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Should I purchase additional Medicare coverage?

While Medicare Parts A & B (also known as “Original Medicare”) will cover many of the basic services and procedures you’re likely to need throughout your retirement years, it definitely doesn’t cover everything. In fact, some of the most common and most costly health costs seniors face are NOT covered by Original Medicare. This includes vision, dental, hearing, and prescription drug coverage.

In order to fill in some of these “coverage gaps” and to help with the costs associated with these expensive yet necessary benefits, many Medicare enrollees purchase some form of additional coverage. While there are various options for additional coverage, the most common are Medicare Advantage, Medicare Supplement, and Medicare Part D plans.

Not sure which form of additional coverage is best for you? We’re here to help you understand your options.

Medicare Advantage (or Part C) plans

Medicare Advantage (also known as Medicare Part C) plans are one of the most popular routes for securing additional Medicare coverage. As of 2017, 33% of Medicare enrollees were covered under a Medicare Advantage plan. More and more people are choosing this option each year.

While these plans are sold by private insurance companies as an alternative to Original Medicare, they are required to include the same standard coverage provided by Parts A & B. However, these plans often include additional benefits, like vision, hearing, and dental benefits. It is worth noting that most Advantage plans include prescription drug coverage.

The specifics of each Advantage plan vary by the insurance company or carrier that you purchase it from.

While Original Medicare is accepted by most doctors and hospitals in the U.S., each Medicare Advantage plan has its own network of providers. Much like the employer-provided plans you may be used to, there are incentives to staying “in network” when seeking out care on a Medicare Advantage plan.

Medicare Advantage plans come in all shapes and sizes, and some even have $0 premiums. Because the structures of these plans are less consistent, it’s important to dig into each plan’s benefits to find the best match for you before making a commitment.

Unlike Original Medicare, all Medicare Advantage plans are required to adhere to a designated yearly maximum for out-of-pocket costs. This can make it easier to forecast your total health costs for the year.

Medicare Supplement (or Medigap) Plans

Another option for additional Medicare coverage comes in the form of Medicare Supplement (also known as Medigap) plans. Like Part D plans, Medicare Supplement plans are optional additions to Original Medicare coverage.

Depending on where you live, there are up to 11 different types of Supplement plans available. The plan types are labeled A-N, and each offers a different set of benefits at a different price. While private companies sell these plans, they federal government regulates them. As such, each plan of a certain letter type must include the same coverage. This is true regardless of which carrier you purchase it from. You can see a more detailed breakdown of these plan types and the benefits they include in the following article.

Because they are sold by private companies, the monthly premiums on these plans can vary. They typically range from $60 to $500 depending on your gender, age, health status, and tobacco use. You can learn more about the differences between Medicare Advantage and Medicare Supplement plans in the video below.

Medicare Part D (Prescription Drug Plans)

Prescription drugs are one of the biggest costs most people will face while on Medicare. Even if you aren’t taking any prescriptions when you first become eligible for Medicare, it is more than likely that you will at some point in the future. In fact, the average Medicare enrollee takes takes 5 prescriptions per day. The Medicare program itself spends over $100 billion on pharmaceuticals each year.

Unfortunately, despite the prevalence of prescription drugs, Original Medicare does not cover the cost of these medications. To get coverage for your prescription drugs, you’ll either need a Medicare Part D plan or a Medicare Advantage plan that includes Part D prescription drug coverage.

Private insurance companies sell Medicare Part D plans as an optional supplement to Original Medicare. Each Part D plan has its own formulary, which is the list of drugs it covers. When selecting a Part D plan, it is incredibly important to ensure that the drugs you are currently taking or plan to take in the near future are covered under your plan’s formulary. Otherwise, you will be left holding the bill for your drugs. This could quickly wreak havoc on your budget.

Because they are not part of Original Medicare, the rules for cost sharing work differently under Part D plans, and the price you pay for your drugs can vary throughout the year. There’s also no limit to the maximum you can pay in a year, so it’s important to find a plan that fits your needs. To learn more about how prescription drug costs are calculated under a Medicare Part D plan, read the article linked below.

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Not sure where to start?

Read our quick-start guide for help, including which questions you should be asking as you approach retirement.

Read our quick start guide