Listen to Your Brother—Switch to Medicare Advantage

To be honest, I had never considered one of these plans when I signed up for Medicare a few years ago. But I wanted to know how my brother, Tom, was paying nothing for his supplemental health coverage, while I was paying $141.44 for an Aetna Medigap policy and another $18 for a prescription drug plan.

He got to the point with his usual finesse. “Why did you wait so long to call me?” he asked.

This was back near the end of 2017. Open Enrollment, the six weeks at the end of the year when you can switch to another provider for your health coverage, was ending in less than 10 days. Tom, who sells health insurance policies in Illinois, said, “You really should check out Medicare Advantage plans. You have only until next Thursday to sign up.”

That got my attention. As a freelance writer and editor, I perk up whenever I hear the word “deadline.”

“I like the Medigap plan I have,” I replied, somewhat defensively. The truth is, I had never considered a Medicare Advantage plan; I just assumed that my Medigap policy, which pays 20% of the costs that aren’t covered by Medicare, was better, meaning, more cost effective, because I didn’t pay for co-payments and deductibles.

“What’s the company?” he asked. “I hope you checked their ratings.”

Fortunately, I had. “Aetna,” I replied.

“That’s a good company,” he said, “but why are you paying so much? I pay nothing–zero, nadda, zip.”

The short answer: Because I don’t want to be limited in my choice of doctors, and I want to keep seeing the doctors I currently see. Tom barreled on. “There may be a Medicare Advantage plan in your zip code that accepts your doctors,” he said before hanging up. “You should check it out.”

When I did, I couldn’t believe the numbers: I thought my digital calculator was going to burn out: I could save an eye-popping $996 a year if I switched t0 the Aetna Medicare Advantage plan, paying $76 a month instead of the combined $159 I was shelling out for Aetna Medigap coverage and a prescription drug plan.

Here’s what learned during my search that I hope will help you manage your health care costs, both now and in retirement:

1. Check credit ratings. There are four “don’ts” to pay attention to:

  • Don’t believe what a health insurer has to say about their credit rating, because they will likely choose the one that’s most favorable.
  • Don’t check just one rating; check at least two or three ratings, because each rating agency uses different criteria and methods to rate companies. Ratings from the five major agencies (A.M. Best and Kroll Bond Rating Agency, in addition to the three above) can vary.
  • Don’t assume the task of checking a health rating is easy–it’s a lot like managing your health; it takes some effort. Credit rating agencies can disagree with each other, because they follow different rating systems.
  • Don’t think your work is over once you choose a health provider. Check on the company’s health at least once a year, because agencies can announce ratings changes at any time. I’ll plan to write about this topic in a future blog.

2. Review your health care costs annually. Costs change from year to year because of regulations and marketplace competition. These days, you can’t afford to “lock and load” your health coverage; you need to review costs every year.

3. Pay attention to timing. You are going to pay if you miss a deadline for making changes to your insurance plan.

4. Review your health expenses. Pull together all your records for the last full year and add up what you spent. I used my 2017 health care costs as the basis of my health care estimate for 2018, adding in the copays and deductibles in the Medicare Advantage plan I was considering:

For now, I’m thinking of where to save that $37 a month, which will help pay some health care costs. If I’m going to live another 30 years in retirement, that money adds up. If I were younger, I would fund a Health Savings Account (H.S.A.), which is lot like an Individual Retirement Account, with one important exception: It allows you to use the money to pay for health care expenses in retirement–without paying any taxes when you withdraw it. Since healthcare costs in retirement are currently estimated to consume as much as 20% of your budget, that’s a smart move to think about making now, if you can.

What health changes did you make in 2018? Are you thinking of switching to a Medicare Advantage Plan to save money? What goals do you have for the money you’ll save?

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