Part 2 of 3: Should I purchase a Medicare Advantage plan or Medicare Supplement?
In my business, this is obviously the most often asked question I receive. This will be the type of coverage you have for the rest of your life barring some exceptions. My goal is to take a consultative approach with my clients so I prefer to educate and leave the decision making up to them.
This will be a 3-part series that includes:
Part 2: Cost
Usually next in line for discussion is cost. First let’s start with the constant. To be eligible to purchase either a Supplement or a Medicare Advantage Plan you must be enrolled in both Medicare Part A and Part B. I typically tell my clients whatever you pay the government for Part B is between you and the government. Enrolling in a Supplement or Advantage plan will have no impact on your financial liability to the government for your Part B premium. Now that we have the housekeeping out of the way we can talk about the costs of the actual plans. You could break the costs into two separate categories: 1. Monthly costs and 2. Cost of care such as deductibles, copays, and coinsurance. Let’s start with monthly costs. Most Supplements have premiums that are based on the insured’s age. You could see monthly premiums for Supplements ranging from $50/month (for a high deductible F) to over $200 a month for a Plan F. Medicare Advantage plans are not based on age so the monthly premium would be the same for someone that is age 65 or age 105. Medicare Advantage Plans are reimbursed by the government for “becoming” your Medicare so that is why you see Advantage plans with much lower premiums and in many cases, they have a $0 monthly premium.
Those were your monthly costs so now we can address cost of care. There are variables, but a Supplement will pick up all or some of the Medicare deductibles and coinsurance (20%) leaving the policy holder with little to no out of pocket costs. While Supplements are more expensive from a monthly premium basis they are sometimes easier to budget because you are left with little to no extra costs with regards to how many times you access care. Medicare Advantage Plans might come with a $0 monthly premium, but you will most likely have copayments or coinsurance for all your access to care. Example a $10 copay for a primary care physician, $45 copay for a specialist, $285 copay for each night in the hospital days 1-7, etc. While the Advantage plan has an attractive monthly premium an insured must understand that there could be large fluctuations from a monthly basis depending on the type of care someone is receiving.
My Take
I explain the difference as “pay me now versus pay me later”. For instance, with a Supplement you are “paying me now” with a higher monthly premium, but little to no costs for doctor or hospital visits. With an Advantage Plan, you are “paying me later” with little to no monthly premium, but paying each time you access care.
While these topics certainly aren’t all the questions that come up when comparing Supplements versus Advantage Plans hopefully this article will give you a good basis for understanding some of the differences.
My priority is to educate our clients in a way that empowers them to make their own decision regardless of product choice.