The Hidden Costs of "Saving" With Medicare Advantage

Medicare is an essential program for millions of older Americans, but navigating the
maze of available plans and options can feel daunting. Many retirees on fixed incomes
focus on the lower premiums generally available through Medicare Advantage — an
alternative to traditional Medicare — and opt for it as the more economical choice. But
as the saying goes, sometimes “you get what you pay for.”

Traditional Medicare — encompassing Parts A, B, and D as well as Medigap
Supplements — is considered the gold standard of government-sponsored health care
for seniors in the U.S. A whopping 99% of medical facilities and physicians accept these
plans. Medicare Advantage, on the other hand, operates much like the familiar
cafeteria-style insurance plans many people have had during their working years. These
plans might initially seem less expensive, but they come with limitations that could end
up costing you a lot more in the long run.

For example, HMO plans under Medicare Advantage have zero deductibles, which
sounds enticing. However, there’s a catch: You have to stay within a designated
network. Moreover, relocating — even within the same state or to a neighboring county
— might necessitate a change to your Medicare Advantage plan and its coverage.

Now, it’s essential to understand that Medicare Advantage can be a viable option for
those genuinely unable to afford traditional Medicare. But for those who opt in simply to
save a few dollars on premiums, I think there’s a cautionary tale worth sharing.

Consider the experience of a friend and client of mine, let’s call him Joe for our
purposes. Joe was fit, health-conscious and neither a smoker nor a drinker. Despite
having the means to pay for traditional Medicare, Joe chose a Medicare Advantage plan
to save money. However, when he fell seriously ill, the restrictions of his plan became
apparent. After exhausting his hospital coverage, the closest plan-approved acute care
center was two hours away from where Joe lived and from his friends and family —
even though there was a center just down the street from his hospital. Beyond that,
additional plan restrictions would have added significantly to his out-of-pocket costs.

Thankfully, because this occurred during a Medicare enrollment period, we were able to
help Joe switch to traditional Medicare and find an appropriate Medigap plan. Although
the facility he transferred to was still some distance away, all his medical bills were
covered. But without this last-minute switch, his estate would have been saddled with
enormous medical bills.

The moral of this story? If you’re 65 and healthy, it might seem appealing to try to save
with Medicare Advantage. But as health needs change — and they often do as we age
— you might find that by age 70 or 72, the flexibility and comprehensive coverage of
traditional Medicare could prove invaluable. So if you can afford it, traditional coverage
may be well worth the investment for the extra peace of mind and level of care it affords.

If you’re thinking about enrolling in Medicare and would like to learn more about
coverage options, I invite you to attend our free Medicare learning session — click here
for event details and registration.

Solomon Shen
Co-Founder & Wealth Management Advisor
Merit Wealth Advisors