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What is Medicare

Medicare is a federal program that provides health coverage if you're 65 or older, or if you have a severe disability.

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Medicare Advantage

Offered by private insurance companies, these plans combine Part A, Part B and often Part D and include additional benefits such as dental, vision, hearing and fitness.

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Medicare Supplements

Often confused with Medicare Advantage (part C), supplemental insurance fills the gaps in original Medicare.

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What is Medicare

Medicare is a federal program that provides health coverage if you’re 65 or older, if you are under 65 and have certain disabilities, or if you have End Stage Renal Disease. In most cases it doesn’t matter what your income is unless you have earned over certain limits in the past 2 years ($87,000 annually if you file a single tax return & $174,000 annually for those filing jointly). If this applies to you please see Medicare.gov for information on the Income Related Monthly Adjustment Amount (IRMAA).
Summary Info: https://www.medicare.gov/your-medicare-costs/part-b-costs
Detailed Info: https://www.ssa.gov/benefits/medicare/medicare-premiums.html

So what are the pieces that make up Medicare?

Part A - Hospital Insurance

Think of this as your access to hospitals. Typical coverage includes inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. It usually comes with no premium for those that have worked for more than 40 quarters (10 years).

Part B - Medical Insurance

Think of this as your access to doctors. It typically covers certain doctors' services, outpatient care, preventive services, and medical supplies. It requires a monthly premium which is $144.60 in 2020.

Original Medicare -- Medicare Parts A and B make up your basic Medicare coverage, also known as Original Medicare. This covers approximately 80% of approved Medicare expenses which leaves you responsible for the remaining 20%. There is no limit on how much that 20% may be. Basic Medicare coverage does not cover prescription drugs.

Part D - Prescription Drug Insurance

Prescription Drug Plans (PDP’s) are offered by private insurance companies and require a separate monthly premium. To cover your prescription drugs you must purchase a Prescription Drug Plan as an additional option to Original Medicare. Part D is an optional coverage however you may be penalized if you choose not to enroll and then later choose to enroll without having maintained equivalent coverage.

These plans must be Medicare approved and provide at least the standard level of coverage set by Medicare. The plans can choose what drugs they cover (called a formulary) but must cover at least two options in each drug category. They can also choose what Tier a specific drug will be covered at in their plan which will affect how much you will pay for that drug. Each plan has a different monthly premium and choosing the right plan for you is completely based on your individual needs.

Medicare Advantage (also known as Part C)

Medicare Advantage combines Part A, Part B and often Part D into one plan for which you may, or may not, have to pay. Working similarly to a Group Health Plan, Advantage plans are one of the most cost-effective ways to be protected from the approximate 20% for which you are responsible on Original Medicare. It usually offers prescription coverage, and sometimes additional benefits like dental, vision, hearing and fitness.

Medicare Advantage plans are offered by private insurance companies and combine Medicare Part A and B and generally include Part D (Prescription Drug coverage). The private insurance companies have a contract with the federal government to take over the responsibility for your Part A and Part B. They are required to offer coverage at least as good as Original Medicare. Most often their coverage exceeds that requirement by offering extra benefits over and above what Medicare would normally cover such as dental, vision and hearing coverage, fitness memberships, virtual medical visits and routine physicals. One of the most important benefits they offer is an annual Maximum Out of Pocket (MOoP). This provides added protection above Original Medicare by limiting the maximum amount of money you could have to spend for covered medical care per year.

Medicare Advantage plans function very similarly to the group plans which most people are familiar with from their prior health coverage. Advantage plans are network based. They can have either PPO or HMO networks. PPO or Preferred Provider Organizations have a preferred network that will keep your costs lowest if you stay within that network. You have the option to go outside of the network and still have something covered but likely at a higher share of cost. HMO networks are Health Maintenance Organizations that require you to stay within their network for your plan to cover medical care.

Another benefit of Medicare Advantage plans is that they do not require a medical deductible before they help with your costs. Most Doctor visits and procedures are reduced to a simple copay while a few things may have a coinsurance cost. This greatly reduces the likelihood that a member will reach their MOoP.

An easy way to think of these plans is they are formatted to “pay as you go” when you need medical care while providing an extremely low monthly cost and minimal risk of meeting your MOoP.

Medicare Supplement Plans

also called MediGap Plans

Once you are enrolled in Medicare Parts A and B, you may elect to enroll in a Medicare Supplement Plan rather than a Medicare Advantage Plan. A Medicare Supplement Plan has limited enrollment opportunities, pays portions of expenses left by Original Medicare (Parts A and B) depending on which supplement plan you choose, requires a standalone Prescription Drug Plan and is typically used by those with higher health needs.

Medicare supplements are plans offered by private insurance companies that fill in the gap of the approximate 20% that Original Medicare leaves as your responsibility. If you can imagine Original Medicare (Parts A and B) as a box that is filled up to 80%, a Medicare supplement is designed to fill the rest of that box in varying levels up to almost 100%. Medicare supplements will only stay inside of the same box as that which original Medicare covers. As a result they do not cover things like dental, vision or hearing because Medicare does not cover them. Simply put, if Medicare doesn’t cover it neither will a Medicare supplement.

Medicare supplements do have several benefits. First their coverage is nationwide because they do not have network restrictions like HMO’s. If a doctor accepts Medicare then they accept a Medicare supplement. Second, supplements provide peace of mind in knowing that regardless of how large a bill you incur for Medicare approved expenses, you will have little to no out of pocket costs. If you have higher health needs and visit doctors frequently, Medicare supplements allow you to even out your costs by just paying the supplement’s monthly premium and leaving the rest to your plan.

Medicare supplements do not include prescription drug coverage however standalone prescription drug plans are available to meet this need.

With a Medicare supplement plan you're prepaying for your care so you can rest easy knowing that whatever might come your way you are well protected.