Joanne: The Medicare Advantage versus Medicare Supplement debate continues to be the most heated discussion in the Medicare world. This is for good reason since it's likely the most important decision that you will make during your time on Medicare. So in today's episode, we will compare both options and talk about some of the enrollment trends between the two now that we're into 2024

Cameron: But before we start, my name is Cameron Giardini, and together with my co-host, Joanne Giardini Russell, we operate Giardini Medicare, which is an independent insurance agency based out of Southeast Michigan. Although we are based in Michigan, we do work virtually over the phone to directly help consumers in about 13 states find the right Medicare coverage for them.

If we do not work in your state, we will connect you with another trusted independent agent who will be able to help you find the coverage you want. Also, we now have a free online course that you can register for and go online to gmedcourse.com. There will be hundreds of Medicare topics available to you on that website, and you can study them at your own pace.

So make sure to check that out after this episode. So a brief overview of today's episode, we will give a brief overview first of what is Original Medicare. Then we will talk about how to understand Medicare Supplement Coverage. A reminder that we do usually call these Medigap Plans, which is the same thing.

We'll talk about the pros and cons of those Medigap Plans. Then we'll shift and talk about understanding Medicare Advantage plans. We'll talk about the pros and cons of Medicare Advantage plans. Last but not least, we'll talk about deciding between those two options and make sure to think long-term about that decision.

So Joanne can start with a brief overview of Original Medicare. 

Joanne: And here we go. So we have two components first to start us off. We have part A, which is hospital insurance, and this is going to provide inpatient hospital stays, care, and skilled nursing facilities. Hospice care, and some home health care.

We've got the other part of Original Medicare, which is part B, and that is your medical insurance. This part is going to cover certain doctor services, outpatient care, medical supplies, and preventative services, it covers a whole bunch of things. So together. Part A and Part B, again, make up what we refer to as Original or Traditional Medicare.

Now, please remember, too, that you must be enrolled in both Part A and Part B to enroll in a Medicare Advantage plan or Medigap coverage. This also includes paying at least the base Medicare Part B premium, which in 2024 is $174.70 per month. Now, can you just keep Original Medicare and avoid having to make any decision between Medicare Advantage and Medigap coverage?

You certainly can do that. You can just have original Medicare, but Don't forget that Original Medicare does not provide full coverage, and you would be responsible for many of the out-of-pocket costs, such as the $1,632 deductible for Part A, and that's inpatient hospital stays, and 20 percent coinsurance for Part B services.

And a key thing to remember here is that there's no max out-of-pocket. There are other out-of-pocket costs, but these are just brief examples right there So we generally will always recommend enrolling into either a Medigap plan or a medicare advantage plan Now before getting into Medigap versus medicare advantage Just remember that if you are getting a medicare advantage or Medigap coverage through retiree coverage from a former employer.

A lot of what we're discussing today is not going to apply to you. So please reach out to a broker to discuss your specific and unique coverages. 

Cameron: And now that we've talked about what Original Medicare is, we have to shift and talk about understanding Medigap coverage. So according to CMS, which is the Centers for Medicare and Medicaid Services, a Medigap policy is health insurance sold by private insurance companies to fill the quote-unquote gaps in Original Medicare coverage.

Medigap plans help pay some of the health care costs that Original Medicare doesn't cover, just like that 20 percent coinsurance that Joanne has mentioned. In all but three states, Mediget plans have basic benefits standardized by specific plan letters. There are currently 10 standardized plan letters that range from A to N.

This can seem overwhelming, but generally, we only recommend either Plan G, Plan N, or the high deductible plan G. We discuss all of these in more detail in other episodes though. So make sure to check those out now because Medigap coverage is secondary to original Medicare, regardless of the plan letter that you choose with Medigap coverage, you can experience nationwide access to medical providers that accept original Medicare.

This is also regardless of your Medigap insurance company. So it doesn't matter your insurance company. You can go to any provider that accepts original Medicare. Also, again, because Medicare is still your primary coverage when you have a Medigap plan, prior authorization is extremely rare with Medigap coverage since the insurance company is not responsible for coverage decisions.

Now, as far as costs go, Medigap premiums, or monthly premiums, will vary greatly based on your age, gender, and perhaps most importantly, the state and the zip code that you live in. Here are some brief examples of Medigap Plan N pricing for a 65-year-old male. In Michigan, they might pay $100 per month.

