ALTERNATIVES TO ORIGINAL MEDICARE
MEDICARE ADVANTAGE OPTION
PRESCRIPTION DRUG PLAN OPTION
Now that I’ve probably insulted you, I am going to make up for it by describing in plain English what your options are and it really is very simple. Here are your choices:
• Keep Original Medicare and add a Supplement/Medigap policy to cover
deductibles and co-pays.
• Select a Medicare Advantage plan (Part C) which is run by a private
insurance company approved by Medicare.
• Add a Prescription Drug policy (Part D) to your Original Medicare with
or without a Medigap policy, or if you opt for a Medicare Advantage plan,
most include drug coverage in the package.
Now as they say “Even a Caveman” can understand these three basic choices and what’s more, we are going to assist you in selecting the best option for your individual situation. Unfortunately there is no magic bullet where one shoe fits all, but let’s take a look at each of these basic options.
Original Medicare is a great gift to all of us, but with a little effort and research, you can make it much better. You have already taken that step by visiting MedicarePhD.com.
The problem with these alternatives to basic Medicare is that seniors are inundated with such a large volume of information they do not know where to turn. This information is usually presented in a confusing manner and can be difficult to comprehend for most of us.
What transpires all too often is that the individual becomes overwhelmed and the easiest decision is not to make one. Thus, they just keep Original Medicare and go no further. Well, that’s a coward’s way out and WE ARE NOT GOING TO ALLOW YOU to go in this direction.
We have briefly touched on this product earlier, and recall a Medigap policy (often referred to as Medicare Supplement policies) is purchased from a private insurer to assist you with deductible and co-pays that come with Original Medicare. It is not a government plan but it is strictly regulated by Medicare and ALL POLICIES ARE STANDARDIZED.
• STANDARDIZATION -- The government has established 11 Medigap plans that can be sold and labels them A, B, C, D, F, F (High Deductible), G, K, L, M, and N. To avoid confusion, these designations have nothing to do with Parts A, B, C, and D. The coverage provided under each letter does not change year to year, once you decide on one of the 11, you are pretty much set for the future.
In June of 2010, 4 of the original 12 plans were dropped (E, H, I, and J) and plans M, N, and F (High Deductible) were added. These new plans basically added some cost sharing in exchange for lower premiums. However, if you signed up for one of the dropped plans before June of 2010, you are able to retain that plan.
In most situations, it makes no sense to switch to one of the new plans if you are currently enrolled in a Medigap plan. The primary reason for this advice is that if you are 6 months beyond your original sign up date for Part B, you no longer are guaranteed automatic acceptance and are subject to pre-existing restrictions. Furthermore, you no longer have the age guarantee meaning that your premium will be set according to your current age, not age 65.
• WHY CHOOSE MEDIGAP—Individuals who know they will be
encountering significant on-going health issues should strongly
consider a Medigap plan, the reason being their continual co-pays
and deductibles will be covered. However, if you are healthy, you will
be paying for unnecessary coverage which is actually quite costly.
• Guaranteed renewable if you pay the premiums
• No deductibles or co-pays
• All Medicare providers accept Medigap plans
• Do not have to evaluate yearly
• Drop and add anytime
• No prescription drug coverage
• Costly—by the time you pay this premium, your Part B
premium, and your prescription drug premium, you can be
• Miss enrollment period or change plans, pre-existing
conditions come into play
Hopefully you now understand the first of three options to Original Medicare, the Medigap policy that supplements the basic Medicare coverage. Let’s now progress to the second option, Medicare Advantage plans, Part C, and see what they have to offer.
• ELIGIBILITY—Anyone who has Part A & B is eligible and can
sign up without penalty for 6 months after signing up for Part B.
During this period you cannot be refused coverage and all pre-
existing conditions are waived. However, if you miss this window,
Medigap companies can ask health questions, raise their prices, or
deny you coverage. If you have not caught on by now, IT IS
COSTLY TO MISS MEDICARE ENROLLMENT
• COST—The biggest detriment is they cost in
the $200 to $300 per month range depending
on the policy selected and the company
providing the coverage. These plans also do not
provide Part D Prescription Drug coverage so
you have to add this cost ($39/month average).
When comparing the cost of these plans
among various providers, it is best to also look
at the cost as you age because companies vary
in how they address this issue. In other words,
ask what your premium will be next year and
how is this determined.
A significantly lower cost option than the Medigap plans, Medicare Advantage plans are Part C of the Medicare equation. One in four people eligible for Medicare have one of these policies.
