The Hidden Drawbacks of Medicare Advantage

Insurers offering Advantage plans have an enormous financial interest in your Medicare choice, but what they won’t tell you can make a huge difference in your pocketbook and treatment options. 

If you are nearing 65, you’ve doubtless heard about the many benefits of choosing a Medicare Advantage plan. Medicare Advantage is administered by private insurance companies, not the federal government, and they want you to join. This is not for altruistic reasons; they get paid enormous sums for their efforts. And they are quite successful; more than 40% of seniors 65 and older are on a Medicare Advantage plan.

Chumming the Water

“Chumming” is the practice of throwing cheap baitfish and fish guts into the water to attract big, high-value gamefish. Medicare Advantage lures in customers with low or no additional premiums (everyone pays a premium for Part B) and a variety of benefits not offered through Medicare. You may see dental, vision, or hearing assistance, but caveat emptor. Buyer beware, indeed. The vision benefit may be $100 every other year for eyeglasses, and dental may only cover routine cleanings. 

Advantage plans also might cover gym membership, home improvements such as wheelchair ramps, transportation to doctors’ offices, and even meal delivery. These are all valuable services to you and to your Advantage plan insurer. In this case, both of you have a common goal of keeping you healthy and able to continue living in your residence. The benefits are obvious for you, and all about financial gain for your insurer.

Coverage

Medicare Advantage plans are based in a specific area. They may have providers only in your state, only in your county, or only, in some rural areas, 100 miles away from you. It is extremely important to ask where providers are located for both basic and specialty care. You will have to use doctors in the network, which may vastly limit your options. Many people buy a particular Advantage plan not realizing that doctors with whom they’ve established long relationships are not available in that network. And if you travel much or have a second home, your network does not travel with you; you will pay out-of-network charges. When you are outside of the US, Advantage plans offer zero coverage, and do not include a provision for paying some of the costs to get you back to the US for treatment as original Medicare plus Medigap do.

Furthermore, Advantage plans are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). You will likely be required to get a referral to see a specialist, and treatment can be denied. In addition, you must pay a copay each time you see a doctor or specialist. The US Department of Health and Human Services (HHS) released a report in April that found Advantage plans inappropriately deny required care to tens of thousands of enrollees every year.

Check Every Year

Your Medicare Advantage plan can change services and costs every year, so be prepared to run the numbers annually versus other plans. The yearly enrollment period (Oct. 15 to Dec. 7) is homework time. And while you can change Advantage plans every year, woe be to you if you want to switch to original Medicare.

When you first sign up for Medicare, you can get a Supplement (Medigap) policy regardless of preexisting conditions. But that is a one-time offer. After that initial pass, you can be denied based on your health forever after. 

Let’s say you are in good health at age 65 and opt for an inexpensive Advantage plan. Then, a few years later, you are diagnosed with cancer. You would like to be treated at a specialized facility, but none in your area is covered by your Advantage insurance. And every test, every treatment, every doctor requires a copay. You quickly hit the $7,550 maximum out-of-pocket for your plan, but that starts over in January when you find out you need additional treatment. Why not switch to original Medicare with a Supplement that will cover nearly all your costs? You can’t because your cancer diagnosis gets you rejected.

Cost

Advantage plans are less expensive than original Medicare with a Medigap policy. When you’re 65, that alone can be enough to make your decision. Who doesn’t want cheaper health care? But Advantage plans come with a vast array of copays that can make you feel nickel-and-dimed and may even keep you from seeing a doctor when you should. 

For people who stay relatively healthy throughout their life, Advantage plans can save money and provide good care. But for those who travel throughout the US, who get a devastating diagnosis, who want to choose their own doctors and specialists in a timely manner, who want to buy one policy that will stay the same — original Medicare and a Supplement are hard to beat.

Source:  Society of Certified Senior Advisors Blog: 07/27/2022

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