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It was big news last fall when Joe Namath was on the airwaves promoting his “excellent, free” Medicare plan with all of those bells and whistles that he, himself was being offered as a Medicare beneficiary! Call this 800 number and you can have one, too.
Listen carefully to each of his words, as we do, and technically things were correct. But do you think the average consumer could properly evaluate Namath’s plan?
No way.
I received plenty of calls asking, “Is it really true?”
Yes, it is. But, let’s talk through the parts of the commercial that were left out.
Let’s tackle the highlights
You will often hear me refer to the fact that there are two choices when it comes to Medicare coverage: Medicare Advantage plans, also known as “Part C,” and Medicare supplements, which I refer to as Medigap plans.
What is Medicare Advantage? It is the plan that Joe is talking about.
The Centers for Medicare and Medicaid services defines Medicare Advantage plans as an “all-in-one” alternative to original Medicare. These bundled plans typically include Part A, Part B, and part D. Medicare Advantage plans are often called Part C, MAPD (which is Medicare Advantage Prescription Drug plans), zero-premium plans, the private Medicare alternative etc.
Medicare Advantage plans work similar to employer and individual health insurance plans your client may be accustomed to before starting Medicare. Advantage plans consist of HMO and PPO plans and often require you to choose a plan with a specific network of doctors and hospitals that you agree to use.
With the Medicare Advantage plan, the three parts to Medicare (A, B and D) are then bundled into one package that is provided by a private insurance company. This is why it is sometimes referred to as “Part C,” even though Advantage plans are not a part of original Medicare. Many, many national and local insurance carriers offer Medicare Advantage plans.
How can these plans cost zero per month?
Here’s how… Private insurers are able to offer these plans because the federal government actually pays them to offer Medicare Advantage plans to beneficiaries. These companies receive $1,000/month (or more) per enrollee from the government. In exchange, they administer and manage the health coverage for individuals that sign up for their plan.
What the insurance companies do a little differently than the government is they also provide some additional benefits not included in original Medicare. Many of these additional benefits come built into the plan at no additional monthly cost. As Joe said, “You can get more benefits and save money” with one simple call.
One extra benefit that you may be familiar with is that many Advantage plans include coverage for routine dental, vision and hearing care. Original Medicare does not provide any coverage for these services.
Dental and vision coverage are just some of the basic bells and whistles that Joe mentions. Benefits can extend to a bathtub bar being installed, meal delivery, transportation and more. It’s easy to see why people perk up to getting those items for “free.”
Remember that when enrolling into a Medicare Advantage plan, you still have to pay your monthly premiums to the government for Medicare Part B. Most Medicare beneficiaries will pay $144.60/month for their Part B coverage in 2020. This will be paid on top of the “zero” premium paid to the carrier.
When Joe mentions this “completely free” healthcare, many people lose sight of paying the basic Part B premium to Medicare. And for some people, a total of $144.60 each month added to their zero-premium plan seems like very little. To some, it is a lot.
When you purchase that zero-premium plan, here’s how the costs might play out during the year. I will assume the part B premium is the base rate of $144.60/month, which would be $1,735/year. I will use a Medicare Advantage plan for this example, which has a monthly premium of $0/month, which is also $0/year.
Next, let’s assume you see your primary care physician two times during the year, each visit with a $0 co-pay. In addition to the primary care visit, I will assume you visit a specialist (like a cardiologist or dermatologist) three times during the year. Each visit comes with a co-pay of $40 and three visits add up to $120/year.
In addition to the doctor visits, I will assume someone spends two days as an inpatient in the hospital during the year. With our sample plan, a consumer would pay $325/day for the first six days you are an inpatient in the hospital. That two-day stay would result in an out-of-pocket cost of $650.
Lastly, let’s assume that they also had five physical therapy (PT) sessions throughout the year. With this Medicare Advantage plan, each PT visit costs $40, so five visits would cost an additional $200.
Add this up and you can see that, using this actual plan as an example, those out-of-pocket costs add up to $2,705/year. Is that a lot? To some folks yes, others no. Are they “free?”
No.
Despite all of the advertisements, there are no plans that are truly “zero dollars and zero worries” annually. It’s impossible. This does not in any way mean that Medicare Advantage plans are a bad thing; it means you have to pay attention to all the details.
Some features to these managed-care, zero-premium plans that you should consider when enrolling are:
- The plan can change mid-year and your physician or facility may no longer be in the consumer’s network. Numerous headlines occur each year with this type of news;
- Out-of-pocket costs: Most people do not truly expect the out-of-pocket costs that they incur as they use their insurance – they remember the “free” parts that were advertised in the commercials;
- Should a person receive a bad diagnosis (cancer, for example), they don’t realize the co-pays that come with chemo/radiation. This will ramp up their out-of-pocket costs for the year (which, by law, are set to a maximum of $6,700 per year); and
- Along the lines of cancer, if/when they get a diagnosis and they want to return to original Medicare paired with a Medigap plan (which, for more dollars, can provide more comprehensive coverage) – they will be medically underwritten and can be denied coverage. Consumers typically do not realize the repercussions of pre-existing conditions in the Medicare space.
I’ll wrap this up
Are these plans “zero premiums and zero worries?” (from a carrier ad campaign). No. Can they work for some people? Of course, especially if you are healthy and stay healthy.
Some agents will tell us how they were able to get a person a zero-premium plan and all of their medications for no cost each year vs paying $2,000 with Medigap and a Part D plan.
True? For sure, it can be. That tells me that the person is healthy and taking two tier-one medications, for example. If and when an illness/situation arises, the math will change.
If you are comparing only price, no doubt Medicare Advantage can win. If a person enrolls into a zero-premium plan, rarely has more than a cold over his lifetime and dies in his sleep at age 100, Medicare Advantage won financially – no doubt.
Because a person is healthy today means nothing for tomorrow. Most people age 65 and over know this. We can lose sight of insurance being “insurance” – there for when it’s needed.
Are we all attracted to free healthcare? For sure. We’re all tired of overpaying for things we may not use daily.
And, remember, Joe is being paid to advertise for the massive call centers that are robo-dialing your clients. That turning-65-year-old person is on everyone’s hit list. If your client answers the phone, zero sounds pretty darn good after all of those years of paying for coverage. They’re tired of it, they hear the pitch and it’s pretty appealing.
Just be sure your clients are presented the flip side, should something go wrong. You do that with other financial products in their world. Make sure they do the same with their Medicare coverage.
Joanne Giardini-Russell is a Medicare guru with Giardini Medicare (formerly Boomer Health Group), which was created to help those approaching Medicare eligibility or those currently enrolled in Medicare better understand what they are purchasing and how their choices may affect their long-term outcomes regarding care, finances, etc.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.