How Can Medicare Advantage Provide Coverage at Such a Low Cost?
Many seniors wonder how Medicare Advantage plans are able to provide a significant range of coverage at such a low cost, especially if their experience is with paying traditional MediGap/Medicare supplement premiums. When the federal government started Medicare Advantage (Medicare Part C), it required that private companies offering these plans get approved by the government before providing these services.
The Medicare program is funded through the federal government and taxes paid on income. The federal government pays a fee to Medicare Advantage carriers to administer and provide Medicare benefits on a per member per month (PMPM) basis. The carrier then uses 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 low or even get down to $0. Remember, you must continue to pay your Part B premiums to be on a Medicare Advantage plan, just as you’d pay original Medicare premiums.
Let’s take a look at how traditional Medicare and Medicare Advantage plans compare head-to-head. You need to understand the costs of each plan in terms of monthly premium and range of coverage, as well as what you’ll be expected to pay out of pocket, before determining which type of plan is appropriate for your long-term needs.
The range of coverage offered by Medicare is designed to cover the most basic of health needs and is generally best suited for seniors who don’t have major health problems or other exotic or unique complications. Medicare Part A is also known as “hospital insurance” and covers hospital stays and some home healthcare. Medicare Part B pays for the more-routine doctor and medical expenses as well as preventive care and some tests and screenings.
While traditional Medicare provides basic coverage, you may need to consider some extra coverage to meet those needs it isn’t able to take care of. Two options you can use to supplement traditional Medicare’s coverage include:
- Prescription Drug Coverage (Medicare Part D): When traditional Medicare first started, our society didn’t have the same variety or the same expenses associated with today’s prescription drugs. As prescription drugs became more a part of consumers’ daily lives and costs increased, the government added Medicare Part D to provide prescription drug coverage to seniors on Medicare. If you take a number of prescription drugs and would like those covered, you’ll need to enroll in a Medicare Prescription Drug Coverage plan.
- MediGap (Medicare Supplemental Insurance): MediGap plans grew out of the same need recognized above: seniors had healthcare needs that were not being met by the traditional Medicare programs. The coverage and costs of MediGap plans are different, depending on the plan. You can learn more about MediGap plans by visiting our Medicare Supplemental Insurance page.
Medicare Advantage Plans
In an effort to help control health care costs, provide a more valuable product, and offer seniors more options for managing their long-term health care, the government created Medicare Part C, or Medicare Advantage. Plans offered through Medicare Advantage deliver all the benefits of traditional Medicare, plus they can offer additional benefits like prescription drug coverage, fitness benefits, and vision and hearing coverage. You need to investigate the individual plan features and associated costs before making a coverage decision. But if you like having all your plan benefits in one package, Medicare Advantage might be the best policy for you.
Costs and Cost-Sharing
As with any other product or service, the real issue here is how much help you can afford. No matter which type of Medicare coverage you select, you are required to assist with the costs of the plan. As you figure your budget, there are two major items you need to watch:
- Deductibles: your out-of-pocket costs for health care coverage (Once you reach your deductible, your plan will start to help pay for some of your health care costs.)
- Premiums: your monthly contribution to participate in the benefits of your plan
In traditional Medicare, premiums and deductibles are set amounts that tend to vary only according to the cost of care where you live. Medicare Advantage plan premiums and deductibles can fluctuate significantly, depending on the specific plan. Two other tools Medicare plans and other forms of insurance use to help manage your healthcare costs are:
- Copays: the amount you pay each time you use a service
- Coinsurance: the percentage youpay for your health care costs and what the plan pays. (For example, you might pay 20% of your costs, and the plan would pay the remaining 80%.)
Part A copays kick in only after a certain number of days you’ve spent in the hospital. Part B copays and coinsurance amounts are set by Medicare, so they’re usually the same for everyone. Some Medicare Advantage plans don’t have a copay, and some have a high copay. Similarly, some plans will use coinsurance and some won’t.
Value = Getting the Most for Your Money
All too often when people select a healthcare plan, they look at only dollars and cents and neglect value. While on the surface it may look as though you are saving money, down the road, you may find that the additional benefits associated with a more-expensive plan would have saved you money. Some plans may provide too much value, and you may not use the extra benefits. In that case, scaling back may be in order. At the end of the day, we want to make sure you get the most for your healthcare dollar.
Contact Flaherty Insurance Group today. We’re ready to review the advantages and disadvantages of these plans with you and help you pick the plan appropriate for your healthcare needs.