The 2014 annual election period ends December 7, 2013 for 52 million Medicare beneficiaries ⁱ, many of whom continue to struggle in making informed health benefits decisions. A thoughtful health plan decision requires (1) knowing your needs and priorities; and (2) digesting as many as 200+ pages of incomprehensible verbiage about benefits, coverage, exclusions and restrictions for each alternative.

In order to provide some clarity, Health Navigaid studied and compared the features of two primary options for Medicare beneficiaries – a Medicare Advantage plan vs. a Medigap supplement plus a Medicare prescription drug plan – and developed a framework that can be used by senior citizens to make reasoned annual health benefit elections. While the results of our study will have limited value to Medicare beneficiaries who have made their 2014 decisions, our intent is to provide broad guidance that can be used during any open enrollment cycle. If you are Medicare-eligible, we hope you will consider our suggestions during future annual election periods. If you have a parent or grandparent who deals with these decisions annually, we hope you will relay this edition of Navigacy to her/him.

I. Annual Choices for Medicare Beneficiaries

Most Medicare beneficiaries have the following options:

• Continue to pay your Medicare Part B premium ($105/month for most of us in 2014) and remain on Original Medicare. While you will retain the freedom to use any Medicare participating provider nationwide, you may have unlimited financial exposure to the portion of your Medicare benefits not covered fully by Original Medicare. These expenses can be substantial – for example, a Medicare beneficiary’s 20% share of a chemotherapy regimen with the drug Xgeva can cost at least $23,000.
• Continue to pay your part B premium and enroll in a Medicare Advantage plan. Generally, these plans offer the same benefits as Original Medicare with the additional benefit of capping your out-of-pocket costs at a fixed annual amount. Many Medicare Advantage plans also provide prescription drug coverage, and some plans offer this for a $0 premium. However, you often will incur financial penalties if you do not use their provider networks, and you will encounter pre-authorization and in-network requirements that you do not experience with Original Medicare.
• Continue to pay your part B premium and purchase (1) a Medigap supplement; and (2) a Medicare Part D prescription drug plan. In addition to retaining your freedom to use any Medicare provider nationwide without penalty, a Medigap supplement will cover most or all of your Medicare deductibles and coinsurance. At least two of the available Medigap supplements would cover 100% of the above $23,000 chemotherapy bill. However, cost considerations can be significant – the premium for a Medigap supplement can reach at least $2,500 annually.

II. Our Study

We analyzed five 2014 Medicare Advantage plans that provide prescription drug coverage and four Medigap supplements plus a prescription drug plan available to an age 68 female resident of Delaware County, Pennsylvania. Following identification of key differences, we developed a structure that can be used by Medicare beneficiaries to make annual enrollment decisions.

Since plan availability, coverage, restrictions and premiums will vary by geographic area, and premiums also may be affected by age and gender, actual results for Navigacy readers may differ from our findings.

We used the following measures in our comparison of Medicare Advantage and Medigap plans – (1) premium cost; (2) out-of-pocket expenses; (3) availability of preferred hospitals and physicians; and (4) referrals, pre-authorizations and other plan restrictions.

Premiums

 Medicare Advantage. 2014 monthly premiums are in the $0-78 range, or $0-900 (rounded) annually.

Medigap supplement plus a Medicare prescription drug plan. Ignoring one particularly high cost private insurer, 2014 monthly premiums for the most comprehensive Medigap coverage (“Plan F”) are in the $185-208 range, or $2,200-2,500 annually. Premiums for prescription drug plans that provide comparable coverage to the prescription benefits in the Medicare Advantage plans studied are in the $40-50/month range, or $500-600 annually. Total combined premiums: $2,700-3,100 annually.

Advantage: Medicare Advantage plans. Compared to Medigap F with a Medicare prescription drug plan, Medicare Advantage premiums are $1,800-3,100 lower.

Out-of-Pocket Expenses

Medicare Advantage. Even with a cap on out-of-pocket expenses, you still can spend up to $6,700 annually in four of the five Medicare Advantage plans reviewed. Here are some of the ways that substantial costs can be incurred:

• Hospital inpatient care: All five Medicare Advantage plans require copayments for inpatient stays. If you spend seven days in the hospital during 2014, you should expect to pay $1,200-1,800 in copays.
• Skilled nursing facility (SNF) care: A 28 day SNF stay would cost you $700-$1,700 in copays.
• Chemotherapy and radiation therapy: All five plans charge 20% copays for chemotherapy and radiation therapy. Depending upon the regimen and duration, the entire $6,700 out-of-pocket maximum could be incurred with either therapy, or in combination.
• Medical supplies and durable medical equipment: All five plans charge 20% copays. Out-of-pocket costs can be steep – for example, 20% copay for an annual supply of intermittent urinary catheters will be approximately $3,300.
• Other Medicare covered benefits: All five plans charge copays for most other covered services, including (but not limited to) primary care ($5-35/visit), specialist care ($30-50/visit), hospital outpatient surgery ($225-400), diagnostic radiology ($10-250), ground ambulance transportation ($100-300) and emergency room care ($65/visit), Some copays are greater for services received from out-of-network providers. While none of these copays are backbreakers, the cumulative cost of paying out-of-pocket for virtually all Medicare covered services can be substantial.

