Alex Trabek. Joe Namath. Joe Montana. Surely you’ve seen them on TV, urging you to contact some insurance company about their Medicare products. Why are these celebrities and former athletes advertising Medicare and Medicare Insurance plans? Depending on how close you are to entering Medicare, you’ve probably also experienced the torrent of direct mail that arrives in your mailbox as your birthday approaches. What gives with all this Medicare advertising? The answer, unsurprisingly, boils down to money: Medicare Insurance is big business, and there’s a huge incentive to reach people who need Medicare. In this quick article, we’ll review why people would even want a private Medicare option, as well as a summary of the most popular choices people make when choosing a private Medicare Insurance plan.
What kinds of Medicare Plans are advertised?
There are three basic kinds of Medicare Insurance plans:
- Medicare Supplement Insurance (Medigap)
- Medicare Prescription Drug Plans (PDPs)
- Medicare Advantage Plans (Part C)
Most advertising is for either Medicare Supplement Insurance or Medicare Advantage plans.
Original Medicare is the basic program around which all of these private plans are built. When you enroll in Medicare (whether you’re automatically enrolled or enroll when you become eligible), you enter Original Medicare, Parts A, and B. This is the basic program, and it’s offered and run by the US government. The three Medicare Insurance products we’ll be talking about are all offered by private insurance companies. To raise awareness of their products and to attract customers, they have to advertise. This is similar to any other product or service you might use; if you don’t know about it, you won’t purchase it, right? However, if something is advertised enough and smart enough, companies can succeed in raising awareness and gaining market share.
Why do people want Private Medicare options anyway?
It’s important to note that nobody needs to choose a private Medicare Insurance plan, with the possible exception of a Part D drug plan. It’s perfectly legal and acceptable to rely on your basic benefits provided by Original Medicare. However, most people choose to add other coverage to help pay for the expenses they’re liable for under Medicare.
These expenses fall under both of the “Parts” of Original Medicare and include:
- Part A Deductible
- Part A daily co-insurance
- Part B Deductible
- Part B co-insurance
- Part B excess charges
You encounter these costs and expenses in different ways, depending on which services and procedures you use. However, with the exception of truly preventative procedures like certain screenings, you will pay at least something for every procedure and service you use.
These costs can really add up. For instance, Part B coinsurance is 20% of the Medicare-approved amount. Since infusion-based chemotherapies are covered under Part B, you might be expected to pay 20% of the cost for these cancer treatments. These costs vary by cancer type and treatment plan, but tens or hundreds of thousands of dollars for a full course of treatment is not out of the question. Your share of this can add up.
Worse than this, there is no annual cap on your out-of-pocket costs. Most other insurance products (like individual or employer health insurance) come with an annual Out of Pocket Maximum (OOPM) amount. This cap protects you from high out-of-pocket costs for major illnesses. Original Medicare doesn’t offer this protection.
Besides the lack of out-of-pocket spending protection, Original Medicare also has some glaring gaps in coverage. Neither Part A nor B generally covers:
- Vision, hearing, or dental
- Prescription drugs
- Coverage outside the United States
To help alleviate some of these shortcomings, private insurance companies offer Medicare Insurance products.
Medicare Supplement Insurance
Medicare Supplement Insurance, also called “Medigap,” works with Original Medicare and covers most of your out-of-pocket expenses. There are ten standardized “Plans” known by letter: A, B, C, D, F, G, K, L, M, and N. Each one of them covers a different mixture of your out-of-pocket costs under Original Medicare. If you choose this type of coverage, you’ll also need to choose a standalone Prescription Drug Plan (PDP), which will help pay for your prescription drugs.
Medicare Advantage Plans
Medicare Advantage plans are also known as Part C of Original Medicare. These plans are an alternative way of using your Part A and B benefits through a private insurance company. They are bound by law to cover everything that Original Medicare covers.
Medicare Advantage plans usually offer benefits beyond Original Medicare, including:
- Vision, hearing, dental
- Fitness/gym memberships
The most important thing is that all Medicare Advantage plans have an annual Out of Pocket Maximum amount. This feature gives people peace of mind and financial protection from lengthy or expensive illnesses. Medicare Advantage plans sometimes cover international travel. Most Medicare Advantage plans also cover prescription medications, known as MAPD plans (Medicare Advantage Prescription Drug Plans).
What are the Demographics of Medicare?
Now that you know why these private Medicare Insurance plans exist, we can return to the question, Why are there so many Medicare advertisements?
Medicare Insurance is a very in-demand product due to the aging of America. Right now, 10,000 Americans turn 65 every day. This trend will continue until at least 2030 when all Baby Boomers are Medicare age or older. For insurance companies, this represents a huge opportunity.
It also represents a big opportunity for health insurance agents. Licensed insurance agents must sell these private Medicare Insurance products. Since there are over 1 million licensed health insurance agents in the US, there’s a lot of competition. These agents and insurance companies need to attract customers, and advertising is an effective way to do that.
There are also many restrictions and regulations on the marketing of Medicare Insurance products. Direct mail and television advertising are two of the approved ways to solicit new clients. Medicare Advantage, in particular, is heavily regulated. Insurance agents aren’t allowed to cold call, door-knock, or otherwise approach people about Medicare Advantage plans without express permission. This explains why you’re likely to continue to see aging sports heroes hawking Medicare Insurance for the next decade (at least).