Traditional Medicare has advantages and disadvantages. Traditional Medicare involves Part A (hospitalization) Part B (doctors and clinics), Part D (drugs). Parts B and D require additional premiums. Furthermore, traditional Medicare has unlimited cost sharing, that runs 20% of the total cost. Most enrollees in traditional Medicare opt to buy a separate supplemental insurance policy to cover their cost sharing.
To limit what they spend out-of-pocket, traditional Medicare enrollees typically sign up for supplemental insurance, such as employer coverage or a private Medigap policy. If they are low-income, Medicaid may provide that supplemental coverage.
Medicare Advantage plans are growing in popularity due to the cost of traditional Medicare. Medicare Advantage are private plans that provide more benefits at a lower cost than traditional Medicare. This is what Kaiser Health News had to say about Medicare Advantage:
Enrollment in Medicare Advantage plans has grown substantially in the past few decades, enticing more than half of all eligible people, primarily those 65 or older, with low premium costs and perks like dental and vision insurance. And as the private plans’ share of the Medicare patient pie has ballooned to 30.8 million people, so too have concerns about the insurers’ aggressive sales tactics and misleading coverage claims.
One Medicare Advantage enrollee, named Richard Timmins, explained his decision:
“I listened to the insurance agent and, basically, he really promoted Medicare Advantage,” Timmins said. The agent described less expensive and broader coverage offered by the plans, which are funded largely by the government but administered by private insurance companies.
“It’s one of those things that people might like them on the front end because of their low to zero premiums and if they are getting a couple of these extra benefits — the vision, dental, that kind of thing,” said Christine Huberty, a lead benefit specialist supervising attorney for the Greater Wisconsin Agency on Aging Resources.
Although Medicare Advantage plans have many advantages, these plans are not without some drawbacks. Medicare Advantage plans are administered by private companies which have narrower provider networks and often require prior authorization for some treatments. As Timmins got older and his health deteriorated, he thought about switching back to traditional Medicare where he would have a much larger choice of health care providers. That is when he discovered a disadvantage of Medicare Advantage.
But, Meyers said, there’s a catch: While beneficiaries who enrolled first in traditional Medicare are guaranteed to qualify for a Medigap policy without pricing based on their medical history, Medigap insurers can deny coverage to beneficiaries transferring from Medicare Advantage plans or base their prices on medical underwriting.
Most states allow Medigap insurers to deny coverage to those who waited until they were sick to sign up for supplemental insurance. Only four states prohibit the practice, Connecticut, Maine, Massachusetts, and New York.
Traditional Medicare allows beneficiaries to go to nearly any doctor or hospital in the U.S., and in most cases enrollees do not need approval to get services.
“There are a lot of people that say, ‘Hey, I’d love to come back, but I can’t get Medigap anymore, or I’ll have to just pay a lot more,’” said Ginsburg, who is now a professor of health policy at the University of Southern California.
Many Medicare enrollees flock to Medicare Advantage plans for the enhanced benefits and cheaper premiums when they are healthy. They sometimes want to switch back to traditional Medicare when they later become less healthy. In the process, they sometimes find they are no longer a desirable customer for Medigap insurers, who either deny coverage or demand a premium much higher than seniors want to pay. That is a situation where it is hard to blame either party. Enrollees opt for cheaper premiums and richer benefits early on when they are healthy. Insurers not wanting high-cost, unprofitable enrollees who were not paying premiums while healthy. Rather than blame Medicare Advantage, policy makers should inform seniors about the trade-offs. Perhaps the free, enhanced benefits early on are not as desirable as the enhanced benefits later on. That is a decision every senior needs to consider.