the 20-percent coinsurance charged by original Medicare for most services. Medicare Advantage plans structure costs differently and may offer a lower (or higher!) coinsurance or may charge copays instead, which are fixed costs you pay for services. A tradeoff could be a higher monthly premium.
- You want coverage for vision, dental, assisted living facilities, or nursing home care. Original Medicare doesn't cover these services. Certain Medicare Advantage plans do.
Updated on 12/5/12