An Introduction to Your Medicare Options
With Medicare Open Enrollment around the corner, many Medicare beneficiaries are taking a look at their coverage to see if they’re getting the best value according to their specific healthcare needs. In order to make an informed decision on what coverage is most appropriate, we must first understand the difference between all of the options available to the average Medicare beneficiary.
Medicare Part A is also known as your hospital insurance. It is generally premium-free for most beneficiaries, covered by the taxes you saw coming out of your payroll during your working career. Part A covers inpatient hospital care, lab tests, surgery, hospice, skilled and home nursing care. The vast majority of beneficiaries are automatically enrolled as they turn 65, having received their Medicare card in the mail three months before their birthday with their enrollment date and Medicare number.
Medicare Part B covers doctors services, such as a visit to a primary care doctor or specialist, flu shots and the like. Medicare pays 80% of all covered services, while the beneficiary pays 20% after the annual $183 deductible is met. There is a premium associated with Medicare Part B, the standard Part B premium will be $134 in 2017 (or higher depending on your income). This amount is generally deducted from your Social Security every month. You are also enrolled in Medicare Part B as you turn 65, but may opt-out if you have group coverage or simply don't wish to receive coverage. Keep in mind that if you do decide to defer Medicare Part B coverage, you will incur a penalty of 10% of the Part B premium for every 12-month period you did not have Part B coverage or comparable private insurance coverage.
Medicare Part C is where most of the decision-making lies when a beneficiary is aging into Medicare. Part C is the private insurance component of Medicare that either comes in the form of a Medicare Advantage Plan or Medicare Supplement insurance. Medicare was not set up to cover the full cost of care for the aging American. Many insurance companies offer products that try and cover the additional cost of care that Medicare doesn't cover. Again, to make the most informed decision possible about what kind of coverage is most appropriate for you, let's explore that difference options available under Medicare Part C.
Medicare advantage plans (ma, Mapd)
Medicare Advantage plans are subsidized by the government through private insurance companies. They can be thought of in many ways as an extension of the coverage Original Medicare already affords its beneficiaries. Medicare Advantage plans operate in a very similar fashion to the private insurance plans you may be used to prior to enrolling in Medicare. There are stark differences, however, between the different types of Medicare Advantage Plans. There are three major types: HMO, PPO, and PFFS. PPFS is a Private Fee-For-Service plan and they have been all but eliminated from the marketplace, so I won't focus on them here. This leaves us with two.
HMO stands for a Health Maintenance Organization. There are usually no additional premiums associated with this plan. The main drawbacks to an HMO is that you must use their network of doctors for coverage, and a visit to a specialist requires a referral. However, co-pays on HMO plans are usually less than with a PPO, anywhere from $0-$15 to see a primary care physician, and $0-$25 to see a specialist. The only other large consideration to make with an HMO is the risk of seeking non-essential emergency care. If you were to, for example, believe you were experiencing a heart attack. You would call an ambulance and they would take you to the nearest medical center, regardless of whether that provider is in-network or not. If you were truly experiencing a heart attack, coverage would apply. However, if you were experiencing extreme indigestion or angina, things that can sometimes mimic the symptoms of a heart attack, if you visited an out-of-network provider, you would be responsible for the majority of the cost of care. Oftentimes those that seek Medicare advice are dissuaded against enrolling in an HMO option. Keep in mind Medicare options are never a one size fits all solution. If you are a relatively healthy individual who likes their primary care physician, doesn't travel much and is aware of the circumstances surrounding an HMO option, it can be a appropriately cost-effective plan.
PPO stands for a Preferred Provider Organization. The main drawback with PPOs is that they have marginally higher co-pays to see a doctor compared to HMO plans. These co-pays usually range from $15-$25 to see a primary care physician, and $25-$40 to see a specialist. However, you may go to any doctor that accepts Medicare for healthcare and referrals are not needed to see a specialist. Many PPOs are set-up so that co-pays are less if you see a doctor in-network, but the access to care is a lot less limited overall. There may or may not be additional premiums associated with a PPO depending on the plan you choose. Plans without additional premiums tend to have much larger out-of-pocket limits than ones that do, and some that are bundled with Part D (prescription drug coverage, more on that below) can have additional premiums, as well. As always, sound advice is to sit with a Medicare advisor prior to enrolling in any Medicare Plan to make sure coverage fits your specific needs.
Medicare Supplement Insurance
Medicare Supplements are not subsidized by the government, are offered through private insurance companies and always have additional premiums associated with them. They are designed to come in and fill the gaps of Original Medicare coverage, which is why they are oftentimes called Medigap insurance. There are nine main Medicare Supplement Plans available in the marketplace today. The coverage is definitive across all carriers, so it is mainly a game of finding the carrier that can offer you the plan that you desire for the lowest price. The chart of the nine main options can be found below:
Medicare Supplements almost always do not come with Part D coverage, which can be purchased separately. Some people like the idea of Supplement insurance in the forms of Plan C or Plan F, knowing that they can budget a specific premium out of their income and know that no matter what happens with their health, their cost of care is completely covered. It is important if you choose to enroll in a Medicare Supplement to enroll early. Premiums increase as you enter advanced age brackets. While premiums can increase slightly each year, they increase based on the age bracket that you originally enrolled, meaning it is much more cost effective to be enrolled in a Medicare Supplement at age 75 if you originally enrolled at age 66 vs a 75 year-old beneficiary enrolled at age 73.
Medicare Part D is known as Medicare Prescription Drug Coverage. It is solely used for the cost of prescription drugs not covered under Original Medicare, but can often be found bundled with Medicare Advantage Plans (MAPD). There are premiums associated with Part D coverage that vary with each insurance carrier. Similar to Part B, there is also a penalty to late-enrollment in Part D if you did not have comparable prescription drug coverage after becoming initially eligible for Medicare Parts A and B. This penalty is calculated as 1% of the "national base beneficiary premium" for Part D, which in 2017 is $35.63, for each month you were not covered. This penalty is added to the premium of whichever Part D insurance you are enrolled in.
If you are turning 65 and are unsure which Medicare coverage option is the best fit for you, or if you are already enrolled in Medicare and want to review your options, Retirement Advisory Consultants can help. We believe that the best decisions are informed decisions and are dedicated to the education of all Medicare beneficiaries so that they can optimize their coverage to fit their individual needs. If you would like to discuss your Medicare options or simply have questions about Medicare or your existing coverage, please fill out the form below or reach out to us via our Contacts page and a Medicare specialist will be more than happy to assist you.