July 7, 2021 — Not so long ago the two most common types of supplemental medical insurance for retirees were employer sponsored plans and Medigap insurance. Medical insurance for retirees is increasingly rare, with very large corporations and governments about the only employers providing it. Medigap plans, which cover additional expenses over and above their Part B (doctors and other medical) coverage insurance, are being eclipsed by the increasing popularity of Medicare Advantage plans (Part C). Run by insurance companies and funded by subsidies from the government, Medicare Advantage has doubled its enrollments in the past decade.
The main reasons for Medicare Advantage’s increased popularity are their low cost and extra coverages. According to kff.org, about 60% of Medicare Advantage enrollees pay no premiums, and another 34% pay less than $100/month. Advantage plans also usually offer a wide number of other coverages not available under Medigap policies. For example, about 3/4 of Advantage plans include vision, dental, fitness, over the counter drugs, and hearing benefits. Nearly all (90%) Advantage plans include prescription drug coverage.
Advantage plans now account for 40% of Medicare beneficiaries in some states, but as low as 1% in other states. The biggest number of Medicare Advantage plans are run by UnitedHealthcare, Humana, or BlueCross BlueShield affiliates. Medicare Advantage plans are far more popular in urban areas than in rural ones, mainly because there are more health care providers and insurers willing to insure there. Coastal and the Great Lakes states tend to have the highest Medicare Advantage enrollment rates, but even within states the enrollment percentages can differ dramatically.
Tradeoffs. Retirees are increasingly choosing Medicare Advantage plans. Although they generally provide much cheaper coverage, Advantage plans do have some disadvantages compared to traditional Medicare. For one, you might not able to choose your own doctor – you have to use one who is part of the insurer’s HMO system, or pay more for a PPO plan. Certain procedures require advance permission. If you stay in the hospital more than 5 days you might end up paying more in copays than a traditional Medicare recipient would. The federal limit on Medicare Advantage in network deductibles and copays is now $7,550 per year, while some Medigap policies have no maximum. Writing at the SquaredAwayBlog, some experts believe Medigap plans give more protection from large medical bills, however. Snowbirds or people who live in two different parts of the country might find themselves out of network with Medicare Advantage plans, and therefore be better off with a Medigap policy.
Bottom line. Choosing between Medicare Advantage and traditional Medicare (Medigap) policies is complex and difficult. You can go to Medicare.gov and compare plans. You can also use an insurance agent who specializes in Medicare to help find the best plan for you. These agents will not generally charge you anything, as they are compensated by the insurance companies.
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