Whether you’re just diving into Medicare, or you’ve done enough research to thoroughly confuse yourself, you’re on the right website. Medicare can be very difficult to navigate as there are many important choices and complex terms to sort through. With a clear sense of the basics and your unique needs, you can make Medicare work for you.
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Let’s start with the basics. The federal government put Medicare into place to provide people over 65 and people with disabilities access to affordable healthcare. The program provides coverage for more than 55 million Americans (and accounts for about 15% of federal spending). It’s a big program and the only truly universal health care administered by the U.S. Government.
You may have heard about different “parts” of Medicare. The first step in understanding how the larger system works is to break it down into its parts. There are two main providers of Medicare coverage: the federal government, which administers parts A & B, and private insurance companies, which offer additional coverage. We’ll discuss both of these options, starting with the step you need to tackle first.
Medicare A & B
You’ll often see Part A and Part B collectively called “Original Medicare” or “Traditional Medicare.” Typically, if you’re already receiving social security benefits when you turn 65, you’ll be enrolled automatically in Parts A & B. If you don’t get Medicare automatically, you’ll need to apply through the Social Security Administration. If you’re approaching your 65th birthday, you can use this article to create your personal Medicare timeline.
What’s the difference between Medicare A & B?
Medicare Part A is also known as “hospital insurance”. It covers inpatient hospital stays, nursing care, hospice care, and skilled nursing facility stays. Medicare Part B, also known as medical insurance, takes care of medical or surgical services from doctors. This includes lab tests, preventive services (like mammograms and yearly “wellness visits”), and medical supplies (like wheelchairs and walkers).
Together, Original Medicare helps pay for the basics, but it doesn’t cover everything.
Parts A & B don’t cover:
- Drugs from the pharmacy
- Most dental care, including dentures, dental procedures or cleanings, fillings, dental plates, tooth extractions, and checkups
- Cosmetic surgery
- Long-term nursing home care that goes over 100 days
- Hearing aids
- Routine foot care
- Eye exams for prescription glasses
Things that aren’t covered under Parts A & B of Medicare are typically referred to as “gaps.” How important it is to fill in those gaps with additional or supplemental coverage depends on your medical needs, current coverage, and doctors you’d like to see. We go over your various coverage options in more detail in this article, but for now, we’ll provide a brief overview of each of these options: Medicare Part C (also known as Medicare Advantage), Medicare Part D, and Medicare supplement.
Medicare Part C or Medicare Advantage
Medicare Advantage (or Medicare Part C) is a popular type of additional coverage. These are plans run by private insurance companies, and while you still have to pay the government for Original Medicare, your Medicare Advantage plan will manage your benefits for Part A & B. These plans also typically include coverage for things like dental, hearing, vision, and prescription drugs.
So, why get Medicare Advantage? In addition to receiving coverage for all of the services you get with Medicare Parts A&B, depending on which Part C plan you choose, you may also receive coverage for added benefits like dental, hearing, or vision coverage at a low upfront cost for your premium.
Why wouldn’t you want to go with this option? Typically, there are network restrictions, which we’ll dive into that a little more now.
Similar to employer or individual insurance plans, there are two main types of Medicare Advantage plans:
- Health maintenance organizations (HMOs)
- Preferred provider organizations (PPOs)
With Medicare Advantage there are a few important terms you’ll need to understand in order to compare plans effectively. A premium is a set dollar amount you pay each month to maintain your coverage status. A deductible is the amount you pay before the insurance “kicks in” to cover your costs. After you’ve reached your deductible, which is typically low or $0 on Part C plans, you start cost-sharing with the insurance company. That means each time you access care, you pay a copay (a fixed dollar amount) or coinsurance (a percentage of the cost) for services while your insurance covers the rest. Cost-sharing amounts can vary between different Medicare Advantage plans. For this reason, you should look into the breakdown for services you use most when picking a plan.
