You’ve already had that milestone birthday and reached the big six-O; you survived mid-life crisis and now you can access your IRA without being penalized! So, before you ponder that next milestone birthday at age 70; let’s talk about that big 65th! Sixty-Five is really something to be excited about because that is when you will likely become eligible for Medicare.
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Now you have reached the age of eligibility and you can look forward to the Medicare benefits you have been working toward all these years with your hard-earned tax dollars! You are enrolled in Medicare Part A and B, and you have received that nice red, white, and blue card and are all set to go, right? Not so fast! Low and behold there is a fork in the proverbial Medicare road! Do you stay on Original Medicare or Medicare Advantage (otherwise known as Part C)?
The basics and background
Original Medicare is a government healthcare program that is broken down into four basic parts:
Part A: Hospital
Part B: Doctors
Part C: Medicare Advantage
Part D: Prescription Drugs
Publications are issued every year by the Centers for Medicare and Medicaid Services called “Medicare and You”. You can download a copy at: https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf. “Medicare and You” is a go-to resource that I recommend everyone turning 65 or is receiving Social Security Disability become familiar with. There is a wealth of great information you will need going forward; but here I will limit the discussion to that first fork in the road after you receive your Medicare Card. The www.medicare.gov website is also a great resource for a deeper dive into the world of Medicare.
Part A and Part B are the basic elements of “Original Medicare” (the government managed healthcare program). Part A comes at no charge for most people; however, there is a premium (a monthly payment) associated with Part B (with the exception of those who qualify for financial assistance). If you are taking Social Security Retirement Benefits at age 65, you will likely be enrolled automatically in Part A and B. If you are still in the workforce and under an employer insurance plan you may choose to only enroll in Part A and defer your Part B enrollment. People on employer insurance that are leaving/retiring soon should make the “fork” decision once they have Part B.
Setting the Course
Now that you have the background, let’s look at the “fork” in the road.
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The biggest difference between “Original Medicare” and “Medicare Advantage” (Part C) is when you have Original Medicare, your Medicare benefit comes directly from the government program and under Medicare Advantage your benefit is transferred to a private insurance company. You can be enrolled only in one or the other so you cannot be enrolled in both Original Medicare and a Medicare Advantage Plan at the same time. You must make a choice. If you have your Medicare Card and are enrolled in Part A and B you are enrolled in Original Medicare by default. So why event consider Medicare Advantage or Part C?
Original Medicare Part B has a set benefit schedule that covers 80% of most claims (refer to the “Medicare and You” publication or www.medicare.gov for specific benefits under original Medicare). So, what about the other 20%? Some people obtain supplemental insurance to cover most of what Original Medicare does not under Part A and B. Part D is not covered under Original Medicare. Part D is prescription drug coverage and it is provided through a private insurance Company at an additional cost.
Many people like Original Medicare because of the freedom to choose any doctor, hospital or specialist that accepts Medicare with no referrals required. They are willing to either pay their 20% co-insurance or purchase a supplement plan to help with those extra charges. They are also willing to pay for a stand-alone Prescription Drug plan, have other creditable coverage through another source such as an employer, Veterans Administration (VA), or are willing to pay a late enrollment penalty if they need the Part D in the future.
So why Medicare Advantage? Medicare Advantage plans, as previously stated, are administered by private insurance companies. They are required to cover what Original Medicare covers and are allowed to have additional benefits not included under Original Medicare. Many Medicare Advantage Plans have the Prescription Drug Plans also included so there is no need to purchase additional Part D coverage under those plans. Those plans are called Medicare Advantage Prescription Drug plans or “MAPD”.
Because Medicare Advantage plans are run by private insurance, they normally have network requirements. There are several types of networks, but the most common are the Healthcare Maintenance Organization (HMO) and the Preferred Provider Organization (PPO). In its basic form, the HMO requires a Primary Care Provider (PCP) be the central figure in a person’s health “maintenance”. All referrals to specialists and other healthcare providers are required to go through the PCP except in emergencies. If these referrals are not obtained through the PCP, the plan may not pay the claim.
PPO’s on the other hand, have more flexibility and care can be obtained without a referral and can be obtained outside the network; however, there is usually a PPO network and care obtained outside the network will likely come at a higher cost.
Networks can be seen as good or bad depending on the situation. While it may seem to be a hassle to stay in network and/or get referrals, the services allow for a team approach to one’s healthcare that is seen as by many as a plus.
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Course Changes
The decision to go Original Medicare or Medicare Advantage is not an easy one to make. If you choose Original Medicare and want to change to a Medicare Advantage Plan, you can do so every year during the Annual Enrollment Period that runs from October 15 to December 7 every year.
If you want to go back to Original Medicare after enrolling in a Medicare Advantage Plan, you can do so January 1 to February 14 the year following enrollment. If you land back in Original Medicare, you will likely need to enroll in a Part D stand-alone Prescription Drug Plan and seriously consider a Medicare Supplement Plan (otherwise known as Medi-gap) to cover what is not covered by Original Medicare.
Obtaining that Medicare Supplement plan may or may not be easy depending on your health and whether you are still in your one-year free look period. Beneficiaries that have switched from Original Medicare to Medicare Advantage have a one-year free look period the first time they make the switch. This means they can switch back without having the plan ask health related questions and consider pre-existing conditions. Beneficiaries with no significant health issues can usually make the switch back to Original Medicare fairly easily but those who have exceeded their free-look period may have difficulty if they have certain medical conditions.
As with most decisions regarding Medicare, I always recommend reaching out to an agent or medicare.gov to be sure you fully understand the consequences of making a change. Ask questions and arrive at that fork in the Medicare road with confidence you are making the decision that will keep your Medicare voyage on course for smooth sailing.
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