Medicare Basics to Help You Decide on the Right Health Insurance Plan

Medicare Basics to Help You Decide on the Right Health Insurance Plan

Established in 1965, Medicare is the federal health insurance program primarily for individuals who are 65 and older. This program plays a key role in providing health and financial security to retirement-age people and younger adults with permanent disabilities. Currently, over 60 million beneficiaries are covered by the Medicare program, with that number expected to rise to 79 million by 2030.

Whether you’re currently covered by Medicare or are looking into getting a plan, it’s important to understand the options available. In this article, we’ll be breaking down the basics of Medicare for your information.

The four parts of Medicare

Before you get a Medicare plan, you first must know about its four parts. Understanding what each one offers is crucial for getting the appropriate coverage. It’s important to note that of the four parts, A and B are often referred to as Fee-for-Service Medicare and are covered by the government, although you may have to pay monthly premiums. Parts C and D are considered private health plans and may come with more restrictions as to where you can be treated. However, they do have wider coverage compared to Parts A and B.

Here’s a breakdown of each Medicare part:

Parts A & B – The Original Medicare

The federal government runs the Original Medicare, which covers the following:
Doctor visits

  • Home health care

  • Hospice

  • Hospital care

  • Lab tests

  • Medical equipment

  • Mental health care

  • Outpatient surgery

  • Skilled nursing facility care

    Part C – Medicare Advantage

    Part C covers everything that Parts A and B cover, but it is purchased as a plan from a private health insurance company. These insurance companies have an existing contract with the government. Most of these plans include prescription drugs as well as vision and dental.

    Part D – Prescription Drugs Plan (PDP)

    This part of Medicare covers prescription drugs, which are offered through Medicare-approved private insurance companies. Using this will reduce your financial burden if you require many expensive prescription drugs on a regular basis.

    Making a choice

    Now, the question is, which one do you choose? Here’s a little bit more detail as to what you can expect from a few popular plans:

    Part C – Medicare Advantage (MA)

    It’s easy to get Medicare Advantage and Supplemental Medicare (Medigap) mixed up, but the two are actually quite different. Convenience makes Medicare Advantage a popular selection. Most plans under the Medicare Advantage cover medical and prescription drugs, while some have dental and vision coverage as well. Moreover, Medicare Advantage enables better budgeting because it’s easier to predict any out-of-pocket costs compared to other Medicare plans.

    Medicare Advantage involves copays, which means that you pay a fixed cost, plus you get an out-of-pocket maximum. Therefore, after you spend a specific amount of money on your health care every year, your plan will pay 100 percent of the cost of services that it covers for the remainder of the year.

    Supplemental Medicare (MedSupp)

    Supplemental Medicare—also known as Medigap or MedSupp—is an appealing option for some because it doesn’t replace the Original Medicare. Instead, it works as an add-on to your Original Medicare and is sold by private companies. This type of Medicare insurance helps pay for some health care costs that Original Medicare may not cover, such as copayments, coinsurance, and deductibles. Some Medigap policies even cover blood transfusions and hospital costs incurred outside of the United States!

    It’s important to note that since they’re sold by private companies, Supplemental Medicare plans will vary from provider to provider. To get a Supplemental Medicare plan, you need to have Medicare Parts A and B. You will simply pay a monthly premium for your Supplemental Medicare policy, which will be charged in addition to your monthly Part B premium that you pay to Medicare.

    Although Medigap does cost more from month to month than the Original Medicare, it is a much more comprehensive solution when paired with Original Medicare and may be better suited for your needs. Note that Medigap must be paired with Original Medicare, but it cannot be sold to those on a Medicare Advantage plan.

    Part D – Prescription Drugs Plan (PDP)

    Referred to as Part D of Medicare, prescription drug plans can be purchased through a Medicare Advantage plan or on its own. It has a coverage gap, in which an individual will pay more out of his or her pocket for prescription drugs at a certain stage. However, not everyone will have a coverage gap.

    The Coverage Gap

    After the deductible period, there are three stages to a Prescription Drug Plan (exact amounts may vary depending on the policy):

    Initial – During this stage, your plan will help cover as much as $3,750 of the costs of your prescription drugs.

    Coverage gap – During this stage, costs may range anywhere from $3,750 to $5,000. You’ll be responsible for a higher percentage of the cost of your prescription medications compared to the initial stage.

    Catastrophic – During this stage, costs exceed $5,000. Fortunately, you will have proportionally lower out-of-pocket drug costs than you would in the coverage gap stage.

    Health insurance can be a lifesaver—literally. If you aren’t covered by a plan, it’s about time that you do. With the information in this post, you’ll be able to decide on the right Medicare plan for yourself and your loved ones.