A Healthy Look at Medicare Alphabet Soup: Sorting it All Out
By Karen Vachon, Insphere Insurance Solutions
Medicare Advantage and Prescription Drug Plan season has begun! The pre-enrollment period has began on Oct. 1st. Annual enrollment for plans runs from Oct. 15th – December 7th. If you’re confused by the options, you are far from alone.
A recent study showed that only a small percentage of the senior population understands how Medicare works. It’s no wonder. There are so many letters and acronyms, it has all the makings of classic government alphabet soup.
Introduced in 1965, Medicare is designed to provide Americans more affordable access to health care in their retirement. It is funded by Social Security and payroll taxes that have been deducted from our paychecks throughout our working lives. Medicare is the largest federally funded health insurance plan in the United States. Over 45 million are insured under the plan and every day, more than 10,000 more Americans become eligible.
Original Medicare Benefits
If you or your spouse have worked for at least 10 years for an employer who paid Medicare taxes, are age 65, and a U.S. citizen or permanent resident, you qualify to receive “Original Medicare” benefits.
There are two parts to Original Medicare (A and B):
Part A is the hospital benefit. Most people don’t pay for this benefit (because you already have contributed through your taxes over the years). There is a deductible and copayments that can add up, especially if you have a lengthy hospital stay.
Part B provides outpatient benefits, such as doctor visits. Part B has a monthly premium that is adjusted annually, and is deducted from your social security. The monthly premium is $99.90/month. Higher income earners will pay more for their Part B (and also Part D). Like Part A, there’s a deductible, and co-insurances. And like Part A, if you become ill, the combination of deductibles and co-insurances can really add up.
It is important to note that Original Medicare doesn’t cover outpatient prescription drugs, health care while traveling outside the US, dental, vision, custodial care, non-skilled nursing home care, acupuncture and cosmetic surgery.
Because of the coverage gaps in Original Medicare, many people choose to purchase additional coverage. This is where many seniors get confused.
Additional Medicare Coverage
When considering extra coverage, you have two options:
1. Purchase a Medigap policy with a Part D Prescription plan.
2. Purchase a Medicare Advantage Plan (Part C) — that may or may not include Part D prescriptions.
Option No. 1 The “Medigap” policy (also known as a Medicare Supplement). These are standardized plans identified by letters: A, B, C, D, F, G, K, L, M or N and are available through private insurance carriers. No matter which carrier you choose, the letter identified with the plan covers exactly the same thing. The only difference is the price. All plans enhance (fill the gaps) of Original Medicare to various degrees (incidentally, the most comprehensive is Plan F).
Medigap plans have a monthly premium that may be as high as $288/month. And, outside of the initial enrollment window (first six months that you turn 65), are subject to underwriting but offer great freedom and flexibility. Generally, people who travel or have medical concerns especially like the freedom and flexibility that these plans offer. Medigap plans have two popular features:
• You may go to any doctor/hospital with this plan.
• Once you have a Medigap plan, you can keep it forever—as long as you pay your premium.
If you purchase a Medigap plan, you’ll also need to purchase Part D prescription coverage. Private insurance carriers administer these plans and the average cost of a Part D premium runs $32/month.
Choosing the right plan for you depends upon the prescriptions you are taking. You want to be sure that your medications are in the plan formulary. As formularies and meds change, it’s typical that seniors will review and shop their prescription plan each year during the Annual Enrollment Period (AEP).
Option No. 2 The Part C Medicare Advantage Plan.
Medicare Advantage plans combine Medigap Part A and Part B (and often Part D prescription coverage) into one plan, with one premium. By law, these plans are required to offer what Original Medicare offers. They also must have an out-of-pocket maximum; thus putting a cap on run-away costs of Original Medicare.
Unlike the Medigap policies, Medicare Advantage plans have a network of doctors and hospitals (similar to HMO or PPO health insurance plans), so the cost is often significantly lower. Many plans offer a $0 premium often including Part D coverage. The disadvantage is less freedom and flexibility. Those willing to receive their care through a network see tremendous savings in their health care costs, along with a number of value added benefits aimed toward keeping you healthy.
Many people ask: How can these plans deliver $0 premium coverage? Administered by private insurance companies, Medicare pays a fixed fee to the carrier, who contracts with a network of providers to deliver coverage.
To qualify for these plans, you must:
• Have Medicare Part A and Part B
• Live in the network area
• Not have end stage renal failure.
It is important to shop these plans carefully. All things considered, these plans can be a great value for the money. However, here are some key considerations to keep in mind:
Is your regular doctor in the plan’s provider network?
Are your prescription drugs in the formulary?
If you’re a snowbird, can you travel with this plan? Are you willing to change primary doctors to reduce your health care costs?
If you choose a Part C Medicare Advantage plan that doesn’t include Part D prescriptions, you will need to purchase a Part D, too.
Outside of when you initially turn 65, Medicare Advantage and Part D Prescription Plans may be purchased only during the Annual Enrollment Period — which runs Oct. 15 to Dec. 7.
As with other health plans, the best Medicare plan to have depends on your health, lifestyle and budget. Here are some resources that can help you:
Community resources. During Annual Enrollment, educational and sales events are offered in the community.
Family. Many seniors also choose to engage their family in the process of weighing their care options.
Medicare materials. I’ve found the www.medicare.gov website to be especially helpful. If you aren’t web savvy, ask a family member or friend to help you, or call 1-800-Medicare (1-800-633-4227).
A local healthcare agent that specializes in Medicare. Chances are, there’s an agent with an office near you. Many can also visit you in your home.
Karen Vachon is a Maine Senior Guide resource. She is a licensed health and life insurance agent with Insphere Insurance Solutions and active community volunteer.