In the same way that you put on layers before going outside on a cold day, you put on layers of health insurance when it comes to Medicare. And just like you wouldn’t put your coat on before your undershirt, there’s an order to these layers of health insurance.
Parts A and B together are referred to as “Original Medicare”, and while they satisfy the minimum medical coverage the government requires you to have, many folks find they have gaps in the following areas:
Further, the government requires you to have Prescription Drug Coverage, also referred to as “Part D”. Time to put on some more layers.
If you’re fine with the coverage provided by Original Medicare (Parts A and B), you can purchase an additional Prescription Drug Plan from a private insurance carrier (Part D), and you will have met the minimum amount of health insurance the government requires you to carry.
If you want additional coverage to “fill the gaps” in Original Medicare, you have two options:
If you’ve ever heard of “Plan G” or “Plan F”, you’ve heard of Medigap plans. They pick up the bill after Original Medicare pays. So if you got a blood test that costs $100, Part B will cover $80, and if your Medigap plan covers Part B coinsurance, it’ll cover all or part of the remaining $20.
Medigap plans are defined by the government but offered by private carriers. This means that the benefits of Plan G offered by Humana and Cigna are the same.The premium, however, will likely be different. Medigap premium is paid in addition to Medicare Part B premium.
The different Medigap benefits are listed on www.medicare.gov. Though there are ten options, four or five can usually be ruled out because, surprisingly, they cost more than other Medigap options with more coverage. The Medigap plan with the most comprehensive coverage that’s currently available to new Medicare enrollees is Plan G.
Should you choose a Medigap plan, you also need to purchase a Prescription Drug Plan. I am happy to discuss which Medigap plan might be a good fit for you.
Unlike Medigap Plans, Medicare Advantage plans are entirely defined and run by private carriers. They typically have you pay a copayment (a flat fee) or coinsurance (a percent of the total costs) for In-Patient and Out-Patient care until your medical payments for the calendar year reach an “out-of-pocket maximum”, at which point the plan covers all your expenses. Out-of-pocket maximums depend on the plan and typically range from $4,000 to $8,000.
Medicare Advantage plans are typically offered as HMOs or PPOs. In the HMO model, you can only see doctors in the HMO, and you must get a referral from your primary care physician to see a specialist. This is in contrast to Original Medicare or Medigap, which allow you to see any doctor who accepts Medicare.
In the PPO model, Medicare Advantage plans let you see out of network doctors, but provide less coverage when you do so. If you choose the Medicare Advantage route, be sure it covers your preferred healthcare providers.
Unlike Medigap plans, Medicare Advantage plans come bundled with prescription drug coverage, so there’s no need to purchase a separate Prescription Drug Plan. Be sure a Medicare Advantage plan covers your prescriptions before enrolling in it.
To compare any plans, you must consider their total cost for the year: their premium plus your share of the year’s expected healthcare bills.
Depending on the plans available in your zip code, a Medicare Advantage plan might make more sense than a Medigap plan, or vice versa. I can help you compare different plans in your area.
Fortunately, there is an “escape hatch” for folks who enroll in a Medicare Advantage plan and are unhappy. If you enroll in a Medicare Advantage plan when you turn 65, you may switch to a Medigap plan for any reason during the first year.
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