Americans who want to avoid as many cost-related Medicare problems as possible in retirement should think twice about choosing Original Medicare for their health insurance — unless they can afford to buy supplemental coverage.
Original Medicare enrollees who have no supplemental coverage report experiencing the most cost-related problems by far, compared with people with other types of Medicare, according to a recent analysis by the Kaiser Family Foundation.
By contrast, Original Medicare enrollees with supplemental coverage report the fewest cost-related problems.
For the report, which was based on an analysis of data from the federal government’s 2018 Medicare Current Beneficiary Survey, the Kaiser Family Foundation sought to determine the percentage of non-hospitalized Medicare beneficiaries who report cost-related problems. Such problems were defined as at least one of the following:
- Trouble getting care due to cost or money
- Delay in care due to cost
- Problems paying medical bills
The report concluded that among:
- Original Medicare enrollees with supplemental coverage: 12% reported cost-related problems in 2018
- Medicare Advantage enrollees: 19%
- Original Medicare enrollees without supplemental coverage: 30%
The report notes that the differences in these percentages could not be fully explained by differences in enrollees themselves, such as income and health status.
It also says the fact that those with Medicare Advantage report considerably more cost-related problems than those with both Original Medicare and a supplemental policy may come as a surprise to some people, considering the cost advantages of Medicare Advantage.
Key financial upsides of Medicare Advantage plans include an out-of-pocket limit on the cost of Medicare-covered services and, for most enrollees, no premium beyond the Medicare Part B premium.
Original Medicare, on the other hand, does not limit out-of-pocket spending on covered services. Additionally, Original Medicare enrollees who opt for supplemental coverage pay additional premiums.
Pros and cons of Original Medicare and Medicare Advantage
Medicare is the federal health insurance program that serves people age 65 and older as well as those with certain disabilities or diseases.
There are two main types of Medicare:
- Original Medicare, also referred to as traditional Medicare
- Medicare Advantage
Original Medicare is offered directly by the federal government’s Medicare program, through the Centers for Medicare & Medicaid Services, whereas Medicare Advantage plans are offered by private insurance companies that are contracted with the federal program.
There’s a lot that Original Medicare doesn’t cover, such as routine vision and dental care. So, seniors with Original Medicare must either foot 100% of such uncovered costs or buy a supplemental policy, also known as a Medigap policy, from private insurers to help with uncovered costs. Seniors with Original Medicare also must buy a separate policy if they want prescription drug coverage.
On the other hand, Medicare Advantage plans are “all-in-one” options: The vast majority of them cover at least some vision, dental and prescription costs.
In other words, the upfront cost of a Medicare Advantage plan generally is lower than that of Original Medicare with equivalent supplemental coverage.
One way Medicare Advantage plans cut costs, however, is by being more restrictive than Original Medicare.
Medicare Advantage plans often limit enrollees to one particular network of doctors and refuse to cover care from out-of-network doctors, for example. They also require prior authorization more often than Original Medicare does.
What it means for seniors
The annual fall Medicare open enrollment period is just around the corner, but seniors who are considering a change should not necessarily let analyses like that of the Kaiser Family Foundation inform their decisions just yet.
That analysis was based on the Medicare system that was in place in 2018, which is more or less the same as it is today. But Medicare as we know it might be about to change drastically.
The multi-trillion-dollar infrastructure legislation that Congress and the White House have been discussing for weeks reportedly might expand Medicare, possibly considerably so.
Possible changes could include requiring coverage of dental and vision care and hearing aids. That would mean both Original Medicare and Medicare Advantage plans would have to cover such benefits, as the latter is required to cover any benefit that the former provides.
The legislative package also might empower the federal government to negotiate prescription drug prices on behalf of Medicare enrollees, and ensure that the negotiated prices apply to all types of Medicare. That could lead to significantly lower drug prices for seniors, regardless of what type of Medicare they have.