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Weighing the benefits of Medicare advantage.

At age 65, workers and their spouses generally become eligible for Medicare, the federal health insurance program for seniors. You may find that Medicare offers better coverage at a lower cost than the coverage you had previously. However, the standard (original) Medicare program has several shortcomings.

As an enrollee in original Medicare, you'll typically be responsible for 20% of the Medicare-approved amount for expenses such as doctors' charges and outpatient procedures. You'll also be responsible for the costs of prescription drugs. Such costs might run into thousands of dollars.

Covering the gaps

To reduce your exposure to steep outlays, you can buy insurance. Medicare supplement (Medigap) policies can help pay your medical bills, and Medicare Part D plans can cover your drug outlays. Both types of coverage are available from private companies, which must follow guidelines set by federal legislation.

Such coverage can be costly, though. Charges for Medigap policies and Part D plans vary widely, depending on the benefits they offer, but the combined cost can be thousands of dollars per year. Married couples with both spouses on Medicare might face extremely high premium payments.


Taking advantage

About 12 million seniors (approximately one-fourth of all Medicare enrollees) choose another way to obtain Medicare coverage. They opt out of original Medicare and enroll in a Medicare Advantage plan. Such plans, which are offered by private companies, may be attractive, but you should know the details before signing up.

Most Medicare Advantage plans have networks of doctors and labs and hospitals, so they resemble health maintenance organizations (HMOs) and preferred provider organizations (PPOs). As long as members stay in the network, they usually have modest costs. You might owe a $30 copay for a visit to a doctor, for instance, instead of the 20% coinsurance patients owe with original Medicare. If members go outside the network for care, though, they probably face higher costs.

Many Medicare Advantage plans offer prescription drugs to enrollees at discount prices. Therefore, seniors who sign up for a Medicare Advantage plan don't need a Medigap policy and, often, don't need to buy a Part D plan, either. What's more, some Medicare Advantage plans offer health benefits not offered by Medicare; these might include dental care, vision care, and even health club memberships.

Paying the price

What costs will you incur if you choose a Medicare Advantage plan? They vary, from plan to plan. You will continue to pay your Medicare Part B premium, which might be as low as $99.90 per month or much more, depending on your income. You may pay an additional monthly charge to your Medicare Advantage plan, but that's not always the case; some plans charge nothing at all to members except the copays for the care they receive.

In general, as long as you stay within the network, Medicare Advantage plans typically cost less than original Medicare plus a Medigap policy plus a Part D drug plan. That may be a good choice, if you are willing to give up the freedom to choose from a broader universe of health care providers. If you think that this would be a worthwhile strategy, check to see whether a plan includes your preferred physicians in its network.

At, a Medicare Plan Finder provides costs, lists of covered drugs, and a quality rating system that goes up to five stars. If you do choose a Medicare Advantage plan and are not pleased with your choice, don't fret. You can leave a Medicare Advantage plan and move to original Medicare until February 14, 2012; you can switch into a five-star Medicare Advantage plan at any time. Also, from October 15 to December 7, 2012, you can join, switch, or drop a Medicare Advantage plan for 2013.
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Publication:CPA Client Bulletin
Date:Jan 1, 2012
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