Know the Truths and Half-Truths in Medicare Advice

One of the most important decisions for those 65 or older is the choice of Medicare coverage. The first big decision is whether to enroll in original Medicare or a Medicare Advantage plan. It is expected that in 2023, for the first time, half or more of Medicare beneficiaries will be enrolled in Advantage plans instead of original Medicare. There are pluses and minuses to each, and I’ve covered them in detail in past issues of Retirement Watch, episodes of the Spotlight Series and my books.

But it’s important to give enough weight to the long-term consequences, and many beneficiaries don’t do that. For example, consider coverage of short-term nursing home care. Neither Medicare option covers longterm stays in a nursing home that are needed primarily for custodial care. But Medicare does cover up to 100 days in a nursing home or skilled nursing facility that’s needed after being in a hospital for at least three days.

This type of care typically is for rehabilitation or recovery after a major surgery or illness. The individual isn’t ready to go home but doesn’t need to stay in a hospital. In original Medicare, you, your doctor and perhaps other medical providers decide whether you should go to a nursing facility and for how long. But when you’re enrolled in an Advantage plan, the plan decides how much rehabilitation is going to be covered.

Advantage plans tend to deny, or limit stays in nursing homes compared to the care received by original Medicare participants, according to a recent report from the Kaiser Family Foundation. Government data indicate that nursing home stays are among the services most frequently denied by Advantage plans. Though original Medicare would cover the stays, the Advantage plans can rule them “medically unnecessary” and deny coverage. Another long-term issue is your ability to change from an Advantage plan to original Medicare.

The rules allow you to change plans each year during open enrollment, such as by switching from an Advantage plan to original Medicare. But as a practical matter, you could end up with less coverage if you switch. Original Medicare Part B has a number of coverage gaps.

The most significant gap, other than prescription drugs, is the 20% coinsurance amount on most types of covered care. You’re on the hook for the 20%, with no dollar limit. That’s why original Medicare participants should obtain a Medicare supplement (also known as Medigap) policy that covers most of the gaps in original Medicare.

They also should have a Part D prescription drug policy. In your initial Medicare enrollment period, insurers are required to sell you the Medigap policy of your choice, regardless of your health history. But after the initial enrollment period, the guaranteed issue no longer applies. The insurers can review your medical history or require a medical exam. Based on the results, an insurer can decline to issue you a policy or charge you a higher premium. States can provide additional consumer protections for purchasers of Medigap policies.

Currently, four states (Connecticut, Massachusetts, Maine and New York) extend the guaranteed-issue rule to Medigap applicants outside their initial enrollment periods. A number of people initially sign up for Advantage plans because they expect lower out-of-pocket costs and want the additional benefits, such as vision and dental care.

But some beneficiaries want to switch to original Medicare after they develop health problems, because they want to select their medical providers and don’t want the plan to decide if they can see specialists or have certain tests and treatment. Though Medicare allows a switch from an Advantage plan to original Medicare during the open enrollment period, as a practical matter it might not be available. The beneficiary might not be able to obtain a Medicare supplement policy to cover the gaps in Medicare.

If you switch to original Medicare and can’t obtain an affordable Medigap policy, you’ll be responsible for all the coverage gaps in Medicare Part B. That might make the switch unaffordable and compel you to stay in an Advantage plan. You might have a similar problem if you move. Advantage plans are local.

There might be an attractive Advantage plan available where you live now. But if you move to another area later in retirement, you must choose from the Advantage plans available in that area. There’s no guarantee an attractive Advantage plan will be available to you. Your best option might be original Medicare, but you might not be able to buy a good Medicare supplement.

Or you could sign up for an attractive Advantage plan when first enrolling in Medicare. But the plan could change its terms and be less attractive, or the insurer might stop offering the plan. Again, you must find a new Advantage plan or switch to original Medicare and hope you’ll qualify for a Medigap policy.