Most people remember seeing FICA or Medicare tax pulled out of their checks when they were working. If you worked at least 40 quarters you were entitled to Part A of Medicare at no additional cost which is what this FICA tax paid for.
Part B of Medicare is a little bit different. In most cases you have to pay $170.10 a month for Part B. If someone has very low income or higher income they may pay less or more. Once you have A and B of Medicare on your red, white, and blue Medicare card, that’s called Original Medicare. Technically that is insurance.
The problem is it’s not great insurance - for a few reasons. It has high deductibles on the hospital. For example if you are hospitalized you would pay over $1500 on day one. And you end up paying 20% of everyday medical visits and procedures like primary care, MRIs, emergency room, outpatient surgery, and more. The biggest problem, though, is that it doesn’t have a cap or a maximum-out-of-pocket, which means that if you had a serious medical problem like kidney failure and needed dialysis, you would end up paying 20% with no upper limit. That comes out tens of thousands of dollars! Another problem with Original Medicare is that it doesn’t have Part D included. Part D is what helps you pay for your prescription drug coverage.
For these reasons, almost everyone with Medicare goes one of two routes to get additional medical and prescription coverage as well as extra benefits. The first option is a Medicare Advantage plan. Generally these include part D prescription drug coverage. The second option is a Medicare Supplement and the Prescription Drug Plan is purchased separately. There are instances like veterans who get their prescription coverage through the VA who may not need extra drug coverage.
Both of these options are great. Anyone who tells you otherwise is trying to sell you something. The goal of both is to cover the high out-of-pocket cost that having only Original Medicare will expose you to.
Oh, and by the way, no one is allowed to call you regarding Medicare Advantage and Prescription Drug Coverage unless you’ve given them explicit permission like filling out a form online. There are so many scams going around right now that I caution you not to speak to someone on the phone unless they can tell you exactly how they got your contact information.
Medicare Advantage is also known as part C of Medicare. The most common subtypes of Medicare Advantage Plans are HMO and PPO. Generally you see little or no monthly premium on these plans, they do use networks of doctors and hospitals, and they have copays as you go along (similar to a group plan). The benefit is that they have very manageable copays, the Part D prescription drug coverage is included and a lot of times you get added benefits like gym memberships, healthy food allowances, transportation, over-the-counter credits, eyeglasses, and dental coverage. In many areas there are also special Medicare Advantage Plans created for people who have Medicare and Medicaid or have chronic health conditions.
Medicare Supplements are also a great option. Sometimes these are referred to as Medigap Policies. The subtypes of Medicare Supplement are called Plans, and they range from Plan A through Plan N. The most common plans currently are plan G (which recently replaced plan F as the top-of-the-line option) and plan N. Supplements have a higher monthly premium. When you’re new to Medicare, you could expect a Plan G to be around $120-$160 a month. They do not include Part D drug coverage so you have to add that separately. Prices and coverage vary, so you want to have an agent run your prescriptions before choosing a plan. The nice thing about Plan G is that it doesn’t have a network and there are no copays. Most of the time I see people enroll and supplements who really crave the convenience of not having to use a network and the peace of mind of knowing that they will never have to pay anything outside of their premium and the Part B deductible which is currently $233.
I want to reiterate what I said previously which is that both of these options are really great. It just depends on how you prefer