Our top Google, Yahoo and Bing search last week was “Is a Medicare Supplement Necessary/Required with Obamacare?” With 157 of you asking this same critical question, we thought we’d better get the word out and clear things up.
The answer is no, but it’s a good idea to have some sort of supplemental Medicare insurance (Medigap or Medicare Advantage) in 2014. Here’s why.
Yesterday MedicareWire reported that U.S. Sen. Rubio was claiming that Obamacare is going to cut Medicare benefits and increase costs. Only half of his claim is factual. Since the passing of the Affordable Care Act law in 2010, Medicare benefits have increased. By that I mean beneficiaries are covered for a few additional health benefits. The Centers for Medicare and Medicaid Services should be commended for working hard to add new, essential health benefits that keep seniors healthy.
Where Sen. Rubio is 100% correct is in the area of healthcare costs for seniors. The U.S. Department of Health and Human Services is diligently working to reduce the government’s healthcare costs. There are two primary ways it’s doing so. The first way is by lowering how much it reimburses both doctors and hospitals for services provided. The second way is by forcing medical suppliers to compete on price.
At first blush both of these cost-saving measures might seem to be a good thing, and for the government, they are. However, there are going to be consequences that roll down hill to patients. Some of these consequences have already reared their ugly head, like the story we covered a few days ago about the Medicare hospital coverage gap. Let’s face it, when doctors and hospitals start getting hefty pay cuts, they are going to look for ways to stop the bleeding.
Believe me when I say the healthcare system is going to start soaking it to the seniors. And it ain’t going to be pretty.
The Medicare supplement insurance carriers know the soaking is coming. That’s why Medigap rates have increased twice this year, and not by a little, either.
What’s really interesting is how the Medicare Advantage (MA) plans have decided to deal with budget reductions. CMS recently announced that 2014 Medicare Advantage plan premiums would remain about the same, with only a $1 average increase. This is astonishing considering the massive funding cuts delivered to MA plans to help fund Obamacare.
How is it that MA plans are managing to keep premiums stable while funding from the government takes an 8 percent drop? There are two reasons, and both are equally important to seniors. One can help you, while the other can bite you in the wallet.
Since 2010, enrollment in MA and MAPD (Medicare Advantage with Part D included) plans shot up considerably. In 2014, we could realistically see a full 30% of all beneficiaries in an MA plan. That’s more than 15 million seniors! As enrollment in privatized health insurance increases, so does the bargaining power of the plan. It’s the same reason large employers get better rates on HMO and PPO plans for their employees.
Unfortunately, volume does not make up the complete revenue shortage facing most Medicare Advantage plans. To make up the shortfall they have two choices: increase premiums or increase out-of-pocket costs. To remain competitive come open enrollment, and comply with CMS regulations, most plans are choosing to increase your out-of-pocket costs with higher copays and coinsurances.
In 2014 Seniors Have A More Difficult Choice Than Ever
Until now the safe choice was to keep your Original Medicare (Parts A and B) and add a Medicare Supplement Plan F and a Part D plan for your prescriptions. This combo covered you from A to Z. Unfortunately, the increased demand for MA plans and the introduction of Obamacare throws a monkey wrench into the works. That monkey wrench is called capitation.
Health insurance networks, particularly Health Maintenance Organizations (HMOs) use a process called capitation to determine how much they will pay physicians, physician groups and other healthcare providers. With the massive increase in demand for HMO plans coming in 2014, physicians participating in HMO networks are going to be slammed with new patients. The result is expected to be a severe shortage of physicians that can or will see patients that do not belong to a health organization network.
So, while that all-you-can-eat Medigap Plan F may have you covered, in-so-far-as your bills are concerned, that doesn’t mean you be able to find a physician that will see you. This is a serious issue that all seniors need to be concerned about. Every area will be different, depending on the makeup of independent physicians versus network physicians. Start doing your homework.
Here’s my personal recommendation. Every senior needs Medicare Part D. Even if you don’t have any regular prescriptions now, for around $20 per month you can be covered. It will save you a lot of money when you do need to have your prescriptions filled.
If you currently have a primary care physician and a Medigap plan for supplemental Medicare insurance, keep it. However, now more than ever is the right time to to go shopping for a better rate. Also, if you are on an F Plan, you might want to look at taking a bit more risk to save a lot of money over the course of the year. A Plan G is always a safe alternative.
If you are new to Medicare (will be enrolling in 2014 or after), or if you still have traditional Medicare without a supplement, Medicare Advantage is the most cost effective way to get your health insurance. On average, the monthly premium will be about $31, with most U.S. counties having one or more $0 premium plans. Plus, each plan is required to show you your maximum out-of-pocket expenses. This will give you a much better idea of your costs should you need medical care.
If you plan to keep your Original Medicare, even if you have a supplement, make sure you’re part of an Accountable Care Organization (ACO). ACOs are a new phenomenon in the private-fee-for-service (PFFS) arena. What started as an experiment by Medicare, ACOs are quickly proliferating. Since Obamacare passed, hospitals, medical groups and other organizations nationwide have formed hundreds of ACOs, and the trend is accelerating. In a nutshell, an ACO forces hospitals, doctors and other health care professionals to deliver your healthcare with more coordination, better quality and at a lower cost, just like an HMO. Like HMOs, ACOs use a capitation process for payments.
To wrap up, don’t allow yourself to be shut out or unprepared for your potential healthcare expenses in 2014 and beyond. To avoid being shutout and not having a primary care physician, make sure that you’re part of a PPO, HMO or ACO. Obamacare does not mandate that seniors have supplement insurance or a private health plan — regardless of your income level — but you will reduce your overall costs if you do.