Understanding Medicare Choices: Why It’s Crucial to Present Both Medicare Advantage and Medigap Options, Even Amid Rising PDP Premiums

As a Medicare advisor, you’ve likely encountered clients expressing concerns over rising Prescription Drug Plan (PDP) premiums, especially with recent changes in the market. While these concerns are valid, it’s important not to overlook a broader conversation about Medicare coverage options. Presenting both Medicare Advantage (MA) and Medigap as viable choices ensures your clients can make informed decisions, balancing their need for comprehensive healthcare with financial stability.?

Rising PDP Premiums: What Does It Mean for Clients?

The increasing costs of Prescription Drug Plans (PDPs) can be concerning for many seniors. However, it’s essential to remember that PDPs, which are typically standalone plans offered alongside Original Medicare and Medigap, come with capped out-of-pocket costs for medications under Medicare guidelines.

• Maximum Out-of-Pocket (MOOP) for Drugs: While PDP premiums may rise, Medicare beneficiaries are still protected from catastrophic drug costs by maximum out-of-pocket limits for prescription drugs, which caps spending on covered medications after reaching a certain threshold. This helps limit the financial exposure that many clients worry about when facing higher monthly premiums. In fact, starting in 2025, under the Inflation Reduction Act, the maximum out-of-pocket will be capped at $2,000. Beneficiaries will no longer be responsible for costs after reaching this limit in a given year.

However, when discussing rising PDP premiums, this should not automatically shift the conversation to Medicare Advantage without considering the bigger picture.

The Role of Medicare Advantage (MA): Attractive but Not Risk-Free

Medicare Advantage plans can be enticing for clients, especially when PDP premiums rise. These plans often bundle healthcare and prescription drug coverage into a single, often lower-cost, package. But it’s critical to present the risks associated with Medicare Advantage, especially in relation to out-of-pocket expenses and provider limitations:

• MOOP for Healthcare Costs: Medicare Advantage plans have a maximum out-of-pocket limit for healthcare expenses, which Original Medicare does not. In 2024, this cap is set at $8,850 for in-network services and $13,300 for combined in- and out-of-network services. Clients need to understand that this is significantly higher than what they might expect with a Medigap policy, where many expenses are covered after the premium is paid.
• Restricted Networks: Unlike Original Medicare, which allows beneficiaries to see any doctor who accepts Medicare, Medicare Advantage plans often have network restrictions. If your client’s preferred doctor or specialist isn’t in the network, they might face higher out-of-pocket costs or may not be able to see that doctor at all.
• ?Changing Plans: One of the biggest risks of choosing Medicare Advantage is that switching back to Original Medicare with a Medigap plan can be tricky. While beneficiaries can leave an MA plan during specific enrollment periods, they are not guaranteed the ability to purchase a Medigap policy without medical underwriting if they choose to return to Original Medicare after their initial enrollment period. This could mean facing denials or higher premiums for Medigap coverage in the future.

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The Value of Medigap: Financial Protection Beyond Healthcare

Even in the face of rising PDP premiums, it’s important to remind clients that Medigap provides financial protection that Medicare Advantage does not, especially when it comes to unlimited out-of-pocket healthcare costs:

• ?No Out-of-Pocket Limit on Original Medicare: While Medicare Advantage plans cap out-of-pocket expenses, Original Medicare alone does not. This is where Medigap plans shine. A well-structured Medigap plan (such as Plan G or Plan N) can cover the costs that Original Medicare does not, including deductibles, copays, and coinsurance. Clients on Medigap plans have far more predictable healthcare expenses than those on MA plans.
• ?Freedom of Choice: Medigap beneficiaries have unrestricted access to any provider who accepts Medicare. This is a major advantage for those who travel frequently or want access to specialists across the country without worrying about network restrictions.

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Risks of Moving to MA and Returning to Medigap Later

One of the biggest risks clients face is the assumption that they can switch back and forth between Medicare Advantage and Original Medicare with Medigap without issue. This isn’t always the case:

• Guaranteed Issue Rights: After their initial enrollment period (which usually lasts six months from when they first sign up for Medicare Part B), beneficiaries don’t always have guaranteed issue rights to a Medigap policy if they decide to switch back to Original Medicare after joining a Medicare Advantage plan. This means they could be subject to medical underwriting, which might result in higher premiums or even denial of coverage.
• Long-Term Healthcare Costs: Clients who initially choose Medicare Advantage for its lower premiums and bundled benefits might later find that the out-of-pocket expenses for healthcare services (copays, deductibles, and coinsurance) add up quickly. If they decide to switch back to Medigap after a serious illness, they could face difficulties re-entering the market and might miss out on the financial protection Medigap provides.

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Educating Clients: The Importance of Understanding All Options

When clients express concerns over PDP premium increases, it’s essential to take the opportunity to educate them on all their Medicare options, not just push them toward a seemingly cheaper Medicare Advantage plan. Your role as a trusted advisor is to ensure they understand the financial protections Medigap offers, the potential limitations and risks of Medicare Advantage, and the implications of switching between plans in the future.

Conclusion: Present Both MA and Medigap Options to Protect Your Clients

Even when faced with rising PDP premiums, seniors deserve to understand the full spectrum of their Medicare coverage choices. By presenting both Medicare Advantage and Medigap options, you can ensure your clients are making informed decisions that consider their health, financial stability, and long-term access to healthcare providers. It’s not just about addressing the immediate concerns of PDP premiums; it’s about safeguarding their financial future and ensuring they have the freedom and coverage they need as they age.