This week’s blog takes a break from the ongoing series about Legal Issues when someone has Dementia to discuss a topic that is important at this time of year.
Medicare’s “Open Enrollment” period has arrived for 2016 coverage. To have an insurance plan for 2016 to help cover the 20% of medical costs that Medicare will not cover, a Medicare-eligible person must enroll in the plan of his or her choice by December 7, 2015. (Open Enrollment is October 15 to December 7 each year.) The new policy will take effect on January 1.
People who have Medicare available to them have three basic options for medical insurance. So called “straight Medicare” provides the insured person with Medicare coverage for 80% of medical costs. The insured person is responsible for the other 20% as a co-pay. People who do not wish to pay the 20% co-pay can purchase either Advantage Plans or Medicare Supplements.
An Advantage Plan is an insurance policy that pays most or all of the 20% of medical costs that Medicare does not cover. The amount of the insured’s new co-pay depends on the Advantage Plan that the insured chooses. Generally, the higher the premium, the lower the co-pay. There are plenty of other options that change the price and co-pay as well. (An Advantage Plan actually steps into the shoes of Medicare and pays the 80% in addition to whatever costs exceed the insured’s co-pay. The Advantage Plan insurance company receives both the premium of the individual insured person and a payment from the Medicare program in lieu of Medicare’s usual 80% payment towards the insured’s costs. The Advantage Program’s coverage of Medicare’s portion of costs is generally not noticed by the insured.) Because an Advantage Plan is a “replacement” for Medicare, it can have some limitations in covered services or in approved service providers as compared to “straight Medicare.” In addition, there are many different advantage plans, each offering slightly different coverage, from which to choose.
When an insured person has a Medicare Supplement (sometimes called a Medi-Gap policy,) the Medicare program pays its usual 80% pays the insured’s medical costs, and the Supplement pays the 20% not covered by the Medicare office. Medicare Supplements, because they supplement Medicare rather than replace Medicare, do not generally have any differences from Medicare in covered services or approved service providers. There are many different Supplements. The differences among Supplements generally is small, but worth examining.
Please be aware, it isn’t necessary to have Medicare additional insurance. Someone can choose “straight” Medicare in which he or she must cover the 20% Medicare co-pay by himself or herself. It costs nothing in a year during which that person has no medical issues. It can, though, without warning, cost lots of money if that person has an accident or needs an operation, for example. Each person on “straight” Medicare could pay 20% of $0 or 20% of $200,000, or 20% of any amount depending on what happens during that year. Before choosing traditional Medicare, you must decide whether you wish to assume the risk of a big surprise in health costs during the coming year.
The monthly premium for an Advantage Plan is generally much lower than the premium for a Medicare Supplements. (Some Advantage Plans have a $0 premium, in fact.) An Advantage Plan’s limitations on services and providers is the trade-off for a lower premium. The most glaring difference, though, between Advantage Plans on the one hand and both straight Medicare and Medicare Supplements on the other hand is the coverage of post-hospitalization rehabilitation services.
With straight Medicare and Medicare Supplements, an insured person who has been admitted to the hospital for three days and then needs post-hospitalization rehab can have 100 days of rehab coverage. Someone on an Advantage Plan may have rehab coverage end before 100 days have elapsed. An Advantage Plan (because it has rules slightly different than straight Medicare) can determine that rehab is not helping the insured person and can end coverage. Sometimes the rehab coverage is stopped as early as day 20. (Advantage Plans used to base their decisions on ending rehab payments on on day-to-day progress reports. Now, Advantage Plans must now look at week-to-week comparisons or even bi-weekly comparisons.) Still, rehab can be very expensive, so Advantage Plans have a strong incentive to end rehab coverage as early as possible.
(“Admission” to the hospital rather than “under observation” in the hospital is a very important distinction in the availability of any insurance coverage for rehab. That issue is not handled differently by Medicare, Advantage Plans, or Medicare Supplements, though. Consequently, the “admission” versus “observation status” issue is not important to today’s discussion. I mention it here as a side note because it is an important issue for all people insured through Medicare.)
Even though we are in an “open” enrollment period, someone covered by any form of Medicare cannot simply switch plans on demand. Medicare, unlike the Affordable Care Act, allows the insurance company to make underwriting decisions on individual plans. Trying to move to a plan that provides more coverage may require a medical examination and will certainly require answering medical questions. Generally, I urge people to move to a Medicare Supplement, if they can (as long as the premium isn’t prohibitive.)
If a Medicare Supplement is not available, an alternative is an Advantage Plan or even straight Medicare with a separate Hospital Indemnity policy. (The cost of an Advantage Plan plus Hospital Indemnity policy is usually less than a Medicare Supplement.) A Hospital Indemnity policy is subject to underwriting, though. Someone who exhibits symptoms that are a concern for the Hospital Indemnity insurance company may not be able to get such a policy.
Without considering the cost of premiums, my preferences for medical insurance is a Medicare Supplement. My second choice is an Advantage Plan with a Hospital Indemnity policy. My third choice is straight Medicare. Finally, my fourth choice is an Advantage Plan. (Because I provide legal services to people who need long term care or that have special needs, my clients have health concerns. That possibly causes my preference for the broad coverage that supplements provide.)
No matter your preference, seek out a Medicare insurance agent that represents more than one insurer. Don’t just assume that the person at the table in your local grocery, pharmacy, or department store can give you all the options. If the person at that table sells insurance for just one company, please consider whether you want to find more options before deciding.
But, don’t go it alone. Get help from an insurance broker. These insurance plans are complicated, and there are many different choices among Advantage Plans and among supplements. Let someone help you figure out your best options. Their help doesn’t cost you anything. They’re paid by the insurer you choose.
Choose your plan wisely.
Acknowledgement: Thanks to Michael Whitaker of Premier Solutions Group in Brookpark, Ohio for helping me understand Hospital Indemnity insurance.