Turning 65 and aging into Medicare can be an overwhelming experience. Most people have had their health insurance provided through employers for many years. As they retire, they make the transition over to Medicare, which has a bewildering array of choices.
Fortunately, it’s pretty easy to boil all of those choices down to just two main options once you learn the basics. Here’s what you need to know to get started.
Original Medicare Has Parts
It has two main parts that you will need if it will be your primary insurance. Part A is your hospital coverage, which provides for inpatient stays, skilled nursing, home health care, blood, and hospice. Part B is your outpatient coverage, and it provides for most other medical services, such as doctor visits, lab work, preventive care, surgeries and durable medical equipment among other things.
You will enroll in these two parts via the Social Security office. You can do this in person or online at their website.
These can either work together with employer coverage (if you are still working) or they can function as your basic coverage, to which you add supplemental plans to fill in the gaps.
The other 2 parts are not part of Original Medicare. They are optional choices. Part C is the Medicare Advantage program, which we’ll get to in a moment. Part D is retail prescription drug coverage, which you can get on a standalone basis or through a Part C Medicare Advantage plan.
Supplemental Options are called Plans
Parts A and B are like other insurance you’ve had in that they don’t cover 100% of all your services. You will have deductibles and copays as you go along, just as you’ve had when enrolled in employer coverage. For example, Medicare Part only cover 80% of your outpatient bills. You are responsible for the other 20%.
Most people purchase supplemental coverage to pay for this and the deductibles that it doesn’t cover. The two primary options are Medigap plans and Medicare Advantage plans.
Medigap plans pay after Medicare. Your provider sends his bill to Medicare and it pays its share. Then Medicare sends the remainder to your Medigap company to pay its share. Medigap plans are standardized to make them easy for you to compare between insurance companies. For example, if you choose to enroll in Medigap Plan F, you can compare the rates for several insurance companies who offer that plan and you’ll know the benefits are the same.
Medigap plans allow you to see any doctor that accepts Medicare. This gives you access to hundreds of thousands of providers all across the U.S. Since Medigap plans were created to fill in the gaps of Medicare Parts A and B, they do not include outpatient prescription drug coverage. You would purchase a stand-alone Part D drug card to use at the pharmacy.
If you apply for a Medigap plan within 6 months of your Part B effective date, the insurance companies cannot turn you down even if you have medical conditions. There are no health questions asked and no waiting periods on any pre-existing health issues. This is called your Medicare supplement open enrollment.
The other main option for coverage is to enroll in a Medicare Advantage plan, also called Part C. Part C plans are offered by private insurance companies. They pay instead of Medicare. Medicare Advantage plans are often cheaper than Medigap plans for a few reasons.
First, you agree to use the plan’s network of providers, which is usually just in your local area. Some plans may be PPO plans where you would have the option to treat outside the network at your own additional expense. Many plans will require you to choose a primary care physician, and in some plans that doctor must refer you if you need a specialist.
You will pay copays for medical services as you go along. Advantage plans have something called an out-of-pocket maximum to protect you. If your copays in one calendar year reach the maximum, then the plan must pay 100% after that.
Many Medicare Advantage plans include a built-in Part D drug plan as well.
Working with a health insurance agent to explain these options and provide quotes for you can save you time and hassle and help you find the most cost-effective fit for your individual needs.