Medicare Advantage Offers Significant Savings, Study Finds
Medicare Advantage plans offer significant savings to enrollees compared to straight fee-for-service Medicare, a new study has found.
Even with the additional premium, beneficiaries enrolled in Medicare Advantage typically spend 40% less than beneficiaries in Medicare Fee-for-Service, according to the comprehensive study by UnitedHealth Group.
Medicare Advantage plans cover the same services as traditional Medicare plans and typically offer additional protections and service that are not covered by Medicare. These services can help enrollees stay healthy, improve their overall health and recovery from ailments, and reduce the need to go to the emergency room.
"Compared to Medicare, Medicare Advantage beneficiaries with chronic conditions receive more preventative care and experience fewer emergency department visits and lower rates of avoidable hospitalizations," the report said.
Medicare Advantage plans are a type of Medicare health plan offered by private insurers that contract with Medicare to provide all your Part A and Part B benefits. Most Medicare Advantage Plans also offer prescription drug coverage.
Significant savings
Medicare Advantage covers 89% of Part A hospital services and Part B provider services, compared to 83% by fee-for-service Medicare plans. Additionally, Medicare Advantage offers Part D prescription drug coverage and includes out-of-pocket health care spending caps.
Advantage plans can also have rich supplemental benefits that help trim costs and add value.
Annual health care costs for 72-year-old enrollee of average health*
- Medicare Advantage: $3,632
- Medicare fee-for-service plus a prescription drug plan and a Medigap Plan F: $5,960
- Medicare with a prescription drug plan and Medigap Plan G: $5,441
- Fee-for-service Medicare with just a prescription drug plan: $5,109
* Premiums plus out-of-pocket expenses.
The study noted that over their lifetime, the seniors can save up to $50,000 to $80,000 in annual health care costs by enrolling in Medicare Advantage.
"Out-of-pocket costs could be less with fee-for-service than with Medicare Advantage when coupled with a prescription drug plan as well as a supplemental plan," the report said. "Nevertheless, high deductibles still led to a significant price difference that favored lower Medicare Advantage costs. Medicare Advantage costs were also more stable."
Premiums
Premiums are more stable in Medicare Advantage plans. In 2019, for example:
- Regardless of age, gender or health, Medicare Advantage enrollees paid the same amount (an average of $1,609).
- Beneficiaries on Medigap Plan G who were 65 paid $1,393 in premiums. However, those who were 85 paid $2,720.
- A 65-year-old under Medigap Plan F paid $1,920 in premiums in 2019, while those who were 85 paid $3,748 in premiums (it should be noted that Medicare Plan F has ended for all new enrollees, but current Part F participants are grandfathered in).
Out-of-pocket costs
Having to pay large sums out of pocket in case of a medical emergency is also a larger probability with a Medicare fee-for-service plan.
The annual Medicare Advantage maximum out-of-pocket limit for 2020 is $6,700 (that does not include prescription drug costs). But that's the upper limit; the average Medicare Advantage plan has an out-of-pocket cap that's under $5,000 (again, not counting prescription drug costs).
Meanwhile, Medicare fee-for-service plans do not have an out-of-pocket cap. For perspective of what that could mean for you, consider that between 2015 and 2017, about 3.5% of Medicare beneficiaries exceeded $6,700 in out-of-pocket expenses. On average, those who exceeded the limit spent $12,000.
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