Which of the several types of Medicare arrangements is best for you?
If you are retired or thinking about retirement, this is something you need to carefully consider.
Original Medicare (Parts A & B)
Medicare is a government-funded health insurance program that provides basic coverage to
those aged 65 and over and certain individuals with disabilities. Original (or Traditional)
Medicare allows a covered individual to go to any doctor, health care provider, hospital, or
facility that is enrolled in Medicare and accepting new Medicare patients. With Medicare
coverage you generally pay a deductible before Medicare pays its share. When it pays its share,
you will also pay your share (coinsurance) for covered services and supplies. There’s no yearly
limit for what you pay out-of-pocket and Original Medicare only pays about 80% of approved
costs for hospitals, doctors and medical procedures.
Medicare Part A (Hospital Insurance) covers services considered medically necessary such as
inpatient hospital care, critical access care, short-term care in skilled nursing facilities, hospice,
and home health care. There is no premium for most people for Part A.
Medicare Part B (Medical Insurance) covers medically necessary services such as doctor and
outpatient care. There is a monthly premium for Part B coverage
Medicare Part D
Most people want more than the coverage Original Medicare provides, including drug
coverage. That’s why there is Medicare Part D. This is stand-alone coverage provided by
insurance companies strictly to cover the cost of prescription drugs. During your initial
enrollment period or during a Special Enrollment period you may purchase Part D coverage
whether or not you purchase a Medigap or Medicare Advantage Plan (though many of the
latter include Part D coverage).
Medigap and Medicare Advantage
Even though Original Medicare (Parts A and B) covers a large share of your medical costs, what
it doesn’t cover can still be expensive. Plus, it doesn’t cover a lot of medical necessities people
want. To fill this need people may also want to purchase either Medigap or Medicare
Advantage coverage. What’s the difference?
The essential difference is that Medigap covers the gaps between what you pay for Original
Medicare and your total costs. Whereas Medicare Advantage may cover those costs but may
also go beyond and provide additional coverages.
Medigap
Medigap, also referred to as Medicare Supplement Insurance, covers certain out-of-pocket
expenses, such as deductibles and co-pays (“gaps” in coverage). It is purchased from private
insurance companies with monthly premiums that can vary widely based on age and location.
Medigap plans are standardized for all insurance companies. There are 10 of them, labeled
Plan A, B, C, D, F, G, K, L, M and N. Some of the Original Medicare costs that may be covered by
a Medigap plan include:
- A deductible for an inpatient hospital stay of $1,600.
- A copayment for each inpatient hospital day, such as $400 per day for days 61 to 90.
- A copayment for each day in a skilled nursing facility, up to $200 per day for days 21 to 100.
- A 20% coinsurance for medical services covered under Medicare Part B.
Medigap plans may cover all or a percentage of these costs, depending on which plan you
choose. Plan K, for example, covers 50% of these kinds of costs, but the premiums are also less
than other Medigap plans.
Medicare Advantage
Medicare Advantage, also known as Medicare Part C, fills gaps but also provides a number of
other benefits that go beyond Medicare parts A and B. A Medicare Advantage plan may also
include drug coverage, which is normally offered separately as Part D.
Most Medicare Advantage plans, according to Investopedia, operate as a health maintenance
organization (HMO) or a preferred provider organization (PPO). HMOs require members to use
the doctors and hospitals in their networks. PPOs generally let members get care outside the
plan’s network, but members may have to pay more for such care. Some plans require prior
authorization for specialist care or procedures, or a referral from a primary care doctor. Plans
might not cover care given outside of the network’s geographical area. On the other hand,
Medicare Advantage plans often offer additional benefits not covered by Original Medicare,
such as eyeglasses, routine dental care, or gym memberships.
Which Medicare Plan design is best for you? It’s difficult to say. If you want more than Original
Medicare, would a Medicare Advantage plan or a Medigap Plan K and Plan D combination be
best for you? If you chose a Medicare Advantage plan, which of the approximately 39 different
Medicare Advantage plans available would you chose? With so many choices, you may want
some help. Please give us a call. We’d be happy to discuss your unique situation.