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Understanding the hidden costs of Medicare Advantage plans


This article is part of an ongoing series of informative Medicare guest posts written by MedicareFAQ.  - Carol

MedicareFAQ3alternateSaving month each month on a low premium plan can be great until serious health issues arise so it's important to know this: Medicare Advantage plans are seductive; there is little to no premium and most plans include ancillary benefits. It makes sense that beneficiaries would choose to enroll in a Medicare Part C option.   


However, with a $0 premium on many plans across the nation, beneficiaries have asked: "What's the catch"?


Here's the catch: The out of pocket fees add up throughout the year. 


If you believe you’re a good fit for a Medicare Advantage plan, start is by making a list of services you have used in the last couple of years. For example, doctor visits, hospital stays, lab work, and x-rays. When you calculate your expenses over the past couple of years, you can get an idea of what a typical year could entail.  


With insurance, you're buying coverage that you hope is never needed.   


The Hidden Cost of Network Limitations  


Medicare Advantage plans require beneficiaries to use a list of network providers to get claims paid at the in-network rate. With some plans, if you leave the network, you’re responsible for 100% of the cost.  

Provider networks limit where you can receive care. So, if the cardiologist you love leaves the network, you’ll need to find a new cardiologist.   


Medicare provides coverage for any provider that accepts Medicare assignment. Meaning you're not restricted to a list of doctors. A Medicare Supplement beneficiary can go to any doctor in the United States that accepts Medicare Assignment.   


Unpredictable Annual Changes  


Medicare Advantage plans change every calendar year. That means the plan you enrolled in won’t be the same plan next year.  Plan benefits will be reviewed before the end of the year and based on the claims paid, the policy will be adjusted to keep losses in line with the premium.  


When considering the best coverage to meet your needs, keep in mind the Advantage plan may change but the benefits within a Medigap plan are set in stone. Supplement benefits do not change.   

They were determined by Medicare and private insurance company’s offer the coverage. The premium may vary from one company to another, but you can depend on the benefits to consistent.  


The hidden cost of Medicare Advantage cost-sharing Plans 


Insurance companies receive a stipend from Medicare based on your Medicare Part B premium in exchange for providing you with Medicare Advantage benefits.  The insurance company imposes some “cost-saving” features to minimize their losses.  


For example, most Advantage plans have a yearly deductible. The deductible can be the same as the Medicare Part B deductible or higher.  Additionally, Medicare Advantage plans also have coinsurance and copays which you’re responsible for paying.  


It’s typical for a Medicare Advantage plan to impose a copay for the most frequently used services. Such as doctor visits, lab work, durable medical equipment, and even the emergency room. The amounts can range from a $20 copay to visit an in-network doctor up to a $500 copayment for the emergency room. For many Durable Medical Equipment devices, you're responsible for 20% of the costs. 


So, if you need a CPAP machine for sleep apnea you could pay $600 for the equipment. However, with a Medicare Supplement Plan G, you pay nothing. 


The Hidden Cost of Medicare Advantage Prescription Drug Coverage  


Medicare requires that you have a creditable prescription drug plan in place. Without creditable coverage, they will impose a penalty 


The Medicare Advantage plan provides coverage for the hospital, doctor and even a prescription drug plan. By picking an Advantage plan, you enroll one time and you’re finally done. This means no more research and no questions, at least for a while. 


On the outside, it looks like a great way to save money. Especially if you’ve been healthy up to this point.  

Eventually, everyone gets sick or injured. When it really counts, will the Medicare Advantage plan be able to protect your retirement assets?  


Medicare Advantage Ancillary Benefits  


Ancillary benefits are additional benefits like dental, vision and the silver sneaker program.  

Your dental plan likely includes one or two free cleanings each year and one set of x-rays. The ancillary benefits are routine; although, some plans offer more comprehensive dental coverage for a higher premium. Sadly, the dental benefit doesn’t offer a discount on fillings or crowns. You still need an actual dental plan, to cover serious dental needs. 


The vision plan provides an eye exam and a pair of eyeglasses up to a set dollar amount. Usually, the allowance for eyeglasses is $100. This ancillary benefit is appealing; however, there are dozens of chain stores that offer a free eye exam and 2 pairs of eyeglasses for under $150.


The silver sneaker program is geared toward getting insured persons active. The idea is fantastic, the benefit itself varies. In some states, the silver sneaker program offers free gym services to the participant allowing the insured to use weights, machines, swimming pools and even take classes with their peers.


However, that’s not the rule.  In some states, the silver sneaker program may offer participants a discount on a gym membership at select gyms, although, seniors can purchase a gym membership for $10-$20 a month in many areas. An alternative is the YMCA which is an incredible gym; they're clean, cost-efficient and offer a range of activities that can lead to new friendships.  


Lower Premium Means Higher Out of Pocket Risk  


The cost-sharing required from Advantage plans allows for lower monthly premiums, however, if a beneficiary has severe health issues, they could be responsible for paying $10,000 in out of pocket expenses yet the Advantage plan isn’t marketed as a plan with up to $10,000 in out of pocket costs plan for a reason.   


Weigh the options and see for yourself  


Really, who can afford to pay a five thousand dollar out of pocket medical expense per year? It just seems more reasonable to ante up and pay a higher monthly premium. A Medicare Supplement plan adds to your Original Medicare and fills the gaps, leaving you with the yearly deductible. The premium for a Supplement plan G is, on average, $150 per month. Once you factor in the yearly Part B deductible it equates to less than $2,000.  When you crunch the numbers, the hidden costs of a Medicare Advantage plan are shocking. 


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