Why is Medicare So Confusing?

Why is Medicare so confusing? It’s a question that we get asked a lot! So, we’re going to try to simplify as much as possible.

Original Medicare

Original Medicare is Part A & Part B. You will likely be automatically enrolled when you turn 65. You will first be eligible in the 7 months surrounding your 65th birthday. That is the 3 months before, the month of and the three months after your 65th birthday.

During this time you may also enroll in a prescription drug plan (Part D) or Medicare Advantage (Part C).

Some key facts about Original Medicare

1. Part A is your hospital insurance
2. Part B is your outpatient insurance
3. You may see any doctor or visit any hospital that accepts Medicare. Most do.
4. Most of your medical needs will be covered by Original Medicare, but there are major exceptions. Namely dental, hearing, vision, & prescription drug.
5. Although Part A is free for most people, there is a premium for Part B. There are also deductibles and copays or coinsurance.

Now many people look to supplement their coverage and that’s where the additional Parts and Plans come into play.

Medigap

Let’s start with Medigap plans. These are also referred to as Supplement Plans. You are first eligible in the 6 month period after you turn 65 and enroll in Part B. During this time, you will not be subject to medical underwriting. However, you can enroll in Medigap plan year round. For Parts A, B, C, & D there are specific enrollment periods.

Medigap plans do not offer additional benefits. So, no dental, hearing, vision or prescriptions. But they fill in the financial gaps of Original Medicare. So, you will pay an additional monthly premium, but will largely avoid or eliminate your deductibles, copays and coinsurance. They are the all inclusive vacation approach to healthcare.

Some Key Facts About Medigap:

1. They are standardized. Plans will remain the same regardless of the carrier you choose.
2. If your doctor accepts Original Medicare, they accept your supplement plan regardless of the carrier. 
3. There are 10 plans to choose from.

Medicare Advantage

Then there is Medicare Part C. This is also known as Medicare Advantage or Managed Care Plans. These type of plans are a replacement to Original Medicare. They must offer at least the same benefits as Original Medicare, but they very often offer additional benefits such as dental, visio, hearing and prescription drug. 

However, you will have to operate within network. This can be a major setback. Medicare Advantage plans are probably the most similar to plans you have had in the past. Some plans are definitely better than others. But in general, Medicare Advantage plans are much less popular than Medicare Supplement plans. 

Some key facts about Medicare Advantage Plans:

1. They are not standardized. Networks, benefits and prices can vary widely, so please work with a broker.
2. They can change on a yearly basis. Make sure to review during the AEP.
3. They are not free. No matter what a plan may claim, at the very least you will still need to pay for your Part B premium. 
4. There are special needs plans available based on health conditions, special needs, and income.
5. There are many ways and times in which you can leave your Medicare Advantage plan if it is not working for you. Please do not stay trapped in a less than optimal plan!

Part D

Finally there is Part D. These are strictly prescription drug plans. They can be used in conjunction with Original Medicare or Original Medicare and a Medigap Plan. You will pay an additional monthly premium for prescription drug coverage.

There are four stages of Part D Plans:

1. The Deductible
2. The Initial Coverage Period
3. The Donut Hole/Coverage Gap
4. Catastrophic Coverage  

To summarize, each of these stages has a financial cap. Medicare keeps track of your prescription drug spending and once you reach that cap, you move to the next stage.

Until you meet your deductible, you will pay entirely out of pocket for your prescription drugs. After that, when you are in the initial coverage period, you will have set copays or coinsurance that is determined by the tier of the drug. There are five tiers and prescriptions tend to get more expensive in the higher tiers. When you are in the coverage gap or donut hole, costs for prescription drugs will increase temporarily until you meet the catastrophic coverage phase. At that point your copays and coinsurance will drop significantly. This is designed to help minimize extra spending on prescription drugs. 

Ideally, you will only spend within the initial coverage phase and will not even make it to the donut hole. Of course, this is not always the case.

Some Key Facts About Part D Plans:

1. The financial caps of each phase are set by the government each year. However, plans can choose to offer better benefits by lowering or entirely eliminating the deductible. This can save you money under the right circumstances.
2. The Extra Help program is available to people based on income and assets. This will help you with your Part D and prescription drug costs.
3. Prices can change depending on which pharmacy you use.
4. Generic will always be cheaper.