As many of you know, original Medicare A and B doesn’t cover all your medical expenses. Under Medicare A and B, there are several gaps in coverage where you will need to pay for costs out-of-pocket. To help reduce financial risk, many people choose additional coverage to fill in the gaps original Medicare doesn’t cover.
There are two options available for additional coverage: Supplemental and Advantage plans. Today we will cover Advantage plans (also called replacement plans). Let’s begin by reviewing the 4 key differences among Advantage plans.
1. Network Differences
First, there are network differences within the Advantage plan system. You will either be on an HMO plan or a PPO plan. HMO plans generally give you a much smaller network of doctors, specialists, and hospitals to choose from. One of the reasons for this is that HMO plans tend to pay doctors less than PPO plans, meaning PPO plans typically have far more doctors and health care provider options within their network.
The other network difference between Advantage plans is the out-of-network policy. If you’re on an HMO plan, you can’t go to a doctor, hospital, or health care provider if they’re not within the HMO network. (Technically, you can – you just have to pay 100% of the bills.) The only exception is for emergency room or urgent care visits. With PPO plans, however, you have the option to see health care providers out of the PPO network. It will cost you a little extra to go out of the network (typically 20-40%), but under the PPO plan, you do have the option.
The final network difference between HMO and PPO plans is the referral process. Under most HMO plans, you’re required to get a referral from your doctor before you see a specialist (like a cardiologist or dermatologist). On a PPO plan, you won’t have to worry about referrals. If you want to see a specialist, all you have to do is simply call and set the appointment.
2. Out-Of-Pocket Expenses
The second major difference between Advantage plans is your out-of-pocket expenses. Unlike Supplemental plans, Advantage plans rely solely on monthly premiums (in fact many have no monthly premium). Instead, you’ll pay copays for everything. For example, if you see a specialist, have an MRI, or go to the hospital, you’ll be responsible to cover a copay for part of the cost.
Fortunately, there is a max out of pocket amount for the year, meaning every time you pay a copay from January 1 to December 31, the amount is added up. Once you’ve reached the copay maximum amount for the year (it could be anywhere from $3,000 to $7,000 depending on the plan), you will no longer be responsible to pay copays until the next year when the whole process starts over again.
Most HMO Advantage plans are going to have a low-range max out of pocket, while PPO plans typically have a higher max out of pocket amount.
Another out-of-pocket expense difference between Advantage plans is your out-of-network expenses. Now as I mentioned before, if you’re on an HMO plan, you can’t go out of network except for urgently needed or emergently needed care. But if you choose a PPO plan, you have the option to go to a doctor or hospital out of the PPO network. If you go out of network, you will be responsible to pay a bit more than you would if you stayed within the network. So this means your annual max out of pocket amount will potentially be higher if you decide to go out of network.
3. Prescription Drug Plans
The third difference between Advantage plans is prescription drug plans. Most Advantage plans in the market today have what we call an embedded drug plan, meaning it’s included within the advantage plan. Now, the one primary difference between Advantage drug plans is the included formulary. A formulary is simply a list of the medications that are covered by the drug plan. This is by far the most important thing we look at when deciding which advantage plan to go with.
Some formularies within Advantage plans are good, while others are not so good. The first thing you want to ensure is that the Advantage plan you choose covers the medications you’re on. The second thing you want to look at is the size of the formulary. The bigger the formulary, the more meds the plan covers, so always do some research on the drug plan’s formulary before deciding on your plan.
4. Monthly Premiums
The fourth and final difference between Advantage plans is monthly premium costs. Medicare Advantage plan premiums vary by plan and location. Why? Remember, with Advantage plans, you’re paying copays instead of relying on monthly premiums like you would on a Supplemental plan.
Some Advantage plans will have a monthly premium cost because the plan has enriched benefits. Meaning you will have a larger network of doctors and hospitals to choose from, you may have a lower max out of pocket for copays, and typically, the drug plan formulary is much better than those offered by the “0” monthly premium plans. So if you have health problems or take lots of meds, it may be in your best interest to choose a plan with a monthly premium so you have a better drug plan, a larger network of doctors to choose from, and a lower yearly max out of pocket.
4 Major Differences To Consider Before You Choose Your Advantage Plan
Let’s summarize what we’ve learned. There are four major differences to consider before you choose your Advantage plan. First, there are network differences, meaning some Advantage plans have fewer doctors and hospitals to choose from. Second, your out of pocket expenses will vary based on the plan you choose. Third, some Advantage plans have great drug plans while others do not (look at the formularies to determine if a drug plan is the right one for you). Fourth and finally, you’ll want to consider the monthly premium costs of an Advantage plan. While many plans have very small premiums, others charge a little more each month but offer greater benefits.
As you can see, there are several factors to look at when choosing the best Advantage plan. Luckily, your don’t have to make this decision alone. Our Medicare Guides help people every day weigh their options and choose the right plan for their needs. If you would like free assistance please click here to schedule a time that works for you to speak with a Guide over the phone.