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Should You Get a Medicare Replacement Plan?

A more seasoned friend of mine asked me the other day about Medicare replacement plans. Open enrollment for Medicare and these replacement plans began October 15, so he’s being flooded with offers to “replace” his Medicare. Given that we handle a lot, and I mean a LOT of cases where insurance companies deny claims when they shouldn’t, I figured I’d give him my take on them and then share it.  Maybe it will be helpful to you.

First, if you don’t know what a Medicare replacement plan is, let me explain. When you are eligible for Medicare, whether by age or disability, you generally have two options (1) use what’s called Original Medicare, or (2) use what the industry calls “Medicare Advantage.” I don’t like the term “Medicare Advantage” because I’m not sure it is truly an “advantage.” In Original Medicare, the government administers and pays your benefits. In Medicare Advantage, also known as Medicare replacement plans, an insurance company administers and pays your benefits with money provided from the federal government.

Second, as most of the marketing ploys for these replacement policies go, an agent for an insurance company will tell you that the “advantage” to a Medicare replacement plan is that they are usually free. The other marketing presentation made is that Medicare replacement plans offer lower or no premiums for Medicare Part D for prescription drugs, and for other services, such as vision or dental, and to cover “gaps” that Medicare does not cover.

I don’t know about you, but usually when someone offers me something free, I think there’s a catch. Think about it this way – in Original Medicare, the government administers and pays your claims for free, well, not for free, because you earned that Medicare for all your hard work over your lifetime, and are paying premiums.  But, if an insurance company steps in and administers the same claims, how are they getting paid?  There has to be something in it for them. That’s why I say, buyer be aware when it comes to Medicare replacement plans.  Also, consider these important facts:  (1) according to the authority on ratings for Medicare replacement plans, NONE of the companies selling them in Alabama qualify for a “high quality” rating; and (2) medicare replacement plans set up their own network of doctors and hospitals you can visit, which can be restrictive to you in your area.

Further, you don’t need a Medicare replacement plan to get coverage for other benefits such as prescription drugs, vision, dental, or any other gaps in Medicare.  There is  a whole host of Medigap and supplemental insurance plans that will cover prescription drugs and other things which Original Medicare does not.  You can buy those coverages as stand alone products.  The federal government offers a fairly decent explanation about how this works here.   A more thorough explanation about the “Hidden Risk of Medicare Advantage Plans,” can be found in this excellent article by Money and Time magazine.

My point is this – if you are looking at your Medicare options, look closely, as in real closely, to the fine print on any Medicare replacement plan. As the line goes in one my favorite movies, it may be that you will find out that “I do no think it means, what you think it means.” Make sure any replacement plan provides you the coverage you want, the doctors you want to see, and the hospitals you want to go to.  Also, make sure that the insurance company has a good track record for paying their claims, and not denying important medical treatment.  So, in looking at your options, do your research thoroughly.  In the end, it will pay off.  After all, it is your health at stake.

Edwin Lamberth

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