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Medicare Parts C & D: Medicare Advantage and Prescription Drug Plans
Executive Summary: Its complicated! Consider working with a competent independent insurance agent who can help you sort it out. Or you can call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048. There is also your state’s SHIP (State Health Insurance Assistance Program). In Indiana you can reach SHIP at 1-800-452-4800, TTY 1-866-846-0139. In Kentucky the number is (877) 293-7447. In Illinois the number is (800) 252-8966.
Indiana SHIP Website:
Illinois SHIP Website:
And before I forget: Medicare does not cover long term care. Long term care is custodial care expected to be needed for at least 90 days if not indefinitely. Medicare covers some rehabilitative care delivered in long term care facilities. But it does not cover custodial care, also known as long term care.
Here are (a few of) the details:
There are publications available for download on the www.Medicare.gov web site that explain Medicare Part C. It is highly recommended that you consult this website and/or official Medicare publications if you are enrolled or eligible to enroll in Original Medicare Parts A and B and are considering the Medicare Advantage and Part D prescription drug options.
Medicare Advantage plans are alternatives to Original Medicare. The plans are issued by private companies under contract with Medicare. Choosing Medicare Advantage does not take away any coverages to which you are entitled under Original Medicare. Instead these plans package Medicare Part A and Part B in one plan. Most Medicare Advantage plans also include Part D prescription drug coverage.
Benefits and Cost Sharing
Medicare Advantage plans are required to provide benefits equivalent in value to the value of benefits covered by Original Medicare. Advertised Medicare Advantage premiums are usually significantly lower than premiums for the most popular Medicare Supplement (aka Medigap) plans such as Plans F & G, especially when Medigap premiums are added to the premiums you pay for Part D prescription drug coverage.
pays for much but not all the cost for covered healthcare services and
supplies. But it does not include a cap on the share of covered medical expenses
that you pay through deductibles, co-pays, and coinsurance. Medicare Advantage
policies protect you from this potentially large financial risk by putting a
cap on the annual share of Medicare-covered expenses that you pay.
This cap varies with different Medicare Advantage policies, The highest annual caps
on your share of expenses under a Medicare Advantage Plan are as much as $10,000. The lowest are around $4,000. These caps do not include your share of prescription drug costs covered under Medicare Advantage Prescription Drug Plans. Medicare Advantage HMOs (Health Maintenance Organizations) are required to cap your share of covered expenses at $6,700. Preferred Provider Organization (PPO) plans are required to cap your share of covered expenses received from in-network providers at $6,700, and place an aggregate cap for services from both in and out-of-network providers at no greater than $10,000. Some plans have lower out-of-pocket caps.
Many Medicare beneficiaries choose Medicare Advantage due to lower premiums. The combined cost of a supplement and a Part D prescription drug plan often exceeds available household resources. Medicare Advantage premiums are currently significantly lower than premiums for Medigap Plan F, the most popular Medigap plan. But your out of pocket costs due to deductibles, co-pays, and coinsurance will be higher with Medicare Advantage than they would be with Medigap Plan F. I’ve heard this expressed as "the choice between paying in advance (Medigap Plan F) and paying as you go (Medicare Advantage)."
Medicare Advantage plans place an annual cap on your out of pocket costs. Out of pocket costs are your share of the costs of medicare-covered healthcare. For example, one plan I represent this year has out of pocket costs ranging from $6,000 to $10,000, depending on how often you used "Out-of-Network" providers. That does not include a $52 per month premium. Part D prescription drug out of pocket costs are not included in this cap and are subject to their own "threshholds" which vary depending on which plan you choose and how many covered prescription drugs you use. Your share of Annual Part D expenses, excluding premiums, can reach $5,100 or more.
When you compare Medigap plans such as plan F with Medicare Advantage you are comparing, among other things, premium costs with cost sharing. Choosing between these options will depend upon how much healthcare you expect to need from year to year. Do you have between $6,000 and $13,000 available to meet your share of the cost of covered Medicare benefits in one year? Your financial circumstances are important to your decision. If you have a bad year health-wise, what you save in premium with Medicare Advantage could be easily outweighed by what you pay in out-of-pocket costs when compared with the cost of higher Medigap premiums.
And then there are next year’s costs to think about. Unfortunately, simplicity is not yet one of the benefits to which Medicare Beneficiaries are entitled.
Prescription drug coverage is another important factor to consider when evaluating coverage options in addition to those of Original Medicare. Unless you have “creditable coverage” for prescription drugs, such as Veterans Administration (VA) benefits or employment-based group health coverage, you should seriously consider, at a minimum, pairing Original Medicare with a Part D prescription drug plan.
Creditable prescription drug coverage is coverage that is at least as good as the coverage that Medicare requires Part D plans to provide. Your current provider of prescription drug coverage, if it is not Medicare Part D, should be able to tell you whether your coverage is “creditable coverage.”
The Penalty: If you do not have creditable coverage, and you do not enroll in Part D when you are first eligible, you will pay a penalty that is permanently added to your monthly Part D premium when you do enroll in Part D. The longer you go without Part D coverage the higher will be the penalty. The penalty is 1% of the national average premium for Part D plans for each month you are eligible and do not enroll.
Another consideration: Medicare Supplement Plans (aka Medigap), Medicare Advantage Plans, and Medicare Part D Prescription Drug Plans are all optional, the Part D Late Enrollment Penalty notwithstanding. There are plenty of Medicare Beneficiaries in Original Medicare who have decided they can live without caps on their share of covered expenses. Sometimes agents try to scare beneficiaries by suggesting that the absence of one of these plans leads inevitably to financial ruin. It could. But you probably know better what the odds are. You know your health history. Don’t send more money to an insurance company than you need to.
For the record, the
Part D Late Enrollment Penalty can be steep. And few of us can say with
certainty what our future prescription drug needs may be. The penalty is 1% of
the national average monthly Part D premium ($33.50 in 2018) for each month you
were eligible but did not enroll. This penalty is added to your monthly premium
when you enroll later than you should have. And it is permanent. So lets see . . . .01 times $33.50 is 0.34 cents, times 120 months is $40.80(!) in addition to the regular premium. I wish I had enrolled when . . .
It’s complicated. Consider consulting with a qualified independent insurance agent. I can be reached at (812) 988-6793. Bill@billstant-insurance.com. Or fill out the contact form on this website. Thanks!
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