By Jacquelyn Kung
Friends and family often ask how to go about choosing Medicare plans and whether even to get one. While this is written mostly from the perspective of a beneficiary, I hope this article helps companies or organizations interested in the aging space too.
The Four Parts of Medicare
In the US, most people are eligible for Medicare once they turn 65. There are four parts of Medicare: A, B, C, and D:
If you have signed up for Social Security already (by calling 1-800-772-1213), then you're automatically enrolled in Medicare Part A. If not, you can sign up for Medicare Part A in the three months before or any time after you turn age 65 (by calling 1-800-633-4227). Part A, which covers hospitals and inpatient care, is free if you paid Medicare taxes for 10 years or more.
For Part B, it's slightly more tricky. You have three months before and three months after your 65th birthday month to sign up. Part B covers physician and outpatient visits and costs $135-$270 per month. If you forget to sign up, then you will pay a higher per month cost -- and get this -- that's for EVERY year in the rest of your life, not just a one-time penalty.
Now, the really tricky parts.
Once you have Part A and Part B squared away, answering these questions are also fun: Do you want a Medicare advantage (Part C) plan? Or, do you want a Medicare supplement plan - and perhaps also a Medicare Part D plan?
What the heck are these things?
The little-known fact about Medicare is that it doesn't cover everything medically related to your care. You still have co-pays and deductibles to meet, not to mention your usual Medicare A/B premiums. In addition, original Medicare does not cover ancillary health services like dental, vision, or hearing. (It also doesn't cover personal care, like toileting, showering, and longer term disability issues, outside the three-week period following a hospital discharge. But that is another story.)
Enter Medicare Part C. For the additional costs and ancillary health services, some people want everything put together for them. This is the land of Medicare advantage (MA) plans. MA plans often include drug coverage, and many also cover ancillary services like dental, vision, and/or hearing. The majority of MA plans are HMOs, which function as a gatekeeper to see certain specialists. That said, PPO plans are becoming more popular as well.
The tradeoff of being on MA versus traditional Medicare is mostly the hassle of dealing with a commercial insurance company, which we all know painstakingly well (think denials in coverage and claims, etc.).
- Side Note #1: At a national level, a person on MA costs the federal government, on average, 2% more compared to the person on traditional Medicare A and B -- so MA was not certain to stay. But because insurance companies receive payment on a per-person or capitated-basis, MA is a little bit more predictable. And, some plans have actually shown better care (because they are not confined to strict traditional Medicare rules, such as a minimum three day hospital stay before post-acute care is covered by Medicare). So in general, Medicare advantage or Medicare Part C seems here to stay -- and many of us think that MA will continue to grow in market share of enrollees. Today it is nearly 40%, from 10% just a decade or so ago.
- Side Note #2: For those interested in Medicare as a potential company growth area, there are special needs areas or plans (SNPs) within the Medicare advantage world, which cover individuals in institutional care (like nursing homes), chronic conditions, and dual eligible status (in other words, those who are low income/assets too.) Within Medicare advantage plans, these are called I-SNPs, C-SNPs, and D-SNPs.
Medicare covers prescription drugs and other medications. But there is a lot wrong with the Part D coverage (such as a "donut hole" where the coverage last until a certain level, drops completely, then picks up again after a certain amount has been spent). So Medicare Part D commercial insurance plans help to ameliorate some of these issues and costs. But it is important to choose a plan that covers your formulary, which means the prescription drugs that you take or are expected to take.
Medicare Supplement Plan
What is a Medicare supplement plan? This one is not an alphabet letter. Its supplements -- mostly A and B.
If as a Medicare beneficiary, you prefer to stay on original Medicare A and B, but you want help with these extra costs of premiums, co-pays, and deductibles, as well as other services, Medicare supplement plans will help. These are also called Medigap and MedSupp plans. The average cost of these plans run around $180 per month per person, or usually much more expensive than Medicare Advantage would cost.
There are many pros and cons of choosing a Medicare supplement plan. One big pro is that you get traditional A and B coverage, which pays for a whole lot and is often known as one of the best players in the world. Moreover, if you sign up for a Medicare supplement plan within six months of starting Part B, you cannot be denied coverage for any reason. In addition, you have a 30-day trial period, during which you can switch MedSupp/Medigap plans, cancel, or get a refund. The cons include the higher costs involved. Again, this is why "more well off” individuals are on Medicare supplement plans.
As you can tell, Medicare plans are a highly complicated personalized area. There are countless confusing things about navigating Medicare Plans (e.g., you are not allowed to have a Medigap and Medicare advantage plan at the same time.)
This is why a licensed Medicare Benefits Adviser (who get paid insurance company broker commissions for their sign-ups of people) are often very helpful. Online, these advisers/brokers parade as websites such as Ehealth.com or Healthplanone.com
- Note: Technically, three months before and three months after you turn 65 is actually a seven month enrollment period. The month of your birthday is counted as a separate month from this +/- three months. Also, there are some exemptions to the Part B benefit enrollment without penalties and special enrollment period but we're not going to cover them here.