Pay Now or Pay Later: The Real Cost of Medicare Advantage vs. Medigap

Is Medicare Advantage Really "Free"?

Medicare Advantage can be enticing, salespeople will tell you it is the best thing since sliced bread because it doesn't cost anything, but is it?  Let's look at it a little closer....

Extra Benefits Under Medicare Advantage Plans

On a Medicare Advantage you get all kinds of bells and whistles on some plans like dental, vision, hearing, over-the-counter, and sometimes with some plans (depending on the area) you might get transportation.  Usually, you will also get a prescription plan as well included with a Medicare Advantage plan.  The dental may or may not be on all plans, these days, as well as the vision and hearing.  Transportation is only on the elite plans, so it has to be a really good plan to have all of them, and if it does, most likely, you are giving up something in order to get the rest.  

What You Still Have to Pay For

But does it cover everything? You usually have to pay the first 3-10 days in the hospital if you have to go, most lab services have a copay, Specialist usually have a copay, and an Ambulance usually has a copay for ground and air.  If you go see a Specialist and you have an HMO, a lot of times, you have to get a referral from your Primary Care doctor.  Now, your Primary care doctor USUALLY doesn't have a copy, but depending on the plan you are on, it could be one.  There could be a transportation benefit with your plan, but it usually has a mile limit on how far you can go, so if you are a veteran, and you go 150 miles to the VA clinic, odds are that it doesn't travel that far, but if you only go 75, it probably does.  It could offer you an over-the-counter benefit to cover aspirin, Tylenol, toothpaste, toothbrush, band aids, and other non prescription things you get at a pharmacy, but not food, gas, or paper products.  PPO's you don't need a referral to see a specialist so you can see any doctor you want, however the cost are higher, and usually it has less benefits than a HMO.  You can get an indemnity plan to cover all of these cost so even though you are billed, you would be getting the money back each time you had to go to a doctor or hospital.

Medigap at Age 65: Why It Matters

Now for a Medigap, when you turn 65, no matter how sick you are, you are qualified, and if you can afford one at 65, you should get one, but that is my opinion.  You will also need a prescription drug plan to go with it because the federal government says we have to have one.  If you want dental, vision and hearing, there are plans that you can purchase that will cover that as well.  But the thing about a Medigap is you are paying out the copay for each one of the procedures in advance because when you go to the doctor, hospital, or even have lab work done, you won't pay anything.  So if your monthly bill for your plan is say $250/month, and your prescription drug plan is $50/month you are paying $300/month, but when you walk into a doctors office or hospital, you don't pay anything.  You still have to pay for your medication, but hospital and doctors, and rehab facilities don't cost anything.

Medicare Advantage for Those on Disability

If you haven't turned 65 yet and are on disability, and are getting on Medicare, you have no choice but to get on a Medicare Advantage until you turn 65.  You can get a Medicare Supplement if you choose when you turn 65 if you want then, because even though you have been on a Medicare Advantage, even if you have been on it for 25-30 years, you can still get a Medicare Supplement if you qualify with the number of credits the government requires.

Final Thoughts: Pay Upfront or As You Go?

So, my question to you, do you want a plan that you pay a guaranteed amount every month, or do you want a plan that you might have to pay something if you go to the doctor or hospital?  Do you want to pay up front for your medical bills, or as they come in? The decision is yours, worth thinking about, what can you afford?

About the Author: Todd Bostic of Todd Bostic Insurance is a Medicare licensed broker with 28+ years of experience.