Medicare makes sense, and it helps prevent the vast majority of seniors from suffering financially in case of a medical emergency. However, it’s not an easy form of insurance to understand, and it’s not perfect. From the dreaded (but closing) “donut hole” to Medicare Advantage plans, there’s a lot to learn about senior health care benefits. Here’s some information to get you started that will hopefully help to demystify Medicare.
Original Medicare and Medicare Advantage
When you’re ready to sign up for Medicare, you have two options. Original Medicare, which is an entitlement benefit for American seniors with a 10-year work history, and Medicare Advantage, a private insurance plan backed by the federal government. Medicare Advantage plans cover everything in Medicare Parts A and B.
Original Medicare: Parts A, B, and D
Medicare is broken up into parts ostensibly to make it more understandable. These are labeled as Parts A (hospital), B (physician services), and D (drugs). Part A is automatic, and there is usually no premium charged. Part B costs just more than $135 per month. This premium is deducted from your Social Security checks or Railroad Retirement benefits. Both A and B come in one form, and that is what you get. There are no add-on options.
However, Part D is a bit different. Medicare Part D is paid in addition to your regular Medicare premium and typically adds around $35 to your monthly costs. You can choose a plan based on your needs. For example, all Part D plans cover metformin, a drug commonly used to treat diabetes, with a co-pay of between $0 and $10. Other drugs, however, are not always included. Higher prices go into effect when you reach the “donut hole.” This is a gap in coverage that kicks in once you reach a certain amount each year; it closes when you pay out of pocket at another threshold, which is a little less than $5,000 in a year.
Medicare Part C (Medicare Advantage)
Medicare Advantage plans are private insurance. These plans can be issued by any approved agency. For example, Aetna offers Advantage plans in most states, and many eligible seniors can find a plan with a $0 premium. One of the many perks of policies like this is that they are pre-packaged with extra benefits not covered by Medicare. Some of these are wellness programs, an on-demand nursing hotline, and vision and dental coverage.
The only real drawback to a Medicare Advantage plan is that it relies on a network of providers to keep costs low. This is great if you live in your main home all year long. If you’re one of the two million Baby Boomers who follow warm weather, then you are probably better off with Original Medicare. Verywell Health explains that network insurance plans limit your selection of doctors and promote wellness and preventive healthcare to keep expenses to a minimum for both you and the insurance company. Original Medicare is good anywhere in the country and must be accepted by doctors and health clinics that take Medicare.
Mind the Gap
If you choose to stick with Original Medicare, there is a gap in coverage in addition to the donut hole. This comes in the form of higher co-pays and limits on hospital stays. Medigap, a supplement to Original Medicare, can eliminate most of this, but it comes at a higher cost and is paid in addition to your premiums. Before choosing any Medicare plan, ask your current doctor if they accept Medicare. Many do not, thanks to low payment allowances and a host of complicated paperwork that must be filled out before payments are received. Medicare is important to your overall wellness once you reach retirement age. However, it is not as easy to choose as you might think. If you’re still unsure, it’s best to contact an agent who is well versed in the options and availability of plans in your state.
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