A step-by-step guide to choosing a health insurance plan that fits your individual health care and financial needs.
If you are new to Medicare – or even if you have been on Medicare for a while – you may find it difficult to figure out what all the plans mean and what the best options are for your evolving health care needs and financial situation.
Medicare is a federal health insurance program. You qualify for it if you are age 65 or older, or if you are younger but have certain disabilities or end-stage renal disease. Unlike other health insurance, Medicare coverage is divided into four parts: A, B, C and D. This allows you to choose which parts you want and avoid duplicating coverage from other insurance.
Medicare Parts A and B
The different parts of Medicare help cover specific services: Medicare Part A is hospital insurance. It covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and home health services. Medicare Part B is medical insurance. It covers certain doctors’ services, outpatient care, medical supplies, and preventative services.
Medicare Part A and Medicare Part B together make up what is called Original Medicare or sometimes referred to as Traditional Medicare. You pay standard rates for services. You can go to any doctor, hospital or other provider that accepts Medicare patients anywhere in the country. When you enroll in Medicare for the first time, you’re automatically in this “traditional” or “original” program, which has been in place since 1966.
The 2010 Affordable Care Act made many improvements to Medicare, including additional benefits and more coverage. Medicare is stronger than ever. You now have access to benefits to help maintain and improve your health like the “Welcome to Medicare” preventive visit and a yearly “Wellness” visit to discuss your health and health care needs.
Medicare Part D
An additional component of Medicare is Medicare Part D, which adds prescription drug coverage to Original Medicare. These plans are offered by insurance companies and other private companies approved by Medicare to help lower your prescription drug costs and protect against higher costs.
Medigap is supplemental insurance to cover some of the out-of-pocket expenses in your Original Medicare coverage.
You can buy one of 10 standardized Medigap policies. Each policy is labeled with a letter of the alphabet—A, B, C, D, F, G, K, L, M, N—and offers a different range of benefits from the others. All policies include coverage for certain core benefits, such as copays for Part B services and extended stays in the hospital. For example: Medicare pays 80 percent of a doctor’s bill and your share is 20 percent. Medigap pays your share and you pay nothing. Some policies provide more benefits—for example, covering additional out-of-pocket costs in Medicare. Generally: the greater the coverage, the higher the premium.
Medicare Advantage Plans (Part C)
Finally there is Part C, which has to do with Medicare Advantage Plans (also called Medicare private health plans). A Medicare Advantage Plan is a type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits. Basically it’s an alternative way of receiving your benefits. These plans primarily include HMOs, PPOs, and Private Fee-for-Service plans.
We caution you right now to be careful if considering a Medicare Advantage Plan. These plans may look good on the surface, however when you inspect them more closely and compare them with all that you get through Original Medicare, you will find that Medicare Advantage Plans have many limitations and often fall short of delivering the best care at the right price. In fact, they aren’t nearly as advantageous as having Medicare Parts A and B alone – much less with the optional Part D prescription coverage and Medigap supplemental insurance that you can get only with Original Medicare.
Ultimately we have found that it is best to stay enrolled in Medicare Parts A and B and have a comprehensive Medicare supplemental (Medigap) policy to pay the gaps that Medicare doesn’t cover. [To sign up for initial benefits, go to www.socialsecurity.gov/pgm/medicare.htm]
Do Your Research
When choosing your Medicare options, it is in your best interest to do as much research as you can. You may be torn as to whether you should add a Medigap policy and if so, which one. And of course there’s the question of the various drug prescription plans. As part of this research, you have to take into consideration your own medical needs and priorities. Do you pay a lot for prescription drugs? Do you have a serious medical condition? All of these factors will influence the type of Medicare options you choose.
After evaluating your own medical and financial situation, you can start researching the different plans and what they cover using the Medicare Plan Finder at the official Medicare website [Medicare.gov] or by calling the Medicare helpline for assistance at 1-800-MEDICARE (1-800-633-4227). You may also want to get advice from expert sources in your area such as your state’s health insurance assistance program or a local agency on aging, which you can find through the government’s eldercare.gov website.
Costs of Original Medicare
Once again, Original Medicare covers Parts A and B, and you pay standard rates for services, regardless of where you live.
- You most likely will get your hospital insurance (Part A) premium free, though you will have to pay about a $1,100 hospital deductible per episode of illness.
- There is also a monthly premium for medical insurance (Part B), which is about $100. In addition to paying a monthly premium, you pay fees for the services you receive.
- For Medicare-covered services, you must first pay the Medicare Part B annual deductible, which is about $140. After you have met your deductible, you pay a Part B coinsurance for Medicare-covered services.
- For doctors’ visits you generally pay 20 percent of the Medicare-approved amount.
- For mental health services you pay 40 percent of the Medicare-approved amount.
- Home health services are fully covered, though there is an additional cost for durable medical equipment if needed.
Once again, when you enroll in Original Medicare, you have the option of adding the Part D drug coverage for an additional premium. Also, many people who have Original Medicare also purchase a Medigap plan to help pay some of their costs (such as deductibles and copays). You must have Medicare Part A and Medicare Part B to buy a Medigap policy.
Shopping for Prescription Drug Coverage
If you need to add prescription drug coverage to Original Medicare, you also will be faced with dozens of different plans.
- First, make a list of your prescriptions, the dosages, and what you pay each month. Then compare what you pay now with what you would pay if you enrolled in Medicare Part D.
- If you have high drug costs, you may save money through a Medicare drug plan. But make sure the plan you choose covers the drugs you need and works at the pharmacies you use most frequently.
- If you have low drug costs, having Medicare drug coverage may cost you more now, but could protect you from high drug costs in the future. There may be a Medicare drug plan in your area with a low monthly premium you can afford.
- If you don’t currently take any drugs, you may want to choose the plan with the lowest premium to get coverage at the least cost. Otherwise, it’s best to choose a plan according to the specific drugs you take, because plans charge widely varying copays even for the same drug.
The plan finder on Medicare’s website automatically does the math to find your best deal.
On average the monthly premiums for basic prescription drug coverage is about $30. However, some existing Part D plans will see premium increases, while others will see decreases. Do your research, as you may find that you can save more money by switching into a new plan.
Shopping for Medigap
When shopping for a Medigap policy, here are some questions you can ask an insurance company. These can help you sort out some of the differences between companies:
- Has the premium for your plan changed in the last 3 years? If so, by how much? How often does it change, or go up?
- Will the premium change as I get older? Or is it the same for everyone, no matter what age?
- How long is your wait for pre-existing conditions?