Medicare helps millions of senior Americans every day, but it isn’t perfect. One of the biggest issues with the service is how confusing it can be. At first glance, the different parts and types of coverage can seem indistinguishable, which can lead people to opt for the wrong coverage, pay too much in premiums, or simply miss out on a better option. This guide aims to provide a basic overview of Medicare and guide you toward making the best choice for your health.
The Basics Of Medicare
Medicare is divided into four parts: A, B, C, and D. Original Medicare is more or less the baseline coverage for most people, which includes Part A and/or Part B (usually both). Part A covers hospital expenses, while Part B covers doctor’s appointments and some other basic medical costs. Usually, there is no premium for Part A but there is one for Part B.
If you need additional coverage (which most people do), you may then choose to add Part D, which covers prescription medication. According to the Kaiser Family Foundation, about 25.4 million Medicare recipients (out of a total of 44 million - more than half) have Part D coverage, either by adding it on to Original Medicare or through a Medicare Advantage Plan.
This brings us to Part C: Medicare Advantage. This is an alternative to Original Medicare, provided by private insurers such as Aetna but approved by Medicare. The types of Medicare Advantage plans vary, but they usually include some combination of hospital, medical, and drug expenses, as well as some extras such as vision and dental. You usually pay your premium for Part B plus a separate premium for Part C.
To make things just a little bit more confusing, there is another option called Medigap, also known as Medicare supplemental plans and often confused with Medicare Advantage. Both are forms of coverage provided by a private insurer that supplement the areas not covered by Original Medicare.
The main difference is that Medicare Advantage is an alternative to Original Medicare, while Medigap is an add-on to it. Medigap tends to cover larger costs like long-term healthcare, hospice care, or emergency care outside the US. It also often pays your deductibles and coinsurance from Parts A and B, reducing the amount of money you have to pay for a given treatment. The Motley Fool has a very useful and informative summary of the main differences between the two.
Which One Is Cheapest?
This is a very complicated question with, unfortunately, no simple answer. Original Medicare may seem cheap, but those deductibles can easily add up. According to Forbes, “the average Original Medicare beneficiary (meaning those who have both Part A and B) was projected to pay $7,620 or more for their healthcare expenses in 2017.”
Medigap is usually more expensive than Medicare Advantage but is accepted by far more doctors, since Medicare Advantage is usually network-based. This means that Medicare Advantage will often be the cheapest option for people who need extra coverage, but it can also be less convenient. Overall, everything depends on your specific healthcare needs.
So How Do I Choose?
There is no magic formula. As a general rule, you will need more than just Original Medicare. This could mean just adding Part D, Medigap, or Medicare Advantage. You should start by looking at the plans available in your area so you can search for Medicare Advantage plans by state.
Then, there are a few key considerations you need to take into account, such as what your healthcare needs are likely to be, whether you travel a lot, and what plans are covered by your preferred doctors and hospitals. You can also seek out the services of a Medicare advisor or consultant, who can guide you towards a decision. Just make sure that you choose someone who is unbiased and reliable.
Medicare isn’t as clear as it could be, but it isn’t as terribly confusing as it seems at first glance. Once you take the time to familiarize yourself with the basics, it becomes easier to weigh your options and choose. And of course, remember that you can always change your mind when enrollment period comes around.