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How does a la carte Traditional Medicare compare to Medicare Advantage, the combo meal?

The question “Do you want fries with that?” has become a shorthand phrase, synonymous with the fast-food industry. So much so that it is the name of a Canadian sitcom, set in a fast-food chain as well as the title of a song by country legend Tim McGraw in which a bitter ex-husband sees his ex-wife’s new love come to the drive-through. Typically, the phrase is used in a somewhat disdainful, if not a derogatory manner. Yet the phrase’s original use was meant to offer better and perhaps more economical service. Originally, fast food stores just sold each food item separately, but it was not long before they started bundling main orders with sides. When I last took my boys through the Culver’s drive-through, the attending team member upgraded them to “baskets” because the fries and water bottles I had ordered cost more when sold separately. If you have already decided to eat fast food, then you might as well get your “fries with that” for less money. Of course, sometimes the fast-food meal deals are not really deals because they have you buying side dishes that you do not really need. And sometimes the sides dishes or drinks that you really want are not included in the packages or, if they are, they cost more. Culvers, for example, will let you build a “basket” including a sandwich, side, and drink, but if your want your side to be a salad, rather than fries or you want a milkshake rather than a fountain drink, you have to “upgrade”, which costs more. In other words, whether the combo really works best for you or saves you money depends on your hunger, your nutritional needs, and your taste.

Medicare also has an “a la carte” choice and an “all-in-one” option. The former is traditional Medicare, which comprises three parts. Medicare Part A covers hospital stays and associated procedures and costs. Medicare Part B covers outpatient care and the associated procedures and costs, and Medicare Part D covers prescription drugs not administered within a hospital stay context. The latter is Medicare Advantage, formerly called Part C. Medicare Advantage functions a lot like employer-sponsored group coverage, using a Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO) structure and adhering to “in-network” and “out-of-network” distinctions. There are many different Medicare Advantage plans because Advantage is Medicare outsourced to private insurance companies. Whether traditional Medicare or Medicare Advantage is best for you depends a lot on your individual medical and financial circumstances as well as your taste in health care. People with disabilities who have received Social Security Disability Insurance (SSDI) Benefits or Social Security Childhood Disability Benefits (CDB) for 24 months are eligible for Medicare. If you or a family member is eligible for Medicare these are the main issues you will want to consider when choosing traditional or Advantage. (photo courtesy of Angelo Pantazis via Unsplash).

What is covered and how. Traditional Medicare covers most services you might require in a hospital or an out-patient setting as well as the medical supplies, required in those circumstances. Part A covers drugs administered while you are hospitalized and Part D, if you opt to purchase it, covers prescription drugs under any other circumstances. All Medicare Advantage plans are required to cover what is covered by traditional Medicare. Many also cover vision and dental services and routine exams that are not covered by the traditional version, and some plans may cover wellness items such as health club memberships. If you have an HMO-structured Advantage plan, you will need referrals from your primary care physician in order to see specialists as with most HMOs. With traditional Medicare, you will not need a referral from your primary care physician in most cases. Rather, you can go directly to a specialist. While neither version of Medicare will cover treatment outside the United States, Medicare Advantage may be even more geographically limited since most networks fall within a single state or even as single metropolitan region.

Both Part D, which is also outsourced to private insurance companies, and the prescription drug coverage portion of Medicare Advantage have formularies. However, while you can change your Part D plan, independent of your part A and B coverage, with Medicare Advantage, you need to evaluate simultaneously your network coverage for hospital and outpatient care as well as your drug coverage because one plan must be suitable on all fronts.

The costs of coverage. With traditional Medicare, you pay a premium for Part B (and for Part A if you do not have enough credits from your work history). With Medicare Advantage, you may pay an additional plan premium on top of the Part B premium. With traditional Medicare, the federal government sets uniform deductibles and co-insurance rates. For example, you almost always pay a 20% copay for Part B services, based on the Medicare reimbursement amount. By contrast, each Medicare advantage plan is structured differently, and the deductibles and co-insurance amounts are determined by private insurance companies. These may be more or less that the 20% co-pay you would have using traditional Medicare for the same service by the same provider. Some plans have fixed-price co-pays for both primary care physicians and specialists, and some have percentage co-pays for each. Some have no co-pays for primary care. However, your cost share under Medicare advantage will be higher for practitioners and facilities that are “out-of-network”, and some plans will not cover out-of-network expenses at all. With traditional Medicare, the cost share is the same for any practitioner or facility that accepts Medicare. There is no limiting concept of “network”.

With traditional Medicare, there is no limit to your potential out-of-pocket expenses. Many people opt to purchase a Medicare Supplement (Medigap) policy to create a limit and also to cover co-insurance amounts. Each Medicare Advantage plan does have an out-of-pocket limit, and once this is exceeded, you pay nothing further for covered services for that year. For this reason, you cannot purchase a Medigap policy if you have Medicare Advantage. It may sound as if Medicare Advantage is cheaper and, in some cases, it may be, but you need to consider carefully whether and to what extent you might need to access out-of-network providers.

You can switch back and forth between traditional Medicare and Medicare Advantage but, as with any change that requires processing by a large bureaucracy, the process is time consuming. In addition, you are limited as to when during the year you can make a switch. For example, in the Medicare general enrollment period, which runs from January 1 to March 31, you can 1) join an Advantage plan for the first time if you would otherwise be getting Part B for the first time during that period, 2) switch from one Advantage plan to another, and 3) return to traditional Medicare if you already have a Medicare Advantage plan. However, you cannot join an Advantage plan during that period if you are already enrolled in traditional Medicare and if you are not newly eligible for part B. You can, however, join, switch, or drop your Medicare Advantage plan in the open enrollment period between October 15 and December 7 of each year.

Assuming you have already made the decision to eat fast food, purchasing a combo meal with a drink and fries may or may not be the best option for either your health or your wallet. From a health insurance standpoint, Medicare Advantage, the package deal, may or may not be the most effective choice for your budget and your health.

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