Understanding the private side of Medicare

Medicare Advantage plans offer a private-run alternative to traditional Medicare. Is one right for you?

“One of the things that happens when people hear the word Medicare is they think, ‘When I turn 65, magically all my healthcare costs will disappear because the government is now stepping in to pay them,’” said Dan Keady, Chief Financial Planning Strategist at TIAA. “People forget or don’t realize that they’re still going to pay quite a bit.”

True, government-provided Medicare Parts A and B will cover certain expenses, but there are copays and deductibles involved, and you likely will need to pay premiums for things it doesn’t pay for—such as a private Part D drug plan, as well as supplemental, or Medigap, insurance to fill gaps in coverage.

And while many retirees find that traditional Medicare combo to be a good fit for their needs, others opt for an alternative known as Medicare Part C, aka Medicare Advantage. “Rather than a direct deal with the government, Medicare Advantage is through private providers,” says Keady. It covers everything Parts A and B include (for a full explanation of coverages in each of Medicare’s parts, consult our booklet, Medicare Fundamentals), as well as a range of expenses they do not. It creates an all-in-one insurance experience that can feel more manageable (and can sometimes be more cost-effective) than the traditional option. Whether it works for you will depend on your situation and preferences. “People are going to have to spend time thinking about what makes sense for them,” says Keady. “There’s not one perfect answer.”

March 31st is the deadline to enroll in Medicare Part C, also known as Medicare Advantage.

Here are five things to know about Medicare Advantage:

1. Medicare Advantage plans are private health insurance plans.

These plans are offered through Medicare-approved private companies as alternatives to the traditional Medicare plan. They bundle all the hospital and medical insurance coverages included in traditional Medicare Parts A and B, plus extra services—which might include dental, vision, hearing, and more. Like all private insurance plans, availability, costs and coverage can change annually.

2. Not every Medicare Advantage Plan is the same.

There are more than 300 different Medicare-approved Medicare Advantage plans available from multiple private providers. There are also different types of plans, including HMOs, PPOs, PPFS plans and SNPs.

Some plans might offer dental care insurance. Some might offer vision. Some prescription drug coverage. Many offer a combination of all these things.

Medicare has an estimation tool that lets you search and see different available Medicare Advantage plans based on where you live and the plan requirements you’re searching for. You can also opt to get plan estimates that take into account the specific drugs you need, which can be incredibly helpful in nailing down costs.

3. Medicare Advantage may or may not be the best route for you.

Many people like the array of services that comes with Medicare Advantage, and in many cases, the associated costs are lower than those with traditional Medicare. This is because some services and providers are available to you without a copay—plus, the Medicare Advantage plans that include prescription drug coverage (and that’s most of them) won’t require an additional premium for Part D.

One challenge, however, is that you are limited to the providers within that insurer’s network, Keady explains. So if your preferred doctors are not on the list, this might not be the route for you. And Medicare Advantage may or may not include specialists you need for your unique conditions.

Additionally, “if you live in multiple places, [traditional] Medicare might be better,” said Keady. Because your in-network healthcare providers with Medicare Advantage might be limited to one area or region, your coverage could be exclusive to the providers where you establish your plan. In this case, you would be charged fees for using out-of-network providers.

4. Factoring the specifics about your health can help you decide which healthcare plan is right for you.

One potential benefit of Medicare Advantage is somewhat predictable costs, especially if you’re relatively healthy. A single premium—with “extra” services that aren’t covered in traditional Medicare, plus basic healthcare maintenance coverage—can be a very attractive financial option.

That said, people with a number of health issues may fare better with original Medicare plus a supplement plan [Medigap] that has good coverage to limit additional out-of-pocket costs without limiting their network of providers or care. Note that Medigap healthcare plans are also private, and as such can offer different benefits, so if choosing that route, you’ll need to look for one that offers the coverage you think you might need.

5. When navigating retirement healthcare and deciding for or against Medicare Advantage, you don’t have to go it alone.

Through TIAA, you have access to financial advisors and tools—such as an online healthcare calculator—that will help you estimate and prepare for your healthcare costs.

And with the guidance of our advisors, you can create a retirement plan that helps smooth the road. “Within the TIAA financial planning suite, we have built in substantial healthcare costs that are growing by more than inflation, so that you and your plan are taking into account these costs,” says Keady.

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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securitiesrecommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material doesnot take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investmentdecisions should be made based on the investor’s own objectives and circumstances.

Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registeredinvestment adviser.