Not content to leave Original Medicare alone, Congress passed legislation in 1997 to allow private insurance companies to relieve the government of its Medicare obligation with individual seniors and in 2003 enacted further legislation that made this option quite lucrative for the private insurers.
This issue of health care rationing is at the crux of the current health care debate. You are definitely more limited in your health care choices with these plans as opposed to Original Medicare, but there are a number of significant reasons to select one. The key is to select the right one and that is how we shall now proceed.
The theory behind the plans is really quite simple. Medicare pays private insurers somewhere between $750 and $900 per month to take over the provision of Medicare benefits to you. The insurer is wagering that they can fulfill your health needs for less than this amount, and thus create a profitable situation. However, this is where the PROBLEMS BEGIN WHEN THESE FIRMS “RATION” OR RESTRICT YOUR HEALTH CARE to stay under the government reimbursement.
HMOs (Health Maintenance Organizations) are not unique to Medicare as this type of health care is offered to persons of all ages. What is important is that HMOs comprise around 65% of the total number of Medicare Advantage plans and thus you need to gain an understanding of what this product offers.
HMOs are big business in the Medicare arena. Companies such as Aetna, Blue Cross, United, Humana and so on all report major profits from Advantage plans, but you have to understand how these profits are achieved. Basically they are attained because the companies were able to provide health care to their policy holders for less money than they receive from governmental stipends.
HMOs control these costs by only allowing you to use certain doctors and hospitals, what is generally referred to as the provider network. Additionally, you must select a primary care physician from the provider network and in most situations this doctor is the one who must authorize referrals to specialists---you just cannot go on your own.
Furthermore, you are almost always required to get pre-authorization to enter a hospital, and remember this hospital has to be on the provider list. You do not have to be a brain surgeon to realize these restrictions can easily lead to a multitude of problems.
These additional benefits are meaningful and believe it or not, most HMO plans do not cost you a cent. Yes, they are free as long as you pay your Part B premium of around $100, and some even refund a portion of your Part B premium. WOW, CAN LIFE GET ANY BETTER AND WHERE DO I SIGN UP?
Well, you can enroll in one of these “Manna from Heaven” plans 3 months before you turn 65 until 3 months after your birthday month. Also, if you are not happy with your choice, you can change plans every November 15 to December 31, and every January 1 to March 31 if you keep the same drug coverage. You need to be aware that you cannot change coverage except for these time windows with very few exceptions.
So now you ask, why go any further since these plans are obviously the most exciting thing since Brad and Angelina hooked up. Well, as Johnny Carson would have said, “KARNAC DIVINES A PROBLEM!”
The following details some issues with HMO’s of which you need to be aware:
• You must be willing to play by their rules, not yours.
That means you may have to get the permission of
your assigned doctor to go to a dermatologist,
cardiologist, allergist and so on. Furthermore, if you
fail to get their permission to enter a hospital
(remember it has to be on their list) you will be
responsible for the cost of the stay. I do not know
about you, but I have a real problem with people
telling me what I can and can’t do.
• Can you trust one individual (your primary care physician) to make all of
your health care decisions? Personally, I don’t think this individual exists.
• Although it appears inconceivable, many enrollees fail to ascertain if their
personal physician is on the provider list, or their favorite hospital. If not,
they have to see another doctor or go to an unfamiliar hospital until the
November 15 enrollment window reopens.
• Going further, many enrollees just do not grasp they are limited to certain
doctors and hospitals and this is due to a lack of research or deceptive
marketing practices. Unfortunately, many plans make it extremely difficult
to obtain a copy of their provider list and thus determining whether your
health care doctors and facilities are in the network becomes challenging.
• I am not exaggerating in relation to this hospital restriction.
For example, one of the largest names in health insurance
only has 3 hospitals on their provider list out of the 13 in the
Florida county in which I reside. Add to this, the closest on
their list is 22 miles from my home.
• There are situations where costs under an HMO can exceed what you would
have paid under Original Medicare. This can happen when you have a
limited hospital stay.
• All too often, your HMO coverage does not extend outside your coverage
area and if you travel considerably, this can be a major issue. For example,
at a community meeting sponsored by a major company in the field, the
agent stated you were covered outside the area if you went to an urgent care
center. Two people in attendance, who were current members of this
company’s plan, both cited examples of how they were denied such coverage
in their travels, and it was entertaining to watch the agent provide weak
• Bigness is not necessarily greatness. A good friend of mine became
overwhelmed by the whole Medicare scene and told me before I launched this
website, “I’m just going to go with Humana because they are the biggest in
Florida, so they must be good.” Well, in this forum we are not going to
determine the viability of Humana’s plans, but one of the reasons they are
the largest is because their advertising literally dwarfs all competitors.
