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Medicare Advantage vs. Original Medicare: How to Help Clients Choose

By Roger Wohlner

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What You Need to Know

  • The annual Medicare and Medicare Advantage open enrollment periods are a good time for your clients to review their current Medicare coverage.
  • It’s important to consider your clients’ changing medical needs as well as their retirement lifestyle.
  • Especially under Medicare Advantage, network providers and other coverage options can change over time. That may necessitate a change for your clients.

The annual Medicare open enrollment period is almost upon us. From Oct. 15 through Dec. 7, those who are already enrolled in Medicare can make changes to virtually any aspect of their coverage. Health care costs are typically one of the largest expenses in retirement, so it is important that clients have Medicare coverage that meets their needs for the coming year.

The gamut of choices for those enrolled in original Medicare, also called traditional Medicare, or a Medicare Advantage plan is wide open during the open enrollment period. One choice is choosing between original Medicare or a Medicare Advantage plan. Options can include:

  • Moving from original Medicare to a Medicare Advantage plan.
  • Moving from Medicare Advantage to original Medicare.
  • Staying with your current Medicare arrangement.
  • Moving from one Medicare Advantage plan to another.
  • Changing coverage options within original Medicare.

In addition to the Medicare open enrollment period, a Medicare Advantage open enrollment for those who are currently in a Medicare Advantage plan runs from Jan. 1 to March 31 each year. Clients who are enrolled in a Medicare Advantage plan have this additional time period to make changes in their coverage for the coming year, including switching Advantage plans and moving to traditional Medicare.

A key decision your client may consider during the open enrollment period is whether to move from traditional Medicare to a Medicare Advantage plan, from a Medicare Advantage plan to traditional Medicare or from one Medicare Advantage plan to another. There can be valid reasons for any of these choices; let’s look at some issues for clients to consider.

Choice of Doctors and Providers

This can be important for your clients in assessing their Medicare options for the coming year. Original Medicare places virtually no restrictions on the doctors, hospitals or other providers that can be used under the coverage provided by Parts A and B. As long as the provider accepts Medicare, your client is covered.

Clients using a Medicare Advantage plan need to determine whether the doctors, hospitals and other providers they will be using will be available on their plan moving forward into 2024. This can become an issue for a number of reasons, including:

  • Your clients’ health situation is changing, and they need additional care provided by new doctors and perhaps at a new hospital or clinic. If any of these doctors or facilities are not part of the network in their current Advantage plan, they may need to switch to another Advantage plan or to original Medicare.
  • Your clients have not experienced any significant health changes, but their current Advantage plan is realigning their in-network providers to exclude some or all of the providers they use.

Medicare Advantage plans generally have a provider network. According to KFF research, in 2023 about 98% of all Advantage plans offered either an HMO (58%) or a PPO (40%) network. These networks — health maintenance and preferred provider organizations — are similar to those that your clients may have used as participants in an employer-sponsored health insurance plan.

Travel Within the U.S.

If your clients will be traveling to other parts of the United States during the year, they may find themselves in an area where their in-network provider choices are extremely limited, or even nonexistent. Perhaps they are entering a new phase of retirement spending a portion of the year away from home, either in a second residence or just traveling.

Most Medicare Advantage networks have a regional tilt. Whether this is a reason to either switch Medicare Advantage plans or to consider moving to traditional Medicare will depend on your clients’ situation.

One option for clients whose current Medicare Advantage network offers limited or no access to providers in an area that they travel to for a portion of the year is looking for another Advantage plan that might offer a network with broader coverage.

For clients who travel to different locations each year, finding a plan with a network that offers in-network providers in various locations might not be a viable option. In this case, switching their coverage to traditional Medicare could save them the hassle of finding in-network providers away from home.

If these clients prefer being in a Medicare Advantage plan, one option is to protest a denial of coverage by the Advantage plan for a provider or service. About 75% of these appeals are ruled in favor of the Medicare recipient, but only a very small number of Advantage plan participants ever file an appeal.

While this can be a good option to consider, the timing of an appeal and other logistics may not be practical for some clients who develop an immediate need for a particular type of care.  

Out-of-Pocket Costs and Medigap Coverage

Cost is a key consideration for most clients. With original Medicare, beneficiaries typically pay 20% of the Medicare-approved cost over and above any deductible as their coinsurance portion. Medicare Advantage plans, meanwhile, generally have an annual out-of-pocket limit for what plan participants will pay for services rendered under Parts A and B.

Under original Medicare, participants can purchase Medigap coverage to pay some or all of their coinsurance costs. These plans, also known as Medicare supplement insurance plans, are issued by private insurers and regulated by the states.

Medigap Eligibility: A Warning

If the policy is purchased during initial eligibility for Medicare, generally within the first six months of having enrolled in Medicare Part B, beneficiaries cannot be refused coverage for health or other reasons.

After that period, with a few exceptions, the ability to obtain guaranteed coverage under a Medigap policy will lapse. This means that your clients may be quoted a higher rate or refused altogether by private insurers offering these policies if they have health issues, or even if they are overweight or have other physical traits considered undesirable by the insurer.

The issue of Medigap eligibility should be considered by clients looking to switch from Medicare Advantage to traditional Medicare. Clients looking to switch from one Advantage plan to another should compare the new plan’s cap on out-of-pocket costs to the limits on their current plan. 

Prescription Drug Coverage

Original Medicare does not include prescription drug coverage, and beneficiaries must either purchase a Part D drug plan through a private insurer or demonstrate creditable drug coverage through an employer plan or other source.

On the other hand, Advantage plans generally include Part D prescription drug coverage. The issue is whether your clients’ medications are covered and also whether their preferred pharmacy provider is part of the plan’s network. 

For clients who take relatively few prescription drugs, the choice of drug plans may not be that critical. However, those who are of Medicare age in many cases do take a number of prescription medications.

If their Medicare Advantage plan limits coverage of either certain prescriptions or their preferred provider, this may be a reason to look for a different Advantage plan. In the case of clients on traditional Medicare, the same can apply to their current Part D drug plan. 

Summary

The Medicare open enrollment and Medicare Advantage open enrollment periods are opportunities to help your clients determine the best options for Medicare coverage for the coming year. You can help your clients by asking questions and reviewing their current plan to see that it offers the best option for their needs.

Like any area of financial or retirement planning, proper Medicare planning can help ensure that your clients have the best coverage for their situation at the best price. 

Roger Wohlner

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