Medicare Part A & B
Medicare Part A and B are the two core parts of Medicare. Medicare Part A covers hospital expenses. You pay for Part A by working a minimum of 40 quarters. You are eligible for Part A the first day of the month you turn 65 or after being on Social Security disability for 2 years.
Medicare Part B covers medical costs, outpatient services, doctors office visits, etc. Part B has a premium that is paid to Social Security. The base monthly premium for Part B starting in 2024 is $174.70. The Medicare Part B deductible is $240 in 2024. Eligibility for Part B is the same as Part A.
Medicare Part C (Medicare Advantage)
Medicare Part C otherwise known as Medicare Advantage is the assignment of your original Medicare benefits to private insurance. Most Medicare Advantage plans combine Parts A, B and D together. There are various copayments for hospital stays and medical services with a max out of pocket cap on expenses during a calendar year. These plans are renewed and have coverage changes annually. The two most popular types of Medicare Advantage plans are HMO’s and PPO”s. These plans have provider networks that you are required to use to receive the full benefits of the plan. Outside of network coverage is limited and in some cases, not provided at all. Many of the plans offer zero premiums and extra coverage for dental, vision, and hearing. You are still required to pay the Medicare Part B premium even if you join a Medicare Advantage plan.
Medicare Part D
Medicare Part D is stand-alone coverage for prescription drugs. This part of Medicare is offered by private insurance companies contracted and approved by CMS. All drug plans have a formulary (list of covered drugs).The plans have a premium, deductible and copayments that determine what your out of pocket costs will be. Copayments on prescription drugs are decided by their tier level. There are 5 tier levels. Generic drugs fall into tiers 1 & 2. Brand name drugs, tier 3. Uncommon drugs, tier 4. Specialty drugs tier 5. Your out of pocket costs will be very low if you take only generic drugs. If you are on brand name medications the costs can be significant depending on the retail cost of the drug.
Medicare Supplement (Medigap)
Medicare Supplement insurance, also referred to as Medigap insurance, is offered by private insurance companies that are designed to fill the gaps in Original Medicare. Medicare supplements are identified by alphabet letters. There are 10 standard Medicare supplements. The two most popular Medicare supplements are plan G and plan N. The benefits are the same between all companies, but the premiums can vary greatly. In other words, a Plan G offers the same coverage with all companies but the price that each company charges is different.
What are the differences between Medicare Supplement and Medicare Advantage?
You can only choose one.
When you choose Medicare Supplement insurance, Medicare stays as the primary payor and the supplement is secondary. Typically, you satisfy the Medicare Part B deductible ($226 for 2023) first then Medicare pays 80% of the approved amount and the supplement pays the other 20%.
A separate (Stand-Alone) Part D drug plan is needed to cover prescription medications.
If you choose Medicare Advantage all of your Medicare benefits are assigned to private insurance. Plan benefits and availability are determined by county. Most plans bundle A,B & D together. Medicare Advantage plans are required to cover, at least, the same benefits as original Medicare.
These plans are heavily advertised on TV during the Annual Enrollment Period. (Oct. 15th through Dec. 7th each year.)
- Premium payment in addition to Medicare Part B.
- Freedom to see any doctor or hospital in the US that accepts Medicare.
- Benefits stay the same each year.
- Up front comprehensive coverage with small deductible. (Plans G & N)
- Prior authorizations not required for medical treatment.
- Do not have to choose a primary care doctor.
- Do not need a referral to see specialist.
- Additional premium for Stand Alone Drug Plan
- Many zero premium plans available.
- Have to use network providers to receive the lowest out of pocket cost of care.
- Benefits change each year. Providers can change as well.
- Comprehensive coverage provided after the annual Maximum Out Of Pocket has been met. Resets yearly
- Prior authorizations required for certain medical treatments.
- HMO plans require a primary doctor and referrals for specialists. PPO plans do not.
- Drug Coverage Included
- Most plans offer extra coverage for Dental, vision, and hearing
In my professional opinion, I usually recommend someone staying on original Medicare and adding a supplement. The only time I recommend starting with a Medicare Advantage Plan is if the extra premiums are not affordable.
Medicare supplements have only one open enrollment period when someone turns 65 or when they first enroll in Part B. This enrollment period lasts 6 months from day your Part B coverage goes into effect. If you wait to apply after this period has ended, to be considered for coverage, your health conditions and medications must be disclosed to the insurance company. If you do not meet their requirements, you can be denied coverage.
Medicare Advantage plans have an annual enrollment period. That means you can get a plan or change plans each year regardless of your medications or health conditions. I have encountered many people over the years who started out with Medicare Advantage, in good health, and a few years later become ill and find out they have to meet the maximum out of pockets each year. At that point they can go back on original Medicare, but they would not be able to qualify for a Medicare supplement. So, in other words they are stuck with Medicare Advantage. This rule applies to most states in the US.