Our research company studied Medicare newspaper ads in Florida (we
subscribe to every Florida newspaper) and found that Humana ran 25 times
more ads than their nearest competitor during the slow times of the
year—April 1st to November 15th.
• A final thought is how long do you think an HMO will keep a doctor in their
network if that physician continually refers his patients to specialists? This
dude is costing them money and this is why I do not want my doctor
determining if I can go to a specialist.
Now that we have gotten your hopes up in our initial discussion of HMO’s and then so rudely discredited many of their promoted attributes, it is time to look at the second option of Medicare Advantage plans, that being PPOs. In closing, NOT ALL HMO’S ARE BAD, YOU JUST NEED TO SELECT THE RIGHT ONE and we will provide guidelines at the end of this site to assist you.
Should you not accept my warnings on the pitfalls of HMO’s, I want you to read “Too Good To Be True: The Fine Print in Medicare Private Health Plan Benefits” published by the Medicare Rights Center. This group is a truly unbiased and a very professional organization protecting consumer rights in the field of Medicare (Medicarerights.org).
Preferred Provider Organizations (PPOs) provide the second option under the Medicare Advantage program. There are many similarities to HMOs such as the same enrollment periods, pre-existing restrictions (none), extra benefits such as maximum out of pocket limits and drug coverage. As with HMOs, the plan offerings can change year to year so you do need to do an annual review to make sure you are continuing to receive the desired coverage.
So how are PPOs different from HMOs? There are 4 main distinctions and they are significant:
• PPO provider lists are more extensive
• PPOs do not require you to get a referral to see a specialist
• PPOs do not require a pre-authorization to enter the hospital
• You can go outside of the provider network for coverage, but you do pay
a little more
In relation to the provider lists being more extensive, we compared the number of hospitals and primary care physicians in a major HMO network to that offered by a major PPO network in my county. As briefly mentioned in a previous section, the HMO network had 3 hospitals versus 13 for the PPO and 49 primary care physicians as opposed to 254 for the PPO. You will encounter a similar situation in your county if the population is of average size or larger.
Therefore, if people have a much larger choice of doctors, do not have to get referrals or pre-authorizations, and can go outside the network for a relatively fair extra charge, WHY IN THE WORLD WOULD THEY GO WITH AN HMO? There are some very good reasons so please read on.
The primary reason the majority of Medicare Advantage plans sold are HMOs is simply that most companies believe they can make more money selling an HMO than a PPO. If they can restrict the provider list, they have more control over the hospitals and doctors in their system than if they had a larger number to manage.
Realize that the doctors in the HMO plan who are always ordering expensive tests and continually sending their patients to specialists will not long remain on that HMOs provider list. Why?---Because they are costing the HMO company money.
Thus, a majority of insurance companies try to sell only an HMO plan and many do not even offer a PPO policy. Additionally, you generally cannot decipher from newspaper ads or company literature whether the offering is an HMO or a PPO, and I can assure you most are HMOs. Most advertising states “Select our DOUBLE GOLD SILVER PLATINUM OPTION” for all of your health care needs and you have no clue what kind of policy they are offering.
Let me share an example with you how this works. I recently attended a major company’s community meeting where they discussed only their Gold, Silver, Diamond Starburst Plan, an HMO offering. When I inquired about their company’s PPO policy (because I knew my doctor was not in their network), they took my name and phone and said an agent would contact me to discuss their PPO.
This never transpired and I was never contacted. This is not to condemn their HMO policy which may or may not be very good, but it certainly points out that one of the large companies wants to primarily sell HMOs because the profit margin is superior.
There are additional factors why HMOs are dominant. The vast majority are free and many offer to pay a portion of your Part B premium. Conversely, some PPOs do charge a modest premium (in the $50 range), but some can be obtained at no cost.
For example, in my area the three largest companies offering PPOs charge $46/month, $56/month and $-0-/month. The firm which has the $-0- premium, actively promotes this plan as opposed to the other two actively marketing their HMO plans. Since this firm sells a large number of Medicare policies nationwide, they have apparently exploited a niche most other firms have avoided.
• PFFS PLANS: Private–Fee-For-Service Plans
(PFFS) are relatively new in the market and
promote themselves as allowing you to go to any
provider in the Medicare system. The problem is
you can select any provider but they might not
select you. The provider, with these PFFS plans, can
determine on a case by case basis whether to provide
treatment, and this can change day to day.
In researching literally thousands of pages of
Medicare information, we could only find one source
that had anything good to say about PFFS plans.
THE BOTTOM LINE---DO NOT
EVEN CONSIDER THEM!
