Page 2 - Cover Letter and Medicare Evaluation for Michael Bichy

after that initial six-month period is over, in Delaware and most other states, they will likely be
required to to answer health-related questions before they can get a Medigap policy. And if
they have health problems, they will either pay much higher premiums or could be denied
coverage.

The most desirable quality of Medigap policies is the flexibility they provide. As you know, there
are no networks, and you do not need referrals to see specialists. You are covered when you
see any provider who accepts Medicare (as a Kaiser Family Foundation study found that more
than 99% of doctors and public hospitals do). If at some future point you want to go to Johns
Hopkins Medicine or the Mayo Clinic, you’ll be covered by a Medigap policy.

Another plus is that coverage decisions are made by Medicare, not by an insurance company.
When Medicare covers a service or treatment, the Medigap insurer cannot question Medicare’s
decision. In an Advantage plan, by comparison, the insurance company decides whether certain
treatments are medically necessary, and it has a financial incentive to limit coverage. As one
example, Medicare covers second opinions, but many Advantage plans don’t except in rare
cases.

The downside of Medigap policies is their cost. A 65-year-old who gets a comprehensive
Medigap policy can expect to pay between $80,000 and $100,000 in premiums over a 25-year
period. That doesn’t include Part B premiums, Rx drug expenses, and costs for services that
Medicare does not cover. And since Medigap policies do not cover prescription drugs,
policyholders must also enroll in a Medicare prescription drug plan (a stand-alone drug plan).

How Medicare Advantage plans work

When people enroll in Advantage plans, Medicare assigns their benefits to the plans. At that
point the plans assume responsibility for the enrollees’ medical care. Medicare pays the plans a
monthly amount to provide this care (the amount is based on the enrollee’s age, pre-existing
conditions, and local costs of care). As an example, Medicare might pay the plan $1,000 a
month for an individual’s medical care. If that individual doesn’t need medical care one month,
the plan comes out $1,000 ahead. But if that individual needs a $10,000 medical procedure, the
plan will receive only $1,000 plus any premiums and co-payments it collects.

Advantage plans therefore try to keep medical costs low and to limit expensive treatments,
perhaps by saying they are not medically necessary. To attract new enrollees, the plans use the
$1,000 monthly payments (in this example) to reduce or eliminate plan premiums and to
provide benefits not covered by traditional Medicare. Most Advantage plans offer some
coverage for dental care, routine vision care, and hearing aids, none of which Medicare covers.

Advantage plans must comply with Medicare’s coverage requirements, and they cannot deny
coverage for something that Medicare covers. But they can charge higher co-payments for
some services and low or zero co-payments for others. Expensive treatments often require 20%

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