Medicare and Medicare Advantage – what’s the difference? Kyle Merry, Tax Associate, and Joshua Buckingham, CPA and Principal at TD&T provide some clarification in this article.
Each year, more people qualify for Medicare and when they do, they find out it’s not as simple as just signing up for Medicare. In addition to basic Medicare, people can choose from a variety of options, much in the same way as they might have before they reached retirement age.
Medicare Advantage – What is it?
With Medicare Advantage, participants select from a number of offerings provided by private insurance companies. These plans provide coverage for Medicare Parts A & B (hospital and medical services), plus sometimes Part D, the prescription drug plan. Typically, the costs to the user are lower than traditional Medicare, but have some potential long term negative consequences. Most Advantage plans operate with either a Health Maintenance Organization (HMO) model or a Preferred Provider Organization (PPO) model. These models require users to select their medical providers from in-network physicians and other organizations. Some plans allow some out-of-network coverage, while others do not.
The biggest trade-off occurs when an individual needs medical care. Advantage plans generally pay providers much less than standard Medicare. Some providers do not sign up with the Advantage plans due to the decreased payments they receive. Also, once a major medical incident occurs, the Advantage plans set up a case manager that works with providers and can dictate not only the number of days of treatment or therapy, but also the type of treatment or therapy, which may not align with what a physician or provider thinks is necessary. Individuals who have an Advantage policy and who think they need more care or treatment will likely be responsible to pay for that care, which can end up being more costly than the savings received from lower premiums. The average skilled stay that Medicare Advantage plans approve is less than 10 days and the general maximum of skilled days is about a month. With standard Medicare an individual can have up to 100 days of skilled care.
The last issue with Advantage plans is payment. Advantage plans can review claims to decide whether the care provided met standards for payment. Some Advantage plans have taken this to the extreme and review all claims. Even a minor technicality can result in either severely decreased payment to providers or denial of payment altogether. For providers this has become a major issue, requiring them not only to gather all medical records for review with the case manager to approve care initially, then once reviewed and approved, to hope the plan will provide payment for the services provided. The best providers are beginning to refuse to deal with Advantage Plans for this reason. Although there are restrictions, a provider may try to get payment from the individual for these services if they are denied through the Advantage plan.
Why is Standard Medicare Likely Still the Best Option?
Traditional Medicare includes Parts A, B, and D. You sign up for each separately. You may not need Part D if you have good health and no need for ongoing prescriptions, or if generic drugs meet your current needs. The standard plans have gaps in coverage, though, which necessitate considering a supplemental or Medigap plan to fill in the coverage gaps. Although standard Medicare is more costly to the individual, it has some major advantages over Advantage plans as stated above. With standard Medicare there are no restrictions on access to any medical provider. The other major reason is as long as the standard of care meets Medicare guidelines, there is no entity, such as exists in Medicare Advantage plans, that dictate not only what type of care to provide, but also either the number of days or number of treatments.
Preparing for the Unexpected
You may be doing just fine on an Advantage plan, until something unexpected happens. For instance, you have a fall and break a hip. Or you have a stroke or heart attack. You may need rehabilitation and your plan may direct you to a facility that you might not have chosen otherwise. After you come out of rehabilitation, you may need more recovery time in a skilled nursing facility. Your Advantage plan’s coverage can limit your choices. If you move into assisted living or longer term nursing care, the facility you prefer may not be in the network offered through your Advantage plan.
You can plan for the unexpected and still face some tough decisions. Once again, you may have to trade off some aspects of coverage for the lower cost of an Advantage plan. You have the ultimate decision of which plan you want to select, but you should approach your decision with your eyes wide open so you can make a choice that makes sense for you.
How to get out of an Advantage Plan
Once medical needs occur, individuals or loved ones begin to see the pitfalls of Advantage plans and may want to get back on standard Medicare. This generally occurs generally during the fall enrollment period. An individual can also call a Medicare representative at 1-800-Medicare and see what actions would need to be taken to dis-enroll from the Advantage Plan and resign up for Medicare. If your loved one is currently in the Hospital or Long Term Care this change can likely occur any time during the year, but may take a month or two to become active.
“I’m in an Advantage Plan, But I Don’t Know How I Got Here”
Some people have found that when they reached 65, the insurance company that had provided health care coverage had automatically enrolled them in an Advantage plan offered by the same company. Those people thought they had one kind of Medicare coverage, when they actually were covered in an Advantage plan. The industry calls this “seamless conversion.” The company has to send the individual a letter that explains the new coverage and gives the person the opportunity to opt-out within 60 days.
This kind of “gotcha” enrollment has angered and negatively impacted a number of people, some of whom have faced thousands of dollars of uncovered costs because they didn’t know they had been switched into an Advantage plan. Some members of Congress, such as Rep. Jan Schakowsky (D-Illinois), think people should have to opt-in, not be forced to opt-out, but so far no legislation has provided this kind of protection. Insurance companies tout the opt-out approach as easier and more seamless.
It’s easy to overlook an opt-out letter. When you approach your 65th birthday, you’re likely to get a flood of mail trying to sell you various Medicare Advantage plans and Medigap coverage. If you think you’ve made your choice, be sure to get it in writing and to watch the kind of mail you get, especially from the company providing your health care insurance prior to Medicare. You can find more about this subject in this article by Susan Jaffee of Kaiser Health News: https://retiredamericans.org/automatically-enrolled-medicare-advantage-plans/
TD&T can provide assistance in understanding the requirements of this and other aspects of the Medicare program. Let us know how we can assist you. Contact our health care industry specialists for advice and updates on this and other developments in the industry