Don’t Do This: #Medicare Mistakes

This Happens.

Medicare beneficiary is currently using the most expensive PPO which is a version of a Medicare Advantage plan. In deciding what configuration will be in effect for 2016, it was pointed out to the person that less expensive options were available. The reason that this was pointed out to the prospect was because the medications she took were generic, the network would remain unaffected, and the resulting premium would be lower by more than $700 per year. Further, the dental, vision, and health club memberships would be identical
At the outset I tried to explain that the cost the existing configuration would be in fact greater then under a Medigap policy, even after a stand-alone prescription plan, Part D, was selected, and that Medigap would provide superior coverage if medical care was required, not to mention the fact that the terms and conditions of the coverage would remain the same over time, unlike Medicare Advantage, when the “fine print” was subject to change annually.

The reason the prospect decided to stay with a Medicare Advantage plan was due to the additional benefits that were included (even though these would remain the same under the less expensive option). This observation can be found widely among Medicare Advantage plans: the most expensive plan is usually not worth the extra premium cost, in the absence of some known anticipated medical costs in the future. That was the case in this instance.

So you would have thought that the applicant would change to the less expensive Medicare Advantage plan, saving $700 a year, and continuing to reap the benefits which were the dental vision and health club membership, OR switch to Medigap and stand-alone prescription coverage. Nope.
Instead, the rationale I was given was quite stunning. The reasoning was that since inpatient hospital admission would have been more expensive under the low lower premium plan (true), that the higher cost Medicare Advantage plan would remain in place.

This is a failure of logic on multiple levels. If it were the case the applicant was worried about the out of pocket cost of an inpatient hospital stay, then Medigap would have provided far superior cost-sharing details. If that was the dominant concern, then Medigap would be superior. If the “extra benefits” was the preimary goal, then the less-expensive PPO would be superior. Instead, by remaining with her existing configuration, let’s take a look at what is implied. The applicant has determined that she is worried about inpatient hospital stay yet still wants to keep the dental, vision, and health club memberships. In fact, the only way this works out is if she does go to the hospital exactly once. If the person is hospitalized for a serious medical situation, then the out of pocket cost will most likely be higher, the premium will be higher, and it is likely that future enrollment in Medigap would be rejected. If she was not hospitalized, then she has overpaid $700+ in premium, per year.

In other words, this person would require a crystal ball, and be hospitalized once (and only once, because multiple hospitalizations would result in much higher costs than Medigap), witha medical condition that did not prevent future Medigap acceptance, in order for her to have selected the most efficient option. If this is in fact the case, then she has a crystal ball, in which case she doesn’t have to worry about insurance at all. She could make more than enough money to cover any and all potential future costs, without limit.

Nevertheless, This Happens.

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