How to Help Clients Pick a Medicare Plan

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Medicare Open Enrollment is just around the corner (October 15 – December 7), which means now is when financial advisors’ clients who are on Medicare can make changes to their plans. For example, during the Open Enrollment period, your clients can:

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• Change from Original Medicare to a Medicare Advantage Plan.
• Change from a Medicare Advantage Plan back to Original Medicare.
• Switch from one Medicare Advantage Plan to another Medicare Advantage plan. 
• Switch from a Medicare Advantage Plan that doesn't offer drug coverage to a Medicare Advantage Plan that offers drug coverage.
• Switch from a Medicare Advantage plan that offers drug coverage to a Medicare Advantage plan that doesn't offer drug coverage.
• Join a Medicare drug plan (Part D).
• Switch from one Medicare drug plan to another Medicare drug plan.
• Drop Medicare drug coverage completely.

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But, how do you determine if your clients need to change Medicare plans? How can you help them choose the ideal Medicare plan? Keep reading to find out! In this blog, we’ll break down the difference between Original Medicare and Medicare Advantage, and what criteria to look at to help clients pick the best Medicare Advantage plan for their needs. For the purposes of this blog, those are the two main areas we’re going to focus on, but it’s important to note that your clients can also modify their Part D coverage (drug coverage.)

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Original Medicare vs Medicare Advantage

Original Medicare includes parts A, B, D, and a Medicare Supplemental (“Medigap”) plan whereas a Medicare Advantage plan is a single, all-in-one plan that covers all the parts that are on Medicare Original from a single private insurance company. While Medicare Advantage plans are simpler to manage, they might not be the right choice for certain clients. For example, someone who takes a specific medication might find that there aren’t any Medicare Advantage plans that cover their medication. Here are a few other key differences between Original Medicare and Medicare Advantage:

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Providers

• Original Medicare allows enrollees to go to any provider that accepts Medicare. Enrollees also typically do not need a referral to see specialists.
• Medicare Advantage plans are plans sold by private insurance companies (Aetna, BlueCross BlueShield, Cigna, etc.), so enrollees will only be covered at providers that accept that insurance network. Depending on the type of Medicare Advantage plan your client gets will also determine whether or not they need a referral to see a specialist.

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Cost

• Clients pay a monthly premium for Medicare, and for out-of-pocket costs, Medicare Part A + B covers 80% of healthcare costs. Put another way, enrollees have a 20% coinsurance. Enrollees can enroll in a Medicare Supplemental plan to help cover their 20%. If clients choose a drug plan, they’ll pay a separate monthly premium for that plan.
• For Medicare Advantage plans, the costs vary greatly depending on the carrier, whether it’s a high or low deductible plan, and other factors. Enrollees pay the monthly Part B premium and may also have to pay the plan’s premium unless they have a $0 premium. Most plans include Medicare drug coverage (Part D).
• It’s also important to understand that clients, no matter whether they choose Original Medicare or Medicare Advantage, will have fixed and variable costs. Fixed costs are their monthly premiums, whereas variable costs are their out-of-pocket costs. For example,if a client will pay 20% of a medical service, this cost varies depending on the total cost of the service. Another reason it’s important to look at both fixed and variable costs is because of deductibles. Although a lower monthly premium is appealing, this often means your client will have a high deductible. In the example below, a client on Original Medicare would have $550.75 in annual fixed costs but on a Medicare Advantage plan their annual fixed costs would be $372.30. However, if the client chooses the Medicare Advantage plan, they expose themselves to potentially paying $11,167.60 if the worst case scenario were to happen. Whereas on Original Medicare, their “maximum financial risk” is $6,854.

Coverage

• Original Medicare covers most medically necessary services and supplies in hospitals, doctors’ offices, and other healthcare facilities. Specifically, Part A covers facility-based healthcare costs, Part B covers medical services, and Part D covers drug costs.
• Medicare Advantage plans are required to cover all medically necessary services that Original Medicare covers. Some plans also offer extra benefits that Original Medicare doesn't cover, such as vision, hearing, and dental services. Drug costs are typically included in Medicare Advantage plans.

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The first step in helping clients choose a Medicare plan is to determine if Original Medicare or Medicare Advantage is the better choice for their health needs and budget. If your client chooses Original Medicare, the only additional plan they’ll need to pick is a drug plan. If your client chooses Medicare Advantage, they have several choices to choose from. This next section will help you and your clients determine which Medicare Advantage plans work best for their needs and preferences.

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How to Optimize your Medicare Advantage Plan

As mentioned earlier, Medicare Advantage plans are Medicare-approved plans sold by private health insurance companies. So although the plans must cover the same services as Original Medicare, other factors can vary greatly — such as costs, where care is in-network, and which prescription drugs are covered. Every year, the details of these plans change. Below is a list of questions to go through to determine what your clients’ preferences are and ensure their coverage still meets their needs.

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• Are my current doctors and specialist in the plan’s network?
• Is my current pharmacy in-network?
• Are my current prescription medications in-network?
• What’s my maximum for out-of-pocket expenses?
• Am I comfortable with needing a referral from my primary care doctor to see a specialist? Or would I rather be able to see a specialist whenever I want to?
• How much am I willing to pay in monthly premiums?
• Would I prefer to have a higher monthly premium but a lower cost for individual medical services received, or would I prefer to pay less each month in premiums, but have a higher cost responsibility when I receive medical care? 
• Do I have any preferences for insurance carriers?
• Am I expecting any large medical events in the next year? Such as a planned surgery? 

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Final Thoughts

Healthcare costs can either help or hurt your clients’ financial goals, and healthcare costs associated with Medicare are no exception. Even beyond costs, helping clients pick the best health plan for their needs can save them a lot of unnecessary stress and give them peace of mind that their health needs will be taken care of. However, choosing a plan can be overwhelming and it can be easy to get lost in all the terminology. Let this blog serve as a resource to make choosing a plan easier, and be a quick reference when you forget the difference between Part A and Part B, or what the difference is between Original Medicare and Medicare Advantage. Finally, go through the list of questions and preferences listed above so you can help clients pick the ideal Medicare plan for their needs, preferences, and financial goals.

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