• SPECIAL NEEDS PLANS: These policies are available only to persons
with serious diseases such as congestive heart failure or HIV, and those
people institutionalized in a facility such as a nursing home. It is
somewhat difficult to qualify for these programs, but if you believe this
type of plan applies to you, please contact us and we will direct you to
• MEDICAL SAVINGS PLANS: In this program, the plan deposits around
$1,500 annually into a savings account for you to use until you hit a
specified deductible, and then you are liable for all expenses up to a
certain limit. Given the fact that these plans are very difficult to
comprehend and that less than 2,000 such policies exist nationwide, we
will direct our efforts more toward the big picture.
Part D of ABC & D’s refers to prescription drug coverage. While Original Medicare covers drugs administered in the hospital and some drugs administered in a physician’s office, there is no assistance with prescription drugs. This, of course, can be a major factor for many seniors so let’s see how we can solve this dilemma for you.
First, prescription drug plans are provided by private insurers, not the government. You can purchase these policies in one of two ways; first as a stand alone plan that supplements your Original Medicare and second by joining a Medicare Advantage plan that provides drug coverage. Out of the 45 million people on Medicare, 27 million have one of these drug plans and IT IS TRULY BAFFLING WHY 18 MILLION ARE WITHOUT THIS INEXPENSIVE COVERAGE!
The following details the basic parameters of these plans:
• ENROLLMENT---Three months before and after your 65th birthday
month and every November 15 to December 31 you can sign up for a
prescription drug plan and you cannot be refused enrollment. If you
lose a plan with your employer, you have 63 days to sign up (I know, I
know—who in the heck decided on 63 days?).
• PENALTIES---If you fail to sign up when eligible, you will be fined 1%
per month of the average nationwide premium, that monthly premium
• COST---As just indicated, you will have to pay around $39/month for a
free standing plan to go along with Original Medicare, but there is no
additional cost if your drug plan is part of a Medicare Advantage policy.
The true cost of these plans is the premium, any annual deductible
(cannot exceed $310 by law), and co-pays.
• CHOICES---As with Medicare Advantage plans, there are generally a
large number of policies from which to choose. According to Kaiser
Family Foundation research, there are approximately 50 different plans
in each state and thus, once again, the potential enrollee is overwhelmed
with the choices.
• COMPARISONS---The various plans differ in relation to 4 items: Cost,
Pharmacies in their network, Formularies (the list of drugs they cover),
and Co-pay amounts. The drugs covered do vary (sorry—no Viagra or
weight loss drugs on any of them) so make sure any drugs you take are
on their list before you sign up. This is as important as confirming your
family doctor is on the provider list.
• WATCH OUT---Some plans require pre-
authorization for your drugs and others may
require what is called “step therapy.” This is a
process where you are required to try cheaper
drugs as a substitute for a high priced drug you
might require and you must exhaust all of the
lower priced options (to see if they work) before
you are covered for the top of the line. OF
COURSE YOU COULD BE DEAD
BEFORE THE OPTIONS ARE
ALL TRIED, so you might want to think
twice before selecting a plan with this requirement.
Now that MedicarePhD.com has hopefully enlightened you on the 3 options to Original Medicare, those being Medigap policies, Medicare Advantage plans (Part C), and Prescription Drug plans (Part D), let’s move on to assisting you in understanding just what the agendas are of these insurance companies and their agents. I hate to ruin your day, but THEY REALLY DO NOT HAVE YOUR BEST INTERESTS AT HEART.
The HMOs are required to offer comparable benefits to Original Medicare. In order to market their product, they offer additional coverage such as prescription drugs, dental, hearing, fitness clubs, maximum out of pocket, plus lower deductibles and co-pays. As with basic Medicare, you cannot be denied acceptance due to pre-conditions and your premium cannot be age related.
In addition to HMOs and PPOs, there are a few plans under the Medicare Advantage umbrella that we will label “Hybrids.” Since they affect very few of you, we will not dwell on them except to provide you a basic understanding.
• COVERAGE GAP---Also known as the infamous “doughnut hole,” refers to
a lapse of coverage in virtually all Part D plans. After your total drug
costs reach $2,830 in any one year, you are responsible for all drug costs
until your out of pocket spending reaches $4,550, not counting your
premium costs. The only exception is that a few plans cover generic drugs
in the gap. This “doughnut hole” is a major bone of contention as it
affects almost 4 million people a year, many of whom just cannot afford this
Now that you have received an overview of the basic three options available with Medicare Advantage plans (HMOs, PPOs, and Hybrids), it is time to take a look at the last option to Original Medicare, that being the Prescription Drug Plans, Part D.
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