Are Medicare Advantage Plans a Sound Financial Decision?

Are Medicare Advantage Plans a Sound Financial Decision? by CF Lieu - Certified Financial Planner Malaysia

Our health can be one of our most significant investments. We don’t want to be draining our pockets of medical costs at some time in our lives. That is why we should prepare a health care plan for medical situations that may arise in our lives. But what should be the ideal health plan? Initially, there was only the original Medicare plan of Part A and Part B (covers hospital and medical expenses, respectively), but they will need to add Part D to include prescription drug coverage; and then there’s the Medicare Advantage plan, which covers Parts A and B and usually Part D plus other benefits that Medicare doesn’t cover. With the many medical coverages available in Medicare Advantage, would it be a sound financial decision to obtain it?

Medicare Advantage: A Brief History

Medicare Advantage plans were established in 1995 to offer an alternative for the original Medicare. These plans are offered by private organizations such as health insurance companies and regulated by the federal government. Thus, you can be assured that Medicare Advantage plans have at least as much coverage as the original Medicare.

Why Sign Up for a Medicare Advantage plan?

As you grow older, there is a high chance of developing medical conditions that need prompt medical attention. Thus, it always helps to have a plan for those days. Here’s what one of the Medicare review site contributors has to say:

“For healthy seniors entering the Medicare marketplace for the first time, there are options in between the most expensive Medicare supplements and Medicare Advantage,” says David Bynon, publisher at MedicareWire, a website that helps people compare Medicare plans. “Personally, I like Medicare supplement Plan N. It’s similar to the more costly Plan G in terms of overall coverage, but you share some of the costs when you see your doctor or need emergency care. As a result, you save money when you’re healthy, but limit your costs and financial exposure when you need more care.”

Flexibility of options is important when it comes to healthcare plans and here are some reasons why you should sign up for Medicare Advantage plans:

  • Extensive coverage inclusion

Many Medicare Advantage plans cover hearing, vision and/or dental care costs. This is something original Medicare does not offer. Medicare Advantage plans also typically include prescription drug coverage (Part D), while in original Medicare, you have to sign up and pay for it.

  • Low cost

The recent average monthly premium for Medicare Advantage is $33, which is a relatively affordable cost. The Medicare Advantage plan might charge you a certain copay per doctor visit or service and many services will be covered through your premiums. This is still relatively better than you, footing 20% of many medical bills and having no limits on how much you pay out of pocket, which is the case of original Medicare. Also, Medicare Advantage plans feature out-of-pocket spending caps (the average spending cap is around $5,000, but many plans feature caps of below $3,000), which is really convenient as your bills get higher.

  • Out-of-country Coverage

Original Medicare can’t be used outside of US borders, while some Medicare Advantage plans over coverage abroad. The latter can work in your favor if you travel a lot.

Medicare Updates to Help You Decide

This year, there has been a significant change in the availability of some Medical Supplement (a.k.a. Medigap) plans. One of these plans is Medicare Supplement Plan F, which is touted as one, if not the most, comprehensive of the standardized Medicare Supplement plans available in most states.

As of January 1, 2020, Congress no longer allows the sale of Medicare Supplement Plan F (the most popular) and Plan C because these plans cover the Medicare Part B annual deductible (see: Medicare Access and CHIP Reauthorization Act). Until now, Medicare Supplement Plan F was the most popular gap coverage because, for a single monthly payment, it covered all gaps in a Medicare beneficiary’s major medical costs.

As the premiums on Medicare supplement policies continue to rise, many Baby Boomers getting their Medicare benefits for the first time turn to Medicare Advantage plans because of their low monthly premiums. Although Medicare Advantage offers incredible savings to healthy individuals, costs and inconvenience rise as your health declines. This puts a financial strain on aging seniors when they can least afford it.

To ensure that you get the best type of service, you can consult websites that compare Medicare plans and disclose Medicare Advantage plan ratings. Medicare Advantage plans earn their ratings by being evaluated based on how well they keep their members healthy (through screenings, checkups, and more), how well they manage members with chronic conditions and how excellent their customer service is. The higher the star rating of a Medicare Advantage plan, the better the service and coverage you’ll be getting.

We have different and specific needs when it comes to our health. Sometimes, deciding on which health care plan is the best choice can be overwhelming. Keep in mind these two important things: how much coverage you physically need and how much you will be able to afford. Consider your current health situation and think things over carefully in order to arrive with a decision that makes the most sense and one that best suits you.

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