In a recent survey, 43 percent of newly retired people said they were spending more on health care than they planned. One of the primary reasons? An unintentionally misguided approach to choosing their Medicare coverage.
Faced with a sometimes overwhelming number of options, too often people fall victim to a premium-centered decision-making process, meaning they compare their plan options based largely on their monthly premiums and opt for the lowest-premium plan in their area. The problem with this approach is that it confuses one cost component of a Medicare plan with the plan’s overall value, but in reality, the two are not at all synonymous.
Although it may seem like the obvious choice to select a plan with the cheapest monthly premium, this could actually be more expensive in the long run. Sometimes a low monthly premium option can leave you exposed to higher out-of-pocket costs when you need care or without access to benefits and services that are important to you.
When evaluating your Medicare options, it’s imperative to look beyond the premium and focus instead on the overall value a plan provides. One of the best ways to do this is to give careful consideration to what’s important to you in a Medicare plan – as well as what isn’t. While this broader and more thoughtful approach to your decision-making process will likely take more time, it could help you save money and protect yourself from unexpected health care expenses. So ultimately it’s time well spent.
Not sure where to begin with this value-focused approach to your Medicare choices? The six questions below are designed to help you move beyond a plan’s premium and consider instead a host of other factors that contribute to a plan’s value. Whether you are thinking of switching Medicare plans or are choosing one for the first time, your answers to these questions can help you maximize your Medicare health care dollars by selecting a plan that provides the greatest value for you.
Q1. How much financial risk are you comfortable with?
All Medicare plan options cover some health care costs, but they vary in the amounts they cover and when they start covering those costs.
Original Medicare (Parts A and B) requires you to meet a Part A deductible ($1,340 per benefit period in 2018) before it pays hospital costs and a Part B deductible ($183 annually for most people in 2018; can be higher or lower based on income) for medical care before it pays 80 percent of costs for doctor visits and outpatient services, leaving you to pay the remaining 20 percent. Costs can add up quickly if you develop a serious illness or condition that requires multiple health care services and doctor visits or if you have an extended hospital stay (requiring a $335 copay/day for days 61-90). Original Medicare does not put a cap on how much you will pay for covered services in a given year, meaning a tough year from a health standpoint could leave you footing the bill for thousands of dollars in health care costs.
If the unpredictability of this equation leaves you uncomfortable, you’re certainly not alone. Most people choose one of two options to help contain their health care costs: Medicare supplement or Medicare Advantage.
Medicare supplement plans can limit your financial risk because they help pay for some things not covered by Original Medicare, such as copays, coinsurance and deductibles. Medicare supplement plans typically have a higher monthly premium than other Medicare plan options but minimize your out-of-pocket expenses as you’ll have little or no costs when you access care.
Medicare Advantage plans limit financial risk through what’s called an out-of-pocket maximum, which caps how much you will pay in health care out-of-pocket costs in a year. Once you reach that amount, your plan will cover 100 percent of the cost of the Medicare-covered services you receive, and you’ll pay only your premiums. The maximum allowed out-of-pocket amount is $6,700 for 2018, but some plans set their out-of-pocket maximums even lower. Medicare Advantage plans tend to have lower premiums than Medicare supplement plans, and members pay copays or coinsurance when they need care.
The key takeaway: Both Medicare supplement and Medicare Advantage can offer some peace of mind by making your health care costs more predictable. One way to think about which one would work better for you: If you’d rather pay more each month in a premium but have low or no costs when you need access to care, Medicare supplement may be the better choice. Conversely, if you’d prefer a low or even a $0 monthly premium and pay copays and coinsurance as you need care, Medicare Advantage could be the way to go.
Q2. Do you want the choice of any health care provider, or are you willing to choose a doctor or hospital from within a network?
Access to affordable, quality care is an important consideration when choosing a plan. The good news is, Medicare’s many options all provide that access, but the way they do so differs in important ways that you should understand before selecting a plan.
Original Medicare and Medicare supplement allow you to visit any doctor or hospital as long as they accept Medicare patients. Most Medicare Advantage plans work with a group of doctors and hospitals to coordinate their members’ care. Some plans will cover care from out-of-network doctors and hospitals but may charge members higher copays. Others won’t cover out-of-network care at all.
If you were enrolled in an HMO or PPO plan through your employer, you’ve likely grown accustomed to the idea of a network, in which case you might be comfortable sticking with that type of plan once you enroll in Medicare. But if you want complete flexibility to see any provider of your choosing, Original Medicare may be the way to go.
Q3. Do you use prescription medications?
Perhaps one of the biggest considerations when evaluating Medicare plans is your need for prescription drug coverage. Original Medicare and Medicare supplement plans do not cover prescription drugs. For help with the cost of your medications, you may want to consider a stand-alone Part D plan or a Medicare Advantage plan with prescription coverage.
