The Basics of Shopping for Medicare Advantage Plans During Open Enrollment

Medicare Advantage plans have been gaining in popularity as Medicare recipients find them to be an affordable alternative to supplemental Medigap plans. In fact, more than 51% of all Medicare beneficiaries are projected to be enrolled in Medicare Advantage plans by 2030 according to data from the Congressional Budget Office.

If you’re thinking of getting a Medicare Advantage plan, or if the Medicare Advantage plan you chose last year does not adequately cover your healthcare needs, Medicare “open enrollment” (running from October 15 through December 7) allows you the opportunity to shop for a new plan.

Whether your goal is to find a plan with a low deductible, a reduced premium that fits your budget, or a plan that offers more benefits for your specific needs (such as vision or dental coverage), we’ll talk about what Medicare Advantage plans are and the basics of plan shopping.

Medicare Review

When Original Medicare was created in 1965, it provided only two parts; Part A and Part B. Part A, which is typically free to US citizens that have paid payroll taxes for at least 10 years (or spouses of these workers), helps pay for in-hospital care. Part B helps pay for regular medical care (e.g., doctor’s bills, X-rays, lab tests). Individuals who choose to enroll in Part B must pay a premium (around $165 per month, per person in 2023), a deductible, and co-payments.

Original Medicare allows beneficiaries the right to choose any doctor or specialist who accepts Medicare and is available nationwide. Original Medicare is administered directly by the federal government, although claims and payments flow through private health insurance companies that act as intermediaries.

What is Medicare Part C (Medicare Advantage)?

Medicare Part C (known as Medicare Advantage) became available in 1997 to persons who are eligible for Part A and enrolled in Part B. Under Medicare Advantage, private health insurance companies can contract with the federal government to offer Medicare benefits through their own policies.

Medicare Advantage is an “all-in-one” alternative to Original Medicare. When you enroll in any Medicare Advantage plan, you will still get all Original Medicare covered services, but you may also obtain extra benefits and services not offered by Original Medicare. You may also be able to reduce your out-of-pocket costs.

The extra benefits and services you receive and/or the amount of money you save will depend on which Medicare Advantage plan you choose (more on that below). Most Medicare Advantage plans include Part D prescription drug coverage.

Medigap Plans and Medicare Advantage Plans

This is important: In addition to your Medicare Part A and B coverage, you must choose between a Medigap OR a Medicare Advantage plan. You may not be sold both types of supplemental plans.

In general, Medigap plans have more standardized benefits but also come with higher premiums. If you’re turning age 65 soon and you anticipate higher healthcare needs in retirement or desire standardized coverage benefits that don’t change often, you may want to learn more about Medigap plans instead of a Medicare Advantage plan.

If you’ve already chosen a Medigap plan, think twice before you cancel that policy because you may be unable to get it back except in certain situations and if you can pass medical underwriting evaluations. The best time to apply for a Medigap policy is during the special enrollment period (three months before age 65 to three months after) because there are no pre-existing condition clauses to prevent you from supplemental coverage.

Shopping Between Medicare Advantage Plans

There’s a lot to consider when deciding which Medicare Advantage plan is right for you. Because out-of-pocket costs and the types of coverage offered will vary, it’s important to compare plans before choosing one.

Here are some questions to ask during the decision-making process:

  • How much is the premium?
  • Will you need to satisfy a deductible or pay co-payment or coinsurance costs? Medicare Advantage plans have an annual cap on how much you pay for Part A and Part B services. This will differ among plans.
  • Does the plan cover the extra benefits or services you need (such as coverage for vision, hearing, dental, or health and wellness programs)?
  • Does the plan offer prescription drug coverage (most Medicare Advantage plans do)?
  • Do the health care providers you normally see participate in the plan?

Several types of Medicare Advantage plans may be available in your area. These include Medical Savings Account (MSA) plans, Special Needs Plans (SNPs), the three types discussed below–Private Fee-for-Service (PFFS) plans, Health Maintenance Organization (HMO) plans, and Preferred Provider Organization (PPO) plans–and others.

Medicare Advantage Private Fee-for-Service (PFFS) Plans: These plans are generally the most flexible and most costly. They allow you to see any Medicare-approved health care provider who accepts the terms of your plan.

Medicare Advantage Health Maintenance Organization (HMO) Plans: You may save the most money on your health costs by joining a Medicare Advantage managed care plan–a Health Maintenance Organization (HMO) plan. However, your choice of health care providers is more limited than with other options–you’re generally covered only when you see doctors and specialists, or go to hospitals that are part of the plan’s network of providers and within the plan’s service area.

When you choose a Medicare Advantage HMO, you’ll need to choose a primary care physician who will oversee your care and refer you to specialists when necessary.  With some HMO plans, you may be able to go out of network for certain services, usually at a higher cost. This type of plan is called an HMO with a point-of-service option (HMOPOS).

Medicare Advantage Preferred Provider Organization (PPO) Plan: With Medicare Advantage PPOs, you will generally only see health care providers within the plan’s network, but, unlike Medicare Advantage managed care plans, you can choose doctors and services outside the PPO network usually for a fee, and you do not need to choose a primary care doctor or get referrals to see specialists.

Buyer Beware When Choosing Medicare Advantage Plans

Despite the growing popularity of Medicare Advantage plans, the unfortunate reality is some claims that are made to Medicare Advantage policy providers – also known as Medicare Advantage Organizations (MAOs) — are denied without just cause. In fact, a 2022 Medicare Advantage report by the Office of Inspector General (OIG) found that out of all claim requests that MAOs denied, 18% met Medicare coverage rules and Medicare Advantage Organization (MAO) billing rules.

The good news according to the OIG’s study is that MAOs reversed some of the denied prior authorization and payment requests, often when a beneficiary or provider appealed or disputed the denial. 

Message: if your claim is denied, dispute and appeal.

If you are enrolled in Original Medicare, you can find your appeal rights on the back of the Explanation of Medicare Benefits or Medicare Summary Notice you received. If you are enrolled in a Medicare Advantage plan, the plan must give you written notification of your appeal rights; this will generally be included in your Medicare enrollment materials.

Medicare beneficiaries also have the right to a fast-track appeals process. If you believe that your health plan is ending its services too soon, you can ask for a quick review of your case conducted by independent doctors. You may have additional rights if you are hospitalized, in a skilled nursing facility or if your home health care ends.

For any other questions you may have about consumer protections or appeal rights, call (800) Medicare or visit the Medicare website.

Choosing Medicare Supplemental Plans as Part of Your Larger Retirement Plan

If you’re thinking of getting a new Medicare Advantage plan, Medicare open enrollment (October 15 through December 7) is your chance to shop for a new plan that may better suit your needs. If you choose a new plan (or drop your Medicare Advantage plan and return to original Medicare only), it would go into effect January 1 of the following year.

Did you know the average retired couple at age 65 can expect to spend $315,000 on healthcare expenses in retirement according to a 2022 study by Fidelity? Whether you’re comparing Medicare Advantage and Medigap plans, or you’ve already chosen a healthcare plan, it’s never too early to prepare for healthcare costs and other retirement expenses that could impact your retirement account balances over time.

A trusted financial advisor with a skilled financial planning team can help you:

  • Learn more about the basics of Medicare Advantage and Medigap plans
  • Ensure your Medicare plan fits your budget when it comes to a portfolio that needs to last decades or even 30 to 40 years
  • Prepare for rising medical costs that grow with inflation
  • Consider all this while also accounting for market fluctuations and risks that will inevitably impact your portfolio.

Proper planning and preparation can give you the peace of mind that you won’t outlive your money when choosing a supplemental Medicare plan. So remember to be prepared, read the fine print, and choose wisely.

For further reading and information, access the links below:

Kaiser Family Foundation: What to Know About the Medicare Open Enrollment Period and Coverage Options

Forbes: Medicare Advantage vs Medicare Supplement (Medigap)

*The information presented here is not specific to any individual’s personal circumstances. FMP Wealth Advisers is not providing investment, tax, legal, or retirement advice or recommendations in this article.

**To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. 

***These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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