Finding the best Medicare plan is a process that involves knowledge of the region, analyzing the circumstances of the insured, and a familiarity with the insurance market. In this post I will provide two case studies that illustrate how important these factors are.
Meet Jim and Jane
Jim and Jane live in the New York Metropolitan area. They decided to purchase “the most expensive plan available to them,” which allows them to see any doctor or go to any facility (anywhere in the US) that accepts Medicare.
The average cost of that plan in the New York area is about $250 per month, per person. Jim and Jane are paying $500 a month for their plan, totaling $6,000 for the year. In addition, Jim and Jane have to get themselves a Part D prescription drug plan even if neither of them is taking prescription drugs. The least expensive Part D plan in the New York area is about $20 a month. That’s an additional $480 per year for their prescription drug plan plus whatever the drugs cost. (We are using zero for drugs for this example.) Jim and Jane are paying $6,480 per year for their Medicare and drug plans. Their 5-year and 10-year out of pocket is $17,460 and $34,920 respectively.
Meet Amy and Aaron
Our other couple, Amy and Aaron, are on a zero premium per month PPO (Preferred Provider Organization) plan with a major carrier with a huge network. The drug costs are included in the plan and for this example we will assume Amy and Aaron are taking Generic Brand Tier 1 and 2 drugs costing each a total of $10.00/month. Yearly total (20.00/mo x 12) = $240.00.
Each time Amy and Aaron go to the doctor or a specialist, they have an average-area copay of $15/$40, respectively. Assuming Amy and Aaron see their primary care physician for 1 annual physical plus 3 additional visits per year (8 total); and a specialist 3 times per year (6 total), the yearly cost for both primary and specialist visits totals $360 respectively.
In addition to doctor visits, let’s assume Amy and Aaron each need 2 diagnostic tests per year. The average cost is $250 per test. Their yearly total for 4 diagnostic tests is $1,000. Diagnostic tests are only necessary if one of their doctors thinks there is something unusual. Note: any preventative tests they receive during their annual physical (such as routine bloodwork or cancer screening) are covered in their plan and cost them $0.
Amy & Aaron, 5 year plan total cost = $8,000.00 (Dr. and tests $1,360/yr + drugs $240/yr = $1,600.00/yr)
Amy & Aaron,10 year plan total cost = $16,000.00
Jim & Jane, 5 year plan total cost = $17,460.00
Jim & Jane, 10 year plan total cost = $34,920.00
Who Has the Superior Plan?
Now, most of you are thinking, “Amy and Aaron have a superior plan to Jim and Jane, because it costs less.” Others are thinking, “Jim and Jane have a superior plan, because unlike Amy and Aaron, Jim and Jane can go to any doctor, anywhere in the United States that takes Medicare — and if Amy or Aaron get really sick their plan might not be accepted and they will have a six figure bill to deal with.”
These are both what I like to call Medicare Myths that people don’t understand.
Myth 1: Doctor Visit Cost — If Amy’s and Aaron’s primary care physician is in their network, and are also Jim’s and Jane’s physician, guess what? That physician does not treat Jim and Jane with anymore care and time than they treat Amy and Aaron because Jim and Jane are “paying significantly more per month.” The doctor’s office doesn’t care. They get paid by Medicare for both couples. Jim and Jane are paying the carrier directly, Amy and Aaron the small copay to the doctor and nothing to the carrier.
Myth 2 and 2A: Getting very sick/Doctor not in plan/Huge cost of getting sick — What happens if Amy or Aaron get really sick while they are on their plan? Because they are with a major carrier odds are almost 100% they have doctors and hospitals in their PPO network that accept the plan. Their plan, and all plans like theirs, have what’s called a Maximum Out of Pocket, or MOOP. The New York area MOOP ranges from about $4,300.00 – $6,700.00, with $6,700.00 being the max on any plans I work with. Once that number is hit, any additional costs are covered. The only way to hit the MOOP amount is to have an extended hospital stay, several hospital visits, or several expensive non-preventative procedures done in the same year from an accident or illness. Amy and Aaron will not wind up with a six figure bill in any year once on the plan.
Now that we’ve brought two of the plethora of Medicare Myths to light, do you know which of our couples has the superior plan? If your answer is YES, you are wrong because without a careful pre-analysis of each couple’s current health status and prescription drugs they are taking, the most appropriate plan cannot be determined.
For a detailed no-cost analysis, please contact me here.
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