To protect your wallet, it’s best to enroll when you become eligible for Medicare, even if you don’t currently take many medications, as it will help you avoid premium penalties later on. There’s a good chance your health needs could change in the future. Consider, for example, that 90 percent of people age 65+ take at least one drug weekly.
If you do not enroll in Part D when you first become eligible for Medicare, you will have to pay a premium penalty when you later enroll of one percent of the national base premium ($35.02 in 2018) for every month you delay enrollment. So for example, if you enroll in a Part D plan 12 months after you became eligible for Medicare, that adds up to a $4.20 penalty that would be tacked onto your monthly premium. The one exception to this rule is if you’re still working when you turn 65 and have what’s considered creditable prescription drug coverage through your job, meaning coverage that’s as good as what you could get through Medicare.
When considering a Part D plan, make sure your medications are covered, meaning they’re included on the plan’s formulary. Your costs could be significantly higher if you take a drug that’s not on your plan formulary. And keep in mind that choosing a Medicare Advantage plan that includes prescription drug coverage can be a cost-saving tactic as well as it’ll give you the prescription coverage you need but without having to pay a separate monthly premium for a stand-alone Part D plan.
Q4. How important is it to you to have routine dental, vision and hearing exams covered? If you don’t have coverage, are you willing to pay the full cost of these services?
According to the America’s Health Rankings® Annual Report for 2017, most people lose dental coverage when they retire. When the total cost of dental care falls on their shoulders, they may stop getting regular check-ups and routine care, making it more likely that they’ll experience serious dental issues or other health complications in the future. Likewise, routine vision screenings are important even for those who don’t wear glasses or contacts as they can detect the onset of health problems like macular degeneration and diabetes.
People are often surprised that Original Medicare does not provide coverage for routine vision, dental or hearing services. Many Medicare Advantage plans provide these extra benefits as part of their standard coverage, which is one of the reasons these plans have grown in popularity in recent years.
Q5. Do you travel frequently or spend part of the year in a different state?
If you plan to travel often, look for a plan that can travel with you to extend the value of your Medicare dollar. Original Medicare and Medicare supplement plans pay for covered services provided by any doctor in the country who accepts Medicare. Keep in mind, though, that typically this coverage does not extend overseas or across the border. If you plan to travel overseas, you should know that some Medicare Advantage and Medicare supplement plans cover care for medical emergencies worldwide.
And you shouldn’t completely rule out Medicare Advantage if you’re a frequent domestic traveler as some plans give members access to their benefits when they travel outside of the plan’s home service area through special programs like Passport offered through UnitedHealthcare. This may make sense for you if you plan to travel within the United States or if you spend part of the year in another state.
Q6. Do you want to call all the shots or receive reminders to get your shots?
Along with the flexibility to see any health care provider that Original Medicare and Medicare supplement plans provide comes the responsibility of managing all of your health care needs on your own. If you’re someone who likes to chart your own course for the health care services you want and need, this may be no big deal. But the health care system can be complex and tough to navigate, particularly if you’re managing a chronic condition or are confronted with a more serious health issue such as cancer.
That’s why some people prefer the care coordination and hands-on support that many Medicare Advantage plans offer. In addition to working with the doctors and hospitals in their network to coordinate their members’ care, Medicare Advantage plans often also provide programs and services to help their members achieve their best health. For example, some call their members or send reminders in the mail about important health screenings and immunizations. Others will even schedule doctor appointments for you to give you one less reason not to receive the screenings you need.
And speaking of making care convenient, more and more Medicare Advantage plans are covering virtual care and telehealth services, and some are even bringing care right into people’s homes. UnitedHealthcare Medicare Advantage members, for example, can get an annual check-up in the comfort of their living room at no additional cost through a program called HouseCalls.
The bottom line.
Hopefully the process of answering these six questions has got you thinking about what matters most to you when it comes to your health and your Medicare coverage. This is the sort of thought process you should take when you’re ready to enroll in a plan, but it’s not a one-and-done type of situation. Your health needs as well as your budget can change over time, so it’s important to re-evaluate your priorities periodically to ensure the plan you selected in the past continues to provide the most value in the present.
Plans are insured through UnitedHealthcare Insurance Company or one of its affiliated companies. For Medicare Advantage and Prescription Drug Plans: A Medicare Advantage organization with a Medicare contract and a Medicare-approved Part D sponsor. Enrollment in these plans depends on the plan’s contract renewal with Medicare.
This information is not a complete description of benefits. Contact the plan for more information. Limitations, copayments, and restrictions may apply. Benefits may change on January 1 of each year.