Medicare 101
What is Medicare?
Medicare is a health insurance program sponsored by the federal government, open to all legal residents of the United States aged 65 and above, as well as those with specific disabilities. Medicare helps its beneficiaries pay hospital (Part A) and medical (Part B) bills, similar to other forms of insurance provided by employers or purchased individually.
The simplest form of Medicare, known as “Original Medicare,” is what beneficiaries will receive upon enrolling should they not choose to sign up for a Medicare Supplement or Advantage plan. Original Medicare covers 80% of medical costs, while beneficiaries are responsible for the remaining 20% of costs.
In the 1990s, the federal government began giving Medicare beneficiaries options for how to cover that remaining 20%. First on the scene came Medicare Supplements, also known as “Medigap” plans. Then, a few years later, Medicare Advantage was introduced. We’ll get into the details of both categories below, but broadly speaking both options exist to help people avoid catastrophic financial situations that could arise if they find themselves on the hook for 20% of a massive medical bill.
Medicare Supplement and Medicare Advantage plans are completely optional. If you want to stick with Original Medicare, you’re more than welcome to do that. But, what if you don’t want to stick with Original Medicare?
What do you need to do now?
If your 65th birthday is approaching, now is the time to decide how you want your Medicare experience to go. We’re willing to talk to you anytime, no matter how far out you are from turning 65, but Medicare regulations give you a specific window of time in which you can take action. That window is called your Initial Enrollment Period, or “IEP”. It is seven months surrounding your birthday — the month of your birth, the three months prior, and the three months that follow. At anytime during those seven months you can apply for Original Medicare and then, should you choose, enroll in a Medicare Advantage or Supplement plan.
You can sign up for Medicare even if you’re still working and receiving health insurance through your employer. Most people don’t have to pay the premium for Part A — if you’ve worked for at least 40 quarters, or about 10 years, during which you’ve had Medicare taxes taken out of your paychecks, you won’t pay the premium — so it often makes sense to sign up for Medicare when you first become eligible.
There are other considerations as well, such as the size of the company you work for. Businesses with fewer than 20 employees are not required to pay for health services for those eligible for Medicare who have not signed up, though some do. Check with HR to learn what your specific company offers for people aged 65 and over.
What are the Parts of Medicare?
Original Medicare, which has existed since the 1960s, consists of Part A (Hospital) and Part B (Medical). If you’re in an accident, and are admitted to the ER, that’s covered under Part A, but if you need to make a routine visit to your family doctor, that’s Part B, for example.
What about prescription drugs? That’s Part D, and it’s not covered under Original Medicare. So, how do you get prescription drug coverage with Medicare? There are a few options.
You can sign up for a standalone Prescription Drug Plan (PDP) to go along with either Original Medicare or a Medicare Supplement plan. The PDP would provide you with Part D coverage in addition to the Part A and Part B coverage you receive though Medicare and/or your Supplement.
You can sign up for a Medicare Advantage Plan (which is for some reason also known as “Part C”). Medicare Advantage Plans are required to cover everything Original Medicare covers, but are allowed to include additional benefits, including prescription drug coverage. Most, though not all, Medicare Advantage plans come with Part D coverage.
Original Medicare goes a long way when it comes to coverage, but as this section shows, it doesn’t cover everything. If you want drug coverage, or you want coverage that extends beyond the 80/20 split of Original Medicare, you’ve got to explore your options. That’s where we come in.
Your options beyond Original Medicare
Medicare Advantage
Medicare Advantage plans are basically Original Medicare — Part A & B — delivered to you by a private insurance company rather than the government. Medicare Advantage plans can be offered only by companies approved by and licensed with Medicare, and every plan must cover everything that is covered by Original Medicare. If Original Medicare covers something, so will your Medicare Advantage plan. Medicare Advantage plans can also offer additional benefits on top of what Original Medicare covers. Additionally, most Medicare Advantage plans offer prescription drug coverage (Part D) as an integral part of the plan’s coverage.
Plans are structured in a few different ways, similar to how employer-provided or individually-purchased health insurance plans operate. Most here in Spokane County fall into two categories. Some work on an HMO model, where consumers must stay within a network of providers. Others operate on PPO models, which have networks but allow for consumers to go out of network and still receive coverage, though at a higher cost to the consumer. There are also SNPs, Special Needs Plans. These plans are only available to specific groups, like those who live in nursing homes, have certain chronic conditions, or are eligible for Medicaid.
Medicare Supplement
The other broad option for coverage is a Medicare Supplement plan. They are also known as “Medigap” plans because they cover the gaps that are left uncovered by Original Medicare. They can help cover things like copayments, coinsurance and deductibles. These plans are also provided by private insurance companies, and they come with monthly premiums. Unlike Medicare Advantage plans, Medicare Supplements do not come with prescription drug coverage (Part D). Drug coverage must be purchased separately.
Importantly, you can not have a Medicare Supplement and Medicare Advantage plan at the same time. It’s just one or the other with these.