Medigap Plan F. Generally, there is no out-of-pocket cost for medical services received from a Medicare participating provider – deductibles and copays are covered by monthly premiums.

Advantage: Medigap Plan F.

Availability of Preferred Hospitals and Physicians

 For serious medical conditions or situations requiring particularly sophisticated medical expertise, many of us seek care at major academic and research or specialty hospitals. One reason for this thinking is these facilities often are the first to acquire new technologies. In fact, some of these hospitals have pioneered new treatment methods. And since these hospitals generally lead the way in making new technologies available, their physicians tend to be more experienced in using new technology – and experience usually matters greatly in treatment outcomes.

There are at least five such hospitals ⁱⁱ in the Greater Philadelphia area. We reviewed the provider networks of the five Medicare Advantage plans studied. Here are our findings:

Medicare Advantage. Two Medicare Advantage plans listed all five hospitals in their network. One plan listed four of the five hospitals. Two plans listed only two of the five.

While lack of availability of a particular hospital does not mean that appropriate medical care cannot be obtained, it can complicate the search for a physician and a hospital. Even if a provider is not in the network of a Medicare Advantage plan, the member always has the right to use a non-network provider. However, there usually is a significant financial penalty for using out-of-network services.

Medigap Plan F. All five hospitals are Medicare participating providers. There are no network restrictions for Original Medicare members with a Medigap supplement.

Advantage: Medigap Plan F. An Original Medicare member can see any Medicare participating provider nationwide without network issues or out-of-network financial penalties.

Referrals, Pre-Authorization and Other Plan Restrictions

Medicare Advantage plans generally operate as managed health care systems with specific rules and requirements.

• Specialist care and diagnostic services: Four of the five Medicare Advantage plans require primary care physician (PCP) referrals for most non-emergency specialist care and many diagnostic services. These plans will impose financial penalties (higher copayments or outright denial of claims) for receiving these services without a PCP referral.
• Pre-authorization: All five plans require pre-authorization for certain Medicare covered services. Pre-authorization requirements range from less onerous to extensive. Again, you can incur significant financial penalties for services that are provided without pre-authorization.
• Other plan restrictions: While all five Medicare Advantage plans offer coverage for emergency care that is provided outside of the local geographic area, non-emergency or non-urgent out-of-network care generally is not covered.

Medigap Plan F.

• PCP referrals to specialists are not required for Medicare covered benefits. While pre-authorization from Medicare may be required for some covered benefits, the scope generally is limited to certification of medical necessity from the ordering physician.
• There are no geographic restrictions for receiving non-emergency care. An Original Medicare member with a Medigap Plan F can receive routine covered benefits as well as emergency care nationwide from any Medicare participating provider.

 Advantage: Medigap Plan F.

III. Key Decision Considerations

The following considerations may be helpful when considering enrollment in a Medicare Advantage plan:

• Are the physicians and hospitals you use are in the network of the Medicare Advantage plan?
• In the event that a new medical condition arises, are the physicians and hospital(s) you would wish to use in the network of the Medicare Advantage plan? While most will not know the names of preferred physicians until the need arises, many of us already know the hospitals where we would wish to receive this care. If these hospitals are in the Medicare Advantage plan network, you can gain comfort in knowing that there probably will be experienced, competent physicians on their medical staffs providing the care you need.
• Are you willing to compromise your freedom of choice with Original Medicare and subject yourself to the pre-authorization and in-network requirements of a Medicare Advantage plan?
• Are your prescription drugs included in the formulary of the Medicare Advantage plan and are your copayments competitively priced?

IV. Suggested Guidance

• If you (1) can answer YES to the preceding questions; and (2) your projected out-of-pocket medical expenses with a Medicare Advantage plan are less than the additional premium cost of a Medigap Plan F supplement plus a prescription drug plan, a Medicare Advantage plan may make sense for you.
• If your projected out-of-pocket costs are greater or you are uncomfortable living with the risk of unknown events and expenses, you may sleep better with a Medigap supplement plus a prescription plan.
• If you cannot answer YES to all four questions, a Medigap supplement plus a prescription drug plan may be better suited to your needs.

Health Navigaid Can Help!

The research required in making reasoned health benefits elections can be daunting. The “what ifs” of staying with current Medicare choices or switching to other options require, at a minimum, (1) identifying your preferred physicians and hospitals; (2) understanding your tolerance for health plan rules; and (3) knowing your historical claims and actual or potential out-of-pocket expenses.

Fear not, because Health Navigaid would be delighted to help you. We can clarify the pros and cons of your options and assist you in making a reasoned decision. Just send us an email at info@healthnavigaid.com or call us at 610-937-2858.

Rick

^{i Kaiser Family Foundation, Medicare Enrollment, 1966-2013.
ii Hospitals selected include Fox Chase Cancer Center, Hahnemann University Hospital, Hospital of the University of Pennsylvania, Temple University Hospital and Thomas Jefferson University Hospital.}