Idaho could be $130 per month. Maryland, $115 per month. Oklahoma is down to $85 per month and then Florida is up to $150 per month. Those are all the same plan with the same coverage, but again, the pricing can vary drastically based on where you live. Now, Original Medicare with Medigap coverage, does not provide coverage for most prescription medications.

So you will also want to enroll in separate Part D prescription coverage to go with your Medigap plan. This is often called Part D and Part D plans. They're also offered by private insurance companies. According to Medicare, the average Part D monthly premium is $55.50 per month in 2024, but there are plans available.

with premiums ranging from $0/month up to over $100/month. And remember, this is in addition to your Medigap premium. The Part D plan that is right for you is almost certainly going to only come down to your specific medications. So make sure you find the right plan for you. Now that we have an overview of Medigap coverage, what about the pros and cons of Medigap plans?

Joanne: Let's start with the pros. Medigap plans provide the freedom to see any provider nationwide that accepts Original Medicare. It's pretty simple. Very rarely, like Cameron said, will you have prior authorization requests because Medigap coverage is secondary coverage and it just follows Original Medicare's lead.

Another positive, it's going to have low out-of-pocket medical costs, so Plan G, for example, only requires that you pay your Part B deductible, which in 2024 is $240. That means that after that deductible is satisfied, you pay nothing out of pocket for all remaining Medicare-covered services. Another nice thing with Medigap contracts is that they're guaranteed renewable, so as long as you pay your premiums, Your Medigap plan will continue to renew each year.

Now, here are some of the downsides. They have higher monthly premiums than Medicare Advantage. They just are higher in terms of monthly premiums. The majority of Medicare Advantage plans are available for a zero-dollar premium per month, which is, of course, far lower than any Medigap premium that we just mentioned.

Now, another downside is that they have limited or no extra benefits. Medigap plans only have to cover what Medicare covers. So often, they don't include coverage for routine dental, vision, and hearing benefits and things like that. Another downside, you're going to have to buy that separate Part D prescription drug plan.

So you will want to enroll in that prescription drug plan and that could come with additional monthly premiums. Another downside, Medigap premiums increase. Not only are the premiums typically higher. Medicare Advantage plans per month, but the Medigap premiums can and they also will increase over time.

Typically, we do say to expect an increase of 5 to 7 percent per year going forward. 

Cameron: Yeah, and I think that's probably the biggest con overall with Medigap plans because if the pricing was always it's $100, $150 per month. I think many people would be happy with that. It's after time when it gets to, you know, $200, even $300 per month where people start to weigh the decision between those and Medicare Advantage plans.

And speaking of Medicare Advantage, let's talk about understanding Medicare Advantage plans in more detail. So, Medicare Advantage plans, are often called Part C, but they are not a part of Original Medicare. It's super important to remember that. They are not provided by the federal government.

Instead, the government funds private insurance companies to provide Medicare Advantage plans as a private alternative to original Medicare. And we'll have another episode talking about specifically how the government gives these private insurance companies these funds, so make sure to listen to that one as well.

Medicare Advantage plans are considered bundled plans, and the reason they are considered bundled is because they provide Part A, Part B, and usually Part D coverage all in one plan. These plans, do become your primary coverage, so while you are enrolled in a Medicare Advantage plan, you won't use your red, white, and blue Medicare card for most services.

So a lot of times you can just keep that in a safe space because you're going to be using the actual ID card from the insurance company with your Medicare Advantage plan. However, just know that although these are an alternative to Medicare, Medicare Advantage plans, they still must cover all of the services that original Medicare would cover these plans.

They are managed care plans. And what this means to you is that they often come in the form of HMOs or PPOs. This also means that unlike with original Medicare, you will have a network of contracted providers and facilities that you may be limited to with your Medicare Advantage plan. Because these are managed care plans, it also means that prior authorization is much more common with Medicare Advantage plans, meaning your providers might need prior approval before some services can be completed.

Now, we're not saying you can never go out of network with these plans. There are certainly PPO plans that may allow that, but it is not as free to go wherever you want, like with Original Medicare and Medigap. And we're also not saying that all plans will need prior authorization for everything. And we're not even saying if you need prior authorization, that services will be denied, but just know it is an added hurdle to jump through at certain times.

According to CMS, when we're talking about costs for Medicare Advantage plans in 2024, the average monthly premium is $18.50 per month for those plans. According to the Kaiser Family Foundation, like Joanne mentioned, 66 percent of Medicare Advantage plans have a $0 per month premium.

