Medicare Advantage may not be so advantageous after all

For years I’ve been telling whoever would listen to think twice before signing up for Medicare Advantage which you can get for free or almost free with extras like dental, hearing, etc. But like most things in life, there’s no free lunch. And Medicare is no exception.

There is a recent New York Times article titled, Medicare Advantage Plans Often Deny Needed Care, Federal Report Finds, that speaks to this point.

Unlike traditional Medicare with Medigap with low deductibles, nationwide coverage and no surprise billing, you are right back in the private insurance world. You have to fight to justify your claims, deal with in-network/out-of-network, etc. — your interests against the interests of insurers.

Even worse, if you want to switch back to traditional Medicare, you have to be underwritten for Medigap. By then you’re probably older and sicker with preexisting conditions that insurers will exclude those conditions or deny you altogether. You have only one chance at the initial enrollment (65 for most people) to get in without underwriting.

How can private insurers offer it for free or almost free? The government subsidizes the program, essentially outsourcing the burden of administering the program. It’s easy money for private insurers. It's a win-win for the government and insurers, but we consumers lose. I guess two out of three ain't bad.
 
Allow me elaborate. By traditional Medicare, I mean the government program—Part A and Part B—that most people think of when they think of Medicare. Part A covers hospitals while Part B covers physicians. Most people supplement Parts A and B with a drug plan (Part D) and Medicare Supplement (or Medigap), which cover what Part A and B don’t cover like medication, co-pays and co-insurance.
 
For most people, traditional Medicare described above (vs. Medicare Advantage) is the better choice. It’s accepted by nearly all healthcare providers in all states. Add Part D and Medigap and you're covered. It's broad and comprehensive.
 
Instead of traditional Medicare, you can also choose Medicare Advantage (also called Part C). It’s a plan administered by private insurers and is similar to employer-provided health insurance plans most of us are accustomed to. Premiums are generally lower for Medicare Advantage, sometimes $0.
 
But don’t let the lower premiums entice you. There is little or no advantage to choosing Medicare Advantage. While coverage itself is the same or often broader than traditional Medicare, there are restrictions and usually higher deductibles, co-pays and co-insurance. For example, you must go to in-network providers for favorable pricing and these providers are usually within your state border. So if you travel a lot, Medicare Advantage is not the plan for you. It may also require referrals to see specialists.
 
So why do so many end up choosing Medicare Advantage instead of traditional Medicare? Well, for starters, it’s marketed heavily. You see commercials on television, on billboards and on the sides of buses with celebrities promoting it. Perhaps you have received an invitation in the mail to sign up for a plan or been stopped by folks at a booth set up in a shopping mall. If you are unaware (as most people are), you can easily think it’s the Medicare and end up signing up for it.
 
But how can insurers charge so little and still stay in business? It’s because they get subsidized by the government for each policy they write to the tune of $900 or $1,000, give or take. It’s money they don’t want to pass up. And by shifting the burden and risk of managing policyowner claims to private insurers, Medicare program (i.e. federal government) saves money too.
 
Can you switch from Medicare Advantage to traditional Medicare? The answer is, yes but…. Yes, you can switch between Medicare Advantage and traditional Medicare. But, insurers will require medical underwriting. As a result, you may be charged a higher premium and/or your coverage may exclude pre-existing conditions. Worse, you might be uninsurable and rejected altogether. The only time you can buy Medicare supplement with no medical underwriting is when you first sign up for Medicare usually at age 65, or later if you are coming off of an employer insurance.
 
So here is a moral of the story.

• When you sign up for Medicare for the first time, carefully choose between traditional Medicare and Medicare Advantage. Traditional Medicare augmented with Part D and Medicare supplement provides the most comprehensive coverage.
• If you choose traditional Medicare over Medicare Advantage when you sign up for Medicare for the first time, be sure to add Medicare supplement and strongly consider adding Part D. (Part D is another can of worms, but that’s a topic for another day.)
• The only time you can buy Medicare supplement without medical underwriting is when you sign up for Medicare for the first time, either at age 65 or when you come off of your employer plan at a later age.
• If you try to get Medicare supplement at any other time, insurers will require medical underwriting. You may end up with a higher premium, exclusions, or be rejected altogether.

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