Transitioning to Medicare insurance can be an overwhelming process. If you don’t have a solid understanding of what Medicare is and how the plans work, you may struggle to pick the right plans for your needs. However, once you have the basics down, you’ll be well on your way to So, how do Medicare plans work?
What is Medicare?
In 1965 President Lyndon B. Johnson founded Medicare as a federally run health insurance program for people 65 and older. Medicare insurance is also available to people under 65 who have a qualifying disability or health condition. There have been many adjustments made to Medicare over the years. Today, the program comprises four parts: Part A, Part B, Part C, and Part D. Each part provides coverage for different healthcare services.
In general, Part A helps cover inpatient hospital and skilled nursing facility stays while Part B covers outpatient services, including doctor’s visits, lab work, and more. These two parts are the foundation of your Medicare coverage and are often referred to as Original Medicare. Without these two parts, you cannot enroll in any other Medicare plans.
Part C, also known as the Medicare Advantage plan program, is an alternative way for you to receive your Part A and Part B benefits. Part D is coverage for your drug prescription medications.
In addition to these four parts, there are Medicare Supplement plans to help cover your cost-sharing responsibility, including Plan F: https://boomerbenefits.com/medicare-supplemental-insurance/medicare-supplement-plans/medicare-plan-f/
Medicare Plan Options
You have two main plan options to choose from once you sign up for Part A and Part B. Your first option is to enroll in a Medicare Supplement plan and a Part D plan. The second option is to sign up for an Advantage plan. Let’s take a closer look at each choice.
Medicare Supplement Plans
Private insurance carriers offer Medicare Supplement plans, also known as Medigap plans. They help cover the “gaps” left over after Medicare pays its portion of approved medical services. What does this mean?
Well, Medicare Part B only pays 80% of Medicare-approved services, which means you are responsible for the remaining 20%. Although 80% is good coverage, 20% can be very costly depending on the service. Therefore, a Medigap plan will help cover some or all of the 20%, depending on your plan.
Currently, there are ten different Medigap plans. Each plan provides a different amount of coverage for Medicare expenses. For example, Plan G covers 100% of a skilled nursing facility coinsurance, but Plan K only covers 50%.
However, all Medigap plans are standardized, meaning they offer the same coverage no matter which carrier you use. For example, a Plan N with one insurance carrier is the same as a Plan N with another carrier. The only difference is the price, but the coverage stays the same.
Medigap plans usually have higher premiums in exchange for low or no out-of-pocket costs. Additionally, if you sign up for a Medigap plan, you can see any healthcare provider in the U.S. that accepts Medicare. So, if you’re someone who travels a lot and is looking for more comprehensive medical coverage, a Medigap plan could be a good choice for you.
Part D Plans
Medigap plans do not include coverage for drug prescription medications, so you will need to sign up for a Part D plan as well. Part D plans are also offered by private insurance carriers who control which medications their plan will cover and the costs.
Each Part D plan has a drug formulary (list of medications) that outlines the plan’s different medications. The carrier divides the drugs into five different tiers, with Tier 1 being the lower-cost drugs and Tier 5 being the most expensive.
Like Medigap plans, you enroll in an Advantage plan through a private insurance carrier. If you sign up for an Advantage plan, you agree to receive your Medicare Part A and Part B benefits through that plan instead of Medicare.
Most Advantage plans also include built-in drug prescription coverage. They can offer additional benefits like dental services as well, so it’s common for people to refer to these plans as “all-inclusive.”
However, Advantage plans operate within provider networks. This means you can only see healthcare providers in your plan’s network. If you go outside your plan’s network, you will likely pay more money for medical services. Although, some plans can be more lenient than others.
Unlike Medigap plans, Advantage plans tend to have low or $0 premiums in exchange for higher out-of-pocket costs. This may be good if you don’t visit the doctor often, but the out-of-pocket costs can add up quickly if you do.
The right plan for you depends on various factors, including your budget, lifestyle, and personal preferences. Take a close look at each option to determine what will be the most cost-effective plan that meets your needs.