However keep in mind, that you still have to pay the part B premium. Now in exchange for these low premiums, Medicare Advantage plans typically have higher medical out-of-pocket cost potentials. So in 2024, the maximum out-of-pocket limit. For Medicare Advantage plans, it's set at $8,850 for in-network services.

A lot of times people will use that number to kind of shock you or scare you away from Medicare Advantage saying that you could be charged up to that amount. However, oftentimes plans do have lower max out of pockets than this actual upper limit. Again, it's just the limit, not what it has to be.

With plans in Michigan, for example, usually just. Based on our own experience being in the $4,000 to $6,000 range. And with many other markets in other states, having even lower max out of pockets than what we see in Michigan. Lastly, one of the main benefits that Medicare Advantage plans provide is providing extra benefits, not covered by original Medicare.

We are sure you have seen these heavily advertised on TV through the mail and online, but according to the Kaiser Family Foundation, at least 97 percent of Medicare Advantage plans provide some coverage for routine dental vision and hearing, and they also provide. fitness benefits. And to wrap that up and talk more about Medicare Advantage, let's go over the pros and the cons.

Joanne: All right. Again, we'll start with the pros. The pros of Medicare Advantage plans are the low monthly premiums compared to Medigap. Although you're still responsible for paying the Part B premium with a Medicare Advantage plan, most of these plans, remember, do have zero premium per month, which is much lower than any Medigap plan out there.

They have extra benefits. Virtually all Medicare Advantage plans provide additional benefits that are not covered by Original Medicare. Another positive here is that the Part D coverage, your drug coverage, is usually included. Medicare Advantage plans typically include Part D prescription coverage included in the plan with no additional monthly premium, although, do remember that you will still have co-pays and out-of-pocket costs related to your medications.

Now, another positive that we like about Medicare Advantage is that they have a max out-of-pocket. So, we've discussed that with Original Medicare, remember, there is no max out-of-pocket on spending. Therefore, if you enroll in one of the Medicare Advantage plans, you are now putting a max out-of-pocket limit in place for yourself.

So, financially, that's a very, very good thing for you. Some of the downsides. The plans have a network, um, some people don't like networks, but you do have a network of contracted in-network providers that you'll likely want to stay with or have to stay with, especially for best pricing. Although slightly uncommon, provider networks can change during the year with those providers or hospitals that could leave the Medicare Advantage plan network.

One of the downsides too for people, is managed care. At the end of the day, these are managed care programs. They may come with prior authorization. So that means that you may need prior approval from the insurance company before certain services or medications can be given or performed for you.

Another downside potentially is that these are yearly contracts. So Medicare Advantage plans, the coverage and the benefits can change and typically do change at least slightly every single calendar year. So you do have to stay a little bit on top of that and just check during the annual election period.

You know, make sure when your documents come in September that you're checking to see what your plan is going to change to potentially for next year. Another downside is the higher potential out-of-pocket costs compared to Medicap. So, again, the potential max out-of-pocket of several thousand dollars per year can be much higher than the potential out-of-pocket medical costs associated with the popular Medigap plans, and that's if you have a bad health year.

Cameron: Yeah. It's always good to think of pros and cons with either of the coverages because there simply are pros and cons to each one. Now, how do these pros and cons and the differences between the two shake out when we look at the trends when it comes to Medicare Advantage versus Medigap plans?

So when it comes to these overall trends, The trend is growing towards Medicare Advantage enrollment, and it continues to grow. And in our opinion, this is only going to increase moving forward. According to the Medicare Payment Advisory Committee, also known as MEDPAC, as of February 2023, 52 percent of Medicare-eligible beneficiaries enrolled in both Part A and Part B are also enrolled in a Medicare Advantage plan.

So, these enrollment numbers have increased threefold since 2010, and by at least 8 percent in each of the last six years. And this shows that over 50%, again, more than half of people now that are eligible and enrolled in Medicare Part A and Part B also have Medicare Advantage. Finally, the Congressional Budget Office, projects Medicare Advantage enrollment to be 62 percent of all eligible consumers by 2033.

Now looking at Medigap trends, according to Telos Actuarial and a report that they've done on the future of Medicare supplements, as of 2022, there were 22 percent of Medicare beneficiaries enrolled in a Medigap plan. Now this is only up from 21%, so a 1% increase since 2011. And in recent years, Medigap plans have essentially seen no growth in overall enrollment percentage.

For full disclosure, even insurance companies believe that enrollment growth and Medicare Advantage plans will increase at the expense of Medigap enrollments. And you can see this firsthand because during a recent investor day, one of the largest Medicare Advantage insurance companies, they said.

And this is exactly what they said. Our PDP, which is Prescription Drug Plans, and MedSupp, which is Medicare Supplement Business, both businesses, we believe, provide a major source for conversion into Medicare Advantage. We believe that our customers will benefit significantly if they move from a prescription drug plan.

Or Medicare supplement products into Medicare Advantage. We will link to that in the show notes, but again, that is directly from the executives at these companies that have Medicare Advantage plans Medigap, and Part D plans. Now, this does not mean that we think Medigap plans are a bad option at all, and we do not think they're going to disappear, but we do think their enrollment growth will be much slower going forward when compared to Medicare Advantage plans, just like they already have been in recent years.

Now, we say this even as insurance brokers, where a majority of our clients choose to enroll in Medigap coverage when they're presented with both options. Also, these enrollment trends can vary greatly across the country. So make sure you listen to our other episode about how where you live impacts your Medicare options.

And last but not least, how do you decide between the two? 

Joanne: It's the hardest part. So almost everyone we talk to wants Medicare Advantage while they're healthy. They want to enjoy the cost savings and all the extra benefits. And then. They want to change to Medigap coverage if their health worsens and then they want more coverage, right?

And more access to providers and easier and things like that. So unfortunately, our job is always to pull them back in and say, it's just not as easy as having Medicare Advantage coverage while you have fewer healthcare needs only to switch to a Medigap plan later if your health worsens. And the reason is when you first enroll.

in Medicare Part B of Medicare. You're going to be age 65 or possibly older, but at that very point, you do have access to your individual Medigap open enrollment period, this is a period that lasts for six months. What it means is, that during these six months, you can enroll in any Medigap plan that you're eligible for without having to qualify based on any health conditions.

However, in most states and circumstances, if you are outside of this Medigap open enrollment period for yourself, if you want to change from a Medicare Advantage plan, And then to Medigap coverage, you're going to have to qualify based on your health. And you can be denied enrollment into Medigap coverage due to certain health issues and pre-existing conditions.

Now we do have a special note here that there is also a one-year trial right period for people to change Medigap records. from Medicare Advantage to Medigap if they enrolled when they were first eligible at age 65. So, whatever route you're planning on taking, think of the worst-case scenario if you enroll in Medicare Advantage or Medigap coverage.

Far too often, people focus on the best case for each option. but it's much more important to understand the downsides to plan accordingly and to think longer term. When it comes to Medicare Advantage plans, typically the biggest downside to plan for is something like a cancer diagnosis or another significant illness that can make you reach your plans max out of pocket and then potentially you're having to be treated while having to navigate your plans network or your providers and having to deal with prior authorization.

On the other hand, with Medigap coverage, you may have relatively few health issues. And it's possible that after years of premium increases, you're going to be paying a few hundred dollars per month for your coverage in addition because you're going to have a separate Part D plan. And then you're missing out on many of the extra benefits that Medicare Advantage plans provide.

I always think of something, Cameron, you've said this years ago whatever path you take, you're going to sacrifice something. So, if you go with Medigap, you're going to have great coverage, but you're going to be paying your premium. Whether you're healthy or not, month in, month out, you're going to be paying that higher premium and some people don't like that.

So, you're sacrificing dollars to get great coverage. However, and then your friends are also telling you everything they're getting for free that you're not. So, that's, what you're sacrificing. But. If you want to go to zero premium to gain some of those perks, you can sacrifice coverage and sacrifice freedom, and the things that are important to the Medigap contract holders.

So sacrifice is a keyword. None, nothing is going to be perfect. You have to decide what you're willing to sacrifice. 

Cameron: Yeah. Definitely. And another thing I think I've said that might sound stupid, but when it comes to Medigap plans, really the worst thing that happens is you stay healthy and the opposite with Medicare Advantage, the worst thing that happens is you become unhealthy.

So it's just kind of what it shakes out to be. But as always, please leave us a review on your podcast app and subscribe so you can listen to future episodes. You can also find more Medicare content from us by going to YouTube or TikTok and searching GRDN Medicare. Last but not least, if you want to send us any feedback or questions, you can email us at info at gmedicareteam.com

Thank you and have a great day.