The Two Kinds of Medicare Insurance

May 7, 2018        About his blog: click here

The Two Kinds of Medicare Insurance

So, it’s time for you to choose a Medicare insurance policy…..what to do?

First, you want to understand something that nobody has told you: There are two very different kinds of Medicare insurance.

The differences aren’t obvious. All the ads tell you what the monthly premiums are, what kinds of things are covered, and how much you pay for deductibles and co-pays. It looks like you’re comparing apples to apples.

But, it’s really apples to oranges. The ads give you a little hint, but people don’t catch it because they haven’t been told what it means.

The hint is that some of the policies say they are Medicare Advantage plans.

A Medicare Advantage policy is one of the two kinds of Medicare insurance. The other kind is called a Medicare Supplement policy.

The key difference is that Medicare Supplement policies work with the original form of Medicare for doctor and hospital care, called Part A and Part B.

Medicare Advantage policies, in contrast, do not work with Part A and Part B. Medicare Advantage is in fact a whole other, separate form of Medicare, which is Part C.

To understand what Parts A, B, and C are, see our posts of April 16 and 23.

With Medicare Parts A and B, the government makes direct payments to your doctors and hospitals, but only for about 80% of the bill. Medicare Supplement policies use your premium money to pay the doctors and hospitals most of the remainder.

Medicare Part C – which is another name for Medicare Advantage – works in a completely different way: The government, instead of giving any money to the doctors and hospitals, gives a flat amount of money, about $800 per month, to the Medicare Advantage insurance company which you pick.

The insurance company, in addition, collects a monthly premium that you pay. Out of all that money, the insurance company pays the doctors and hospitals.

With both Medicare Supplements and Medicare Advantage, how the doctors and hospitals get paid is invisible to you. You could easily be unaware which kind of insurance you have.

So, why bother to know which kind you’re buying? There are some important reasons.

Key differences between Medicare Supplement and Medicare Advantage policies:

** Medical Provider Networks: Both kinds of policies might have limits as to which doctors and hospitals are covered (they are known as In-Network Providers). Doctors and hospitals not on the list are known as Out Of Network Providers.

That’s important, since Out Of Network Providers either aren’t covered at all, or you have to pay higher deductibles and co-pays when you use them.

The point is that you are more likely to see limited Provider Network lists with Medicare Advantage policies, and less likely to have that same amount of restriction with Medicare Supplement policies.

** When can I go on or off the policy?: You can go on or off a Medicare Supplement policy anytime during the year.

In contrast, you can only buy a Medicare Advantage policy on a full year, January-through-December basis (except when you first get on Medicare.) You are “locked in.” If you want to go off of the policy, you have to wait until next January to get onto something else.

** Control of your Medicare money: Medicare Supplement policies work with Medicare Parts A and B, like we said earlier. If you go to a doctor who isn’t covered at all by your policy, the federal government will still pay 80% of the bill, and you would have to pay 20%.

This means that you have the freedom to see most any doctor you choose, anywhere in the country (since most all of them participate with Medicare), without needing anyone’s permission.

With a Medicare Advantage policy, it’s a whole other story. When you sign the dotted line, you are actually signing over all of your Medicare money to the insurance company. Technically, that means you are choosing to leave Parts A and B, and switching to Part C.

The insurance company now controls all of your Medicare money. The company decides which doctors and hospitals it will pay for your visits and treatments, and how much. Whatever they don’t spend, they get to keep.

If you go to a doctor who has no agreement at all with your insurance company, the doctor is not allowed to bill Medicare, period. You would have to pay the entire bill, not just 20% of it.  Yikes!

So, should I buy a Medicare Supplement or a Medicare Advantage policy?

It depends, based on what’s available in your area, and your needs. You have to look at the In-Network coverage for the doctors you use, the premiums, deductibles, and co-pays. You also have to consider if you’re comfortable being locked in January to December, and having the insurance company control all of your Medicare money.

What about Drug Coverage?

You get drug coverage through a Part D drug policy.

If you have Medicare Supplement doctor & hospital coverage, then you buy Part D as a separate policy.  You can buy the Part D policy either from the same insurance company with your doctor & hospital policy, or you can choose a different insurance company.

If you use Medicare Advantage, however, the policies in our area — in almost all cases — have Part D drug coverage already combined in it. In that case, you do NOT want to try to buy a separate Part D policy — you will get kicked off of your Medicare Advantage policy!

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