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Medicare: An introduction

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with certain diseases.

When to enroll

Medicare enrollment windows are limited. If you already receive Social Security benefits at least four months prior to turning 65, you will typically be enrolled in Medicare Part A and B automatically. Those not currently receiving benefits need to apply for Medicare. The first time you can enroll is called your Initial Enrollment Period. Your 7-month Initial Enrollment Period usually begins 3 months before the month you turn 65 and ends 3 months after the month you turn 65.

If you do not enroll when you are first eligible, you may have to pay a Part B late enrollment penalty, and you may have a gap in coverage if you decide you want Part B later.

Primary coverage plans

  • Medicare Part A (Hospital Insurance)
    Part A covers inpatient hospital stays, care in a skilled nursing facility for a limited time, hospice care, and some home health care. When you sign up for Medicare, you are automatically enrolled in Part A.
  • Medicare Part B (Medical Insurance)
    Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services.

Optional coverage

  • Medicare Part C (Medicare Advantage Plans)

A type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits. These plans may offer extra coverage, like vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D). Depending on the plan, you may receive similar benefits as Original Medicare. The premium may be different than if you paid for Parts B and D directly.

A major benefit of these plans is an annual cap on out-of-pocket expenses. The limit can differ depending on the plan, but the maximum out-of-pocket expenses you will pay in 2017 is $6,700 (excluding monthly premiums). Once you reach this amount, the plan will cover 100% of your expenses.

Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans. If you are enrolled in a Medicare Advantage Plan, most Medicare services are covered through the plan and are not paid for under Original Medicare.

  • Medicare Part D (prescription drug coverage)
    Part D adds prescription drug coverage to Original Medicare. Insurance companies and other private companies approved by Medicare offer these plans.

Supplemental coverage (“Medigap”)

  • Medigap insurance
    An alternative to choosing a Medicare Advantage plan, is a Medicare Supplemental Insurance (Medigap) policy, sold by private companies. Medigap can help pay some of the health care costs that Original Medicare does not cover, such as copayments, coinsurance, and deductibles. Some Medigap policies also offer coverage for services that Original Medicare does not cover, like medical care when you travel outside the US. Medigap policies generally do not cover long-term care, vision or dental care, hearing aids, eyeglasses, or private-duty nursing.

Note: The best time to buy a Medigap policy is during your 6-month Medigap open enrollment period. During that time, you can buy any Medigap policy sold in your state, even if you have health problems. This period automatically starts the month you are 65 and enrolled in Medicare Part B. After this enrollment period, you may not be able to buy a Medigap policy. If you can buy one, it may cost more.

Supplements A-N

While there are 10 Medigap policies available in most states, Medicare Supplement Plan F is generally regarded as the most comprehensive. Its extensive coverage makes this a popular plan for beneficiaries who want broader assistance with out-of-pocket costs in Original Medicare; however, this also means that premiums may be more expensive. Although private insurers offer these plans, each plan must meet strict coverage guidelines; in other words, a Plan F offered by one insurer must offer the exact same coverage as a Plan F offered by a competitor.

Is a Medigap plan worth buying?

If you anticipate significant health care expenses, a Medigap plan often makes sense. The premiums are higher than a Medicare Advantage plan, which typically means your out-of-pocket medical expenses will be lower. Medigap may also allow for more provider choice than the Medicare Advantage plans, which generally limit you to providers and facilities within their PPO or HMO network. Another advantage is these plans offer an additional 365 lifetime reserve days of coverage in hospital, once Medicare’s 60 reserve days are exhausted (see below).

2017 Costs at a glance:

Part A Premium

Most people do not pay a monthly premium for Part A. If you paid Medicare taxes for less than 30 quarters, you will most likely pay a monthly premium for this coverage. If you have never worked or have not worked enough employment quarters to qualify for premium-free Part A and you are married, you might gain this benefit through your spouse’s employment history.

Part A hospital inpatient deductible and coinsurance

You pay:

  • $1,316 deductible for each benefit period
  • Days 1-60: $0 coinsurance for each benefit period
  • Days 61-90: $329 coinsurance per day of each benefit period
  • Days 91 and beyond: $658 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
  • Beyond lifetime reserve days: all costs

Part B premium

The standard Part B premium amount ranges from $134 to $429 per month depending on your income.

Part B deductible and coinsurance

$183 per year. After meeting your deductible, you typically pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you are a hospital inpatient), outpatient therapy, and durable medical equipment.

Part C premium

In 2017, the estimated average monthly plan premium is $31.40, but this premium may vary significantly between plans, from $0 to over $300.

Part D premium

The average nationwide monthly premium for 2017 is $34, although plan costs vary depending on the plan you choose and where you live. In addition, if your income is above a certain limit, you will pay an income-related monthly adjustment amount in addition to your plan premium. This monthly adjustment amount ranges from $13 to $76, on top of your monthly plan premium.

Medigap plans

The costs of different Medigap policies can vary widely as there are up to 10 different options to choose from.

Comparing costs

To compare costs for specific Medicare options, go here: https://www.medicare.gov/find-a-plan/questions/home.aspx

For Medigap plans go here: https://www.medicare.gov/find-a-plan/questions/medigap-home.aspx

 

 

Resources

https://www.medicare.gov/

https://www.consumerreports.org

https://www.ehealthinsurance.com/medicare/supplement

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