Ask The Medicare Specialist

QUESTION:

Question from Denise: Many of my friends have Advantage Plans and talk all the time about how much they like them with the low premiums and extra benefits they get. I was referred to the agent a couple of them had gotten their PPO from and made the decision to leave my Supplement and enroll in the same plan as my friends. Now I’m worried I made a mistake. Did I?

ANSWER:

I can’t tell Denise or anyone else who made this common move, leaving a Medicare Supplement, aka Medigap policy, for an HMO or PPO Advantage Plan was a mistake without having a detailed discussion. With inflation really hitting those on fixed incomes hard and Supplement rates increasing, many people don’t have a choice but to make the move to no or low-cost Advantage Plan, which does make sense for many.

However, more than just the premiums and the extra benefits need to be considered. People on Supplements pay little or nothing out of pocket for Medicare covered services while those on Advantage Plans have co-pays that range from $10 for X-Rays; $120 for a trip to the Emergency Room; $175 to $250 for MRIs, CT scans, outpatient surgeries; $200 to $1,800 for hospital stays; and 20% coinsurance that can be in the thousands of dollars for chemotherapy and other infused or injected drugs. I had a client about a month ago who got talked into an Advantage Plan and was getting a monthly injection for osteoporosis as an outpatient service. Her cost with the PPO that was recommended by the agent she worked with is 20% of the billable amount and runs her close to $1,000 a shot. She doesn’t stop paying bills until they reach over $5,000. It was absolutely a mistake for her to enroll in an Advantage Plan that only saved her $65 per month in premiums vs a Supplement. And now, because of her pre-existing condition, she will never be able to go on a Supplement and will be forced to spend to her Maximum Out of Pocket each and every year.

What’s also very alluring about Advantage Plans are all the extra “ancillary’ benefits Denise mentioned. Those can include any or all of the following: As much as $3,000 annually for dental that covers up to 100% of the cost of teeth cleanings, X-Rays, extractions, fillings, root canals, crowns, dentures, partials, and even implants on a few plans; allowances for hearing aids, glasses, and the purchase of over the counter products; debit cards to help pay for medical co-pays and groceries; a gym membership. There are a few plans that will even reimburse people for their golf green fees, fitness classes, tennis shoes, and home health equipment. People who are taking full advantage of it all can literally get thousands of dollars per year in real value of goods and services. When I look at in terms of actual dollars, it’s mind boggling. I completely understand why people are initially choosing and moving to Advantage Plans between the premium savings and value of ancillary benefits. I estimate we’ve had more of our clients leave Supplements for HMOs or PPOs in the last two years than in the previous 10 combined. However, I do have some concerns about people making their decision based mostly on all the ancillary benefits that are provided versus none with Supplements. We make sure our clients are aware of the risks before they make a final decision. Advantage Plan companies are not mandated to provide dental, vision, hearing, OTC, and other extras. They actually offer them to meet Medicare’s criteria that they spend 85 cents in member benefits for every dollar they get in subsidies and premiums from clients. Failure to hit that benchmark for three consecutive years can result in sanctions and penalties. As subsidies to the Advantage Plan companies were increased over the last few years, they literally had to add many of these new benefits to ensure they hit that 85% spending mandate. There are two very serious developments with Medicare which I predict on going to cause some significant changes to Advantage Plans. The first starts in 2025 when a regulation goes into effect that forces Part D prescription coverage to pay 100% of members drug costs once any individual spends $2,000 out of his or her own pocket. This is going to eat up a good chunk of Advantage Plan company’s profits. To make up for the reduced profits, the amount of ancillary benefits is almost certainly going to be reduced and some possibly eliminated. With the Medicare Part A Hospital Trust Fund, where some of the subsidies paid to Advantage Plan companies come from, set to be insolvent by 2031, there’s also a chance the subsidies could be reduced. This could create more ripple effects that could force companies to not only reduce or eliminate ancillary benefits, but also increase premiums, co-pays, and the MOOP. We’re already seeing this happen in other states outside of PA.

Here’s some advice. 1) If you have an Advantage Plan, use as much of your extra benefits as possible in 2024. Don’t put off going to the dentist or the optometrist. If you need hearing aids, get them in 2024. Make sure you’re maximizing your OTC allowances. I say this with a bit of urgency because I don’t foresee these benefits being as generous in 2025 and even less so in ensuing years. 2) If you do think you made a mistake in changing plans, make a no cost appointment with us for a second opinion. Everyone has a limited amount of time to change plans starting January 1st. 3) For those of you who have had Advantage Plans for a few years and have stayed relative healthy and saved lots of money on premiums and taken advantage of all the extras, you may want to consider “cashing in your chips” so to speak by moving to a Supplement while you still can pass medical underwriting. This can also be done for a limited period in January. Those who wait a couple more years when HMOs and PPOs might have very little ancillary benefits, higher premiums and co-pays like they did six years ago, could risk not being able to get a Supplement due to current or previous health conditions.

Once again, I’d like to remind those who enjoy the columns that I do pay quite a bit of money to have them published. In order to continue them, we ask that you allow me or another of our experienced agents to help you make your choice in plan. I can’t tell you how important that choice is. You will always get unbiased advice and accurate information from The Health Insurance Store.

Give us a call or email me personally, aaron@ getyourbestplan.com, if you have any questions regarding today’s column or any other Medicare topic.