Do you know the difference between Medicare, Medigap and Medicare Advantage? What about supplements A, B, C, D and the rest of the alphabet soup? My parents are approaching Medicare age and late last month, I tagged along to attend a free educational class they were attending, hosted by SHIBA (Senior Health Insurance Benefits Assistance). This introductory class, Medicare 101, was a basic overview of the many decisions they lay ahead for my parents. Want to test your knowledge on all things Medicare? Let’s do it, and along the way I’ll share some of what they covered in the class.
1. True or False: Medicare Part A (hospital insurance) is free.
True. Medicare Part A is premium-free for most, but does have a $1,340 deductible and is subject to coinsurance when utilized. Part A will pay a large portion of the expenses associated with hospitalized inpatient care and skilled nursing facility care that may follow. It will also cover some costs of home health care and hospice care. If you’re already receiving Social Security benefits by the time you hit Medicare age, you will be automatically enrolled and can expect to receive your Medicare card in the mail about 3 months before your 65th birthday.
2. True or False: Medicare Part B (medical insurance) premiums are $134.
Maybe! Medicare Part B premiums are based on your MAGI (modified adjusted gross income) from two years ago. That’s right, leave it to the folks who coordinate Social Security to factor in some crazy nuance like this when coming up with how to calculate your premium. That means this year, your Medicare Part B premium will be based on your 2016 MAGI. For most, yes, it will be $134. However, if your 2016 MAGI was over $85,001/year (single) or $170,001 (joint), your premiums (for Part B and to a lesser extent, Part D) will increase. If you’re in this boat and want to see the full schedule of premium increases, click here.
3. True or False: Medicare Part B will cover all my medical needs.
False. This is why Medigap and Medicare Advantage plans exist, to pick up where Part B leaves off. For most, after a $183 annual deductible, Part B will generally pick up about 80% of ambulance and emergency room visits, your doctors’, outpatient medical and physical therapy services, some home health and outpatient mental health treatment and other preventative services. The exact thresholds for coverage and coinsurance have been tweaked over the years (as recently as the budget deal signed last month), but generally speaking, those with higher household income will pay more out of pocket.
4. True or False: If I want the best coverage, I need to sign up for Medicare Advantage and a Medigap policy.
False. There’s no need to sign up for both. If you choose Medigap, this will serve as a secondary insurance to Medicare. If you choose Medicare Advantage, it will serve as your primary policy. If you’re looking for the most comprehensive (and therefore, expensive) coverage available then regardless of which platform you choose, Plan F is for you. Luckily for all of us, the law requires companies providing plans to offer the same benefits for each letter of the plan. According to the Oregon SHIBA representative I met with, a healthy 65 year old could expect to pay about $135/mth for the F plan, on average. The older you get, the more expensive it becomes. A relatively new development is the offering of a high deductible F plan which is exactly what it sounds like.
5. True or False: While I only take a few scripts now, I should sign up for Medicare Part D (Prescription Coverage) in case I need more medication later.
Maybe! There is a penalty if you choose to sign up for Part D after you’re Medicare-eligible. At the moment, that penalty is $35.63 for each month you did not have Part D coverage after you turned 65. In Medicare Advantage plans, Part D can be purchased as part of the package. Otherwise it’s offered as a stand-alone policy. The costs and coverage vary, but generally the initial benefit covers about 75% of the script cost while you pay the remainder. Of course, if your plan has a deductible, that’s paid out of pocket first. You may have heard of the ‘donut hole’ coverage gap in Part D. This refers to a gap in coverage where, once you reach $3,750, the percentage of coverage varies based on whether your script is brand name or generic. More comprehensive coverage then kicks back in once your Rx spending reaches $5,000. Luckily, this gap will close in 2020.
Here’s a side by side comparison of Medigap and Medicare Advantage. For both plans, you must be enrolled in Medicare A and B.
|Medigap (aka, Medicare Supplement)||Medicare Advantage (aka, Part C)|
|Sign Up Window||30 days from age 65||60 days from age 65|
|Pay Structure||Serves as secondary insurance to Medicare||Serves as primary insurance as Medicare pays your provider through the plan|
|How to get it||Sold through private insurance companies||Available when you’re first eligible for Medicare AND annually during fall enrollment.|
|Part D||Not included in the policy; can be purchased as a standalone plan.||You’re able to bundle Part D with this plan.|
|Premiums||Vary in price, usually increase with age health.||All premiums the same regardless of age, gender and health.|
|Other Costs||No co-pay costs (generally) at time of service; out of pocket max for only a couple of plans.||Co-pays due for most services; most plans have out of pocket maximums.|
|Provider Choices||You can see any provider that accepts Medicare. Might be tough to find providers that are accepting new patients in some areas.||These plans use provider networks (HMO, PPO, PFF).|
|Acceptance and Renewability||Guaranteed acceptance when first eligible for Medicare. You can renew the plan as long as you don’t lapse in premium payments.||Benefits may change annually (though not common without action from you). These plans will not accept individuals with End Stage Renal Disease (ESRD).|
|Best For…||Travelers or snowbirds who need flexibility in their provider. Those with high-cost or frequent care needs. Those who have strong ties to their doctors and need flexibility on their drug plan.||Those who can’t find a Medicare provider otherwise. Those who don’t have many health issues and see their doctor infrequently. Those who prefer a pre-packaged and simplified choice.|
When deciding which route might be right for you, a good place to start may be to ask your existing doctor(s) if they have parameters on the plans they accept. You may also have some coverage available through your employer. Oregon PERS employees, for example, often have workshops to help their Medicare-eligible employees navigate their options. Also keep in mind that Medicare Advantage plans are different depending on which county you live in. If a move is in your future, assure that your plan will follow. If you want to visit a class like the one I took with my folks, check out the SHIBA class schedule. While on their site, you can also book and free, one on one consultation to review your options. That’s the route my parents are going.
Want to search for a plan that’s unique to you and your area? Click here. Prefer to talk to someone on the phone? Medicare experts are available 24/7 at 1-800-MEDICARE. Want to get a handle on plans and providers available in Oregon? Click here. If you’re feeling overwhelmed, we welcome the opportunity to help you navigate this often complex area of planning.
If you’re already signed up for Medicare, don’t forget to keep your eyes peeled for your new cards. Beginning April of this year, Medicare will begin releasing new cards that will no longer have your Social Security number on them.