FAQ Friday: Why we Recommend a Medicare Supplement Plan

We recommend Medicare Supplements (Medigap) to 95% of our clients and I will explain why. In order to better understand why, I will break down the two different types of plans that someone on Medicare can choose. The two options are a Medicare Advantage plan or a Medicare Supplement plan. Listed below is a brief, generic explanation of Medicare Advantage plans and Medicare Supplement plans:

Medicare Advantage Plan

  • It is not a Supplement, it is a private company that provides a health plan that you will use instead of using your traditional Medicare. So, you replace your Medicare.
  • $0 – $100 premium depending on the plan’s location. The $134 Medicare Part B premium is no longer paid to Medicare but to the private insurance company.
  • Deductibles and co-pays up to your yearly maximum. Depending on the plan, an average of $3000 – $6000 maximum out of pocket for the year.
  • Networks of doctors and hospitals for HMO plans. PPO plans will offer out-of-network coverage but at an additional cost.
  • Requires referrals and pre-approvals
  • Includes prescription drug coverage
  • Depending on the area, some plans include additional benefits that Medicare does not cover such as dental, vision or gym memberships.

 Medicare Supplement Plan

  • Keep your Medicare. Medicare Supplements work with your Medicare. Medicare remains primary and the Supplement would be secondary.
  • No networks. As long as the doctor or hospital accepts Original Medicare they have to accept a Medicare Supplement regardless if they accept the carrier or not.
  • No referrals or pre-approvals
  • Additional monthly premium
  • Covers the 20% that Medicare does not cover without surprises. As long as Medicare covers the service, the Supplement will cover it.

Now that I’ve explained the two plans, there are two reasons why 95% of our clients are choosing Medicare Supplements and why I prefer them to Medicare Advantage plans. The major reason is if you don’t get a Medicare Supplement plan when you first turn 65, you will have to medically qualify to upgrade to a Medicare Supplement. For example: if you choose an Advantage plan because you’re attracted to the low premiums and the additional benefits (dental, vision etc.) and you are hit with a big diagnosis (COPD, cancer, heart disease etc.) that is going to cost you that maximum out-of-pocket, you might be stuck with that Advantage plan and you can no longer afford those co-pays and deductibles. That is the biggest risk for anyone choosing a Medicare Advantage plan.

The second reason is that it just makes sense to me. It is one of the few insurance plans that you are guaranteed to get more benefits then the premium you pay in. Let me explain. Let’s look at a 20-year period of time and your Medicare Supplement plan costs you $1,500 a year. Over a 20-year period of time you will pay in $30,000 to your Medicare Supplement plan in premiums. I can guarantee you that you will spend more than $30,000 on your healthcare in 20 years.