Maximum Out-of-Pocket Costs
These plans also have a yearly limit on your out-of-pocket costs for Medicare-approved health care services (called an “out-of-pocket maximum”). Once you reach this limit, you won’t have to pay anything for covered services. Each plan sets its own limit, and the limit can change year to year. In 2019, the Part C out-of-pocket maximum is capped at $6,700. Make sure to consider out-of-pocket maximums when comparing plans, especially if you plan on having a lot of medical costs in the upcoming year.
Unlike Medicare Advantage plans, Original Medicare sets no limit to how much you spend for covered services throughout the year. Also keep in mind that costs for prescription drugs do not have a limit on any plan type.
Each of the Medicare Advantage plan types comes with its own pros and cons. For example, with most HMOs, you can only go to doctors, hospitals, and providers included in the plan’s network. Additionally, your primary care doctor typically needs to give you a referral to see a specialist or other health care provider. However, if you’re ok with a smaller network, an HMO may have a lower premium than a comparable PPO. If you’re considering an HMO and have a favorite doctor or specialist, you should ensure that they’re in-network before enrolling.
With a PPO plan, you pay less for health care services when you use providers included in your plan’s network. You will pay more if you use doctors, hospitals, and other providers outside of the plan’s network.
Medicare Part D & prescription drug coverage
Part D plans are the part of Medicare that provides coverage for prescription drugs. Before you can sign up for a Part D plan, you need to be enrolled in Part A and/or Part B. Signing up for Part D coverage is optional, but if you don’t sign up during your eligibility period, or you don’t already have full coverage, you may have to pay permanent late enrollment penalties if you choose to sign up later. Even if you aren’t currently taking any drugs, we recommend signing up for a Part D plan within your IEP to avoid future penalties. You can use our free initial enrollment period finder tool to identify your unique 7-month eligibility period.
If you’re enrolled in Parts A and/or B, you can get drug coverage through a stand-alone Part D plan. If you have a Medicare Advantage plan, drug coverage is almost always included (plans with drug coverage included are typically abbreviated as MAPD). Keep in mind that every Prescription Drug Plan has its own list of covered drugs. Also known as a “formulary”, this list of covered drugs is different on each plan. Your plan’s formulary may also change at any time. If this happens, you will get a notice from your plan provider.
Before enrolling in a plan, you should ensure that all or most of your drugs are covered. You may want to consider paying a little extra for a plan that covers all the medications you’re taking to save money in the long run.
Commonly referred to as “Medigap,” Medicare supplement plans are another type of coverage that can help with the costs of Original Medicare. The government standardizes the coverage levels of these plans. This ensures that the plan benefits are the same for each plan of a particular type, regardless of which company’s plan you enroll in. For this reason, it is definitely worth shopping around to find the plan you need at the best price.
Supplement plans are structured to help you pay for the coinsurance, copayments, and deductibles associated with Parts A & B. For example, all 10 supplement plans cover the coinsurance cost for Part A. Unlike Medicare Advantage, these plans will not manage the benefits you get from Parts A & B. Instead, they are stand-alone plans that run on their own. If you want to learn more about these Medigap plans, visit our article ”Choosing the right Medigap Policy.”
Plan F also offers a high-deductible plan. In 2017, you would have to pay $2,200 before your policy pays anything. Typically, this is a trade-off for a lower premium.
“X” indicates that coverage is 100% of the Medicare allowable amount. A percentage number indicates the proportion of the Medicare allowable amount covered.
Plan N has a copayment of up to $20 for physician office visits and up to $50 for emergency room visits (which may be waived in certain circumstances).
After reaching your out-of-pocket limit, Plans K and L cover 100% of your costs.
As illustrated in the table above, Plan F offers the most comprehensive coverage while Part A covers the least. The monthly premiums for these plans can range from as low as $60 to as high as $500. Premium prices will depend on several factors, including your gender, tobacco use, plan area, and the insurance company you choose. They also do not include coverage for prescription drug, vision, or dental benefits.
If you don’t want to be restricted by a provider network and are not in need of vision or dental coverage, a Medicare Supplement plan may be a suitable option for you. To learn more about which supplement plan would be most beneficial for your needs, check out our article Choosing the right Medigap policy.