February 1, 2024 By Ken Kitchen, licensed insurance agent with DeLong Insurance, Circleville, Ohio
There are a few phrases I hear over and over again across my 23 years as a senior-focused insurance agent. “Why is Medicare so darn complicated?” is one my customers invariably ask. They’re not wrong. “It was set up by our complicated government” I usually tell them. And it’s been added to and modified several times over the decades.
Most adults of a certain age know about the “Open Enrollment Period” every fall. You can tell when it begins by the constant barrage of TV ads, with senior celebrities saying things like “Dyn-o-mite!” or “Beam me up, Scotty.” Some ads sound a lot like a ‘Price Is Right showcase.
This fall “Open Enrollment Period” that runs from October 15th through December 7th, is the time of year for people already on Medicare to join, switch, or drop their Medicare Advantage plan for the new year, starting January 1st. You can also switch from an Advantage plan back to Traditional Medicare during this enrollment period.
Which brings us to a common misunderstanding about Medicare I hear from time to time. “Isn’t all Medicare insurance the same?” “No, it isn’t” I reply. Not even close, really. Here are some of the differences between the two main types.
Traditional (or Original) Medicare – Parts A & B
“Traditional” Medicare started in 1965 and was the only federal health insurance for seniors or the disabled in the US until the late 90’s. It literally has two parts. Part A, which is Hospital benefits, and Part B, which is Medical benefits. With Traditional Medicare, you don’t have to worry about staying “in-network,” because there are no networks. 99% of doctors in the US accept your red, white, and blue Medicare card (according to the Kaiser Family Foundation, 2020). It works in all states. You can go to specialists without a referral or get a second medical opinion before surgery. Most importantly, what your doctor says goes – the government generally doesn’t question or deny your doctors’ recommendations. “Supplemental” or “Gap” insurance is available with Traditional Medicare, because even though Traditional Medicare gives you the freedom to go where you want for care, it doesn’t pay 100% of the costs. Supplemental policies kick in and pay some, or all of the copays, deductible, and co-insurance you would have paid without it (depending on the plan you choose). Traditional Medicare is non-profit, by the way.
Medicare Advantage – Part C
Advantage plans are the new kid on the block, arriving on the scene about 20 years ago. Officially known as “Part C” of Medicare, it’s an alternative to Part A and B Traditional Medicare. This is insurance from a corporation, aka “organization”, that is paid by the government to provide benefits to you. Our government pays these companies to take you, because the risk and expenses you posed to the government become the responsibility of the Advantage insurance company you enroll with. “Privatization” for those of you who speak legal-ese. Advantage was intended to save the government money. But the Advantage corporations quickly figured out how to game the system and now cost much, much more than Traditional Medicare to operate. With Advantage plans, there are networks that accept your “brand” of insurance, and other doctors, clinics, and hospitals that don’t. When you go to a specialist who doesn’t accept your Advantage insurance, it’s called “out of network.” It means you will pay more or all of the cost for that visit. You must get the plan’s permission, called “Prior Authorization,” before treatments, tests, and surgeries. Also, you need a permission slip from your primary care doctor before you see a specialist, who again needs to be “in-network”. Advantage plans are regional and limited to a small number of counties. They don’t really work outside the area you live in (like when on vacation or visiting family in another state). Many plans include prescription drug benefits, though.
Advantage plans have been in the news a lot in the past few years. Mainly for denying or delaying approval for surgeries and treatments, and promising a host of extra benefits that are notoriously hard to get later. Computers now are taking the place of doctors in the “Pre-certification” process, and related class-action lawsuits have been filed against the biggest Advantage companies. Many articles have also been published about the questionable marketing tactics by Advantage companies and their agents. It’s bad enough that legislation has been proposed to tighten and regulate what can be said in Advantage advertising. There’s also a growing trend of entire hospitals and clinics dropping Advantage insurance entirely because of all the red tape forced on administrative and medical staff. Advantage plan corporations are generally for-profit. Yes, indeed. There is a big difference in Medicare insurance types.
Medicare Advantage Open Enrollment Period
Which leads me to the enrollment period we are currently in – The “Medicare Advantage Open Enrollment Period,” which runs from January 1st to March 31st each year. It allows people on Advantage plans to switch to a different Advantage plan, taking effect the next month. It also lets you do one other important thing. It allows people on Advantage plans to switch lanes entirely – back to the less restrictive Traditional Medicare. If you are leaving the Advantage system to go back to Traditional Medicare, you can also enroll in a Medicare Part D drug plan – without any health questions. (Part D prescription benefits were introduced in 2006, and are available to anyone on Medicare Part A and/or B.)
The Supplemental or Gap insurance that lowers your out-of-pocket expenses with Traditional Medicare – has no annual enrollment periods. Generally, the only time one’s health is not questioned is in your “Initial Enrollment Period,” which is the month your Medicare Part B starts (usually your birth month) and the next 5 months. After that, your health and medical issues may keep you from getting a supplemental policy. And if you drop a supplemental policy to go on an Advantage plan, you’ll have 12 months called a “trial period” where you can go back to Part A & B and get your supplement back without any health questions. After 12 months on the Advantage plan, you will have to answer questions about pre-existing conditions and health issues, and are not guaranteed to get any supplement back, ever.
So be careful. Health issues rarely surface in the first year you are trying out an Advantage plan. It’s usually years later when someone is diagnosed with a chronic condition like COPD, diabetes, or cancer, that they find the limitations and restrictions to be too much. And they seek me out, asking if I can help them switch their insurance. This is usually when I hear another phrase, all too often. “I feel like I’m fighting two battles – my medical condition and my Advantage insurance.”