Take your time to understand how Medicare works.
Don’t rush the sign-up process. If you make a decision based on advice from friends and family beware that what works for them might not be best for you.
You would be amazed at how many people simply rely on what a friend or family member has for coverage. There is no one-size-fits-all plan. The follow-on implications can be significant. There can be issues such as which doctors or medications are covered, or you might end up paying significantly more than you should.
Here are the four (4) most common mistakes when it comes to understanding coverage:
Confusing Medicare Advantage and Medicare Supplement
Both plans are sold by private insurance companies (and the same companies often sell both types of plans) so it’s easy to get confused.
However, they are very different in how they provide health coverage, and, you cannot have both at the same time.
| Medicare Advantage (Part C) | Medicare Supplement (Medigap) | |
|---|---|---|
| Description | Private alternative to Original Medicare (Part A and B) | Private supplemental plan that provides ‘gap’ coverage for the costs Original Medicare does not coverTypically referred to as ‘Cadillac’ coverage |
| Premiums in addition to Part B | $0 – $100 per month | $90 – $300+ per month |
| How You Pay for Healthcare | Pay copays as you go, typically limited premiums | Pay upfront through monthly premiums – limited to no copays |
| Doctor coverage | Typically requires the use of a network of doctors | Any doctor or hospital in the U.S. that accepts Medicare |
| Capped out-of-pocket costs | Yes $8,300 for in-network$12,450 for out-of-network (if covered) | No – however, your plan covers most out-of-pocket costs via your premium payments |
Not understanding doctor networks: HMO vs. PPO
Beneficiaries who sign up for Medicare Advantage plans often do so because they are attracted to the ‘$0 premiums and extra benefits (like dental, vision, hearing).
While these are undoubtedly attractive qualities of Medicare Advantage plans, a critical point that is easily overlooked is that these plans may have specific rules around provider networks.
Medicare Advantage plans are ‘managed care plans,’ meaning insurance companies negotiate discounts and rates with healthcare providers to form a ‘network’ that provides care for its members at reduced costs.
Even plans provided by the same insurer can differ in what a doctors and hospitals are covered.
The two (2) most common plans typed are HMO and PPO.
| HMO | PPO | |
|---|---|---|
| Doctor Network | Limited to doctors and hospitals within the plan’s networkOut-of-network not covered except for emergencies | Has ‘preferred’ network of doctors and hospitalsOut-of-network doctors are covered but at higher cost |
| Care coordination | Coordinated by a single doctor (also known as Primary Care Physician or ‘PCP’) | No care coordinator – free to use any doctor |
| Referrals for Specialists | Need referrals from PCP | No referrals necessary |
Prescription Drugs: Not Checking Coverage and Cost
Most Medicare beneficiaries understand that they should sign up for a Part D prescription drug plan to lower costs. However, we’ve encountered many Medicare-eligible beneficiaries who believe their drugs are covered ‘similarly’ by all drug plans.
Every Part D plan has a ‘formulary’ or list of drugs that are covered. While the development of formularies includes at least two drugs in the most commonly prescribed drug classes for the Medicare population, they might not have your specific drug.
In general, each Part D drug plan:
- May differ in their formularies
- May price the same drug differently
- May change their formularies during the year
| Tip: Check your drug costs – don’t be a Medicare statistic 9 out of 10 Medicare beneficiaries are in a drug plan that is not the lowest cost.It is not uncommon for the same drug to vary 200%-300% in costs across different plans in the same zip code. |
Not Assessing Your Coverage Annually
Unfortunately, Medicare is something you can’t ‘set and forget’. Plans can change benefits each year – for instance, services can be added or removed, or more importantly, doctor networks and drug formularies can change.
Review your coverage every year to make sure you don’t miss out on critical changes – if your health situation has changed and you’re seeing new doctors or taking new drugs – shop around to see if you’re still on the best plan.
Bottom Line: Medicare is not one size fits all
We recommend all beneficiaries get advice from an expert and review their plans carefully each year for changes, especially if your health situation changes. It’s important to understand the scope of your coverage.
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