Medicare Advantage has a (VERY) dark side
If you’ve been stuck at home watching TV for the past 12 months, you’ve almost certainly seen at least one ad in which Joe Namath, the former NFL star, is promising all kinds of perks if you sign up for Medicare Advantage instead of ‘regular’ Medicare.
It sounds like a great deal, and in some respects, these perks do make Medicare Advantage plans attractive. But there are very important, very subtle differences that you need to be aware of.
First some basics, when you turn 65, you will become eligible for Medicare. Some people will continue working and may continue employer coverage, but for those who don’t, the choice then is between Medicare (and a Medicare supplement, or medigap policy) and Medicare Advantage.
Medicare Part A covers inpatient hospital care, some rehab care in a skilled nursing facility and some other services like hospice.
Medicare Part B covers some doctors services, outpatient care, medical supplies and some preventive services.
Medicare Part D covers prescription drugs.
When people think of Medicare, they are really thinking about Part A and Part B, which cover most services. Most people will also purchase a medigap policy to cover the 20 percent of costs not covered by Parts A and B. They’ll also typically purchase a prescription drug plan under Part D. When you first become eligible for Medicare, you cannot be turned down for a medigap policy and any pre-existing conditions are covered.
Medicare Advantage is basically a private insurance policy that is required to cover all of the things Medicare would cover. Insurance companies add on additional features in order to make the policies attractive. These can include dental and vision coverage, transportation to doctor appointments, in-home services and the like. But these perks aren’t free, no matter what the advertisement says. In order to make these policies work, they impose limits.
You typically can only use doctors and hospitals in their ‘network.’ If you go outside the network, unless it’s a life-threatening emergency, the cost won’t be covered. If you develop a serious condition like cancer and want to be seen by an out-of-network specialist, you’re out of luck.
Some of these plans require you to choose a primary care physician (PCP) who will coordinate your care. That means you have to see your PCP first and get a referral before you see a specialist.
Your doctor may be in the network this year, but there are no guarantees about next year. Doctor groups move in and out of networks all the time, forcing you to either change doctors or change plans.
If you travel abroad, or spend time in other parts of the country, these plans usually won’t cover you outside of their ‘area’.
The most important and most critical issue, however, is that if you try to go back to “regular” Medicare, your pre-existing conditions may no longer be covered. So if, after 10 years on Medicare Advantage, you’re diagnosed with cancer that is expensive to treat under the Advantage policy, you may not be able to switch back to a regular medigap policy for the cheaper, more comprehensive coverage it provides. You can still switch back to Medicare and a medigap policy, but you won’t be able to purchase coverage for the 20 percent of health care costs that the medigap policy typically covers.
If you’re healthy, and stay healthy, Medicare Advantage seem like a good deal. But who knows what will happen between 65 and 85. If you decide to go with Medicare Advantage, you had better set aside the savings, because you’ll probably need them eventually.
This column is prepared by Rick Brooks, CFA®, CFP®. Brooks is director/investment management with Blankinship & Foster, LLC, a wealth advisory firm specializing in financial planning and investment management for people preparing for retirement. Brooks can be reached at (858) 755-5166, or by email at rbrooks@bfadvisors.com. Brooks and his family live in Mission Hills.
Category: Education, Health & Fitness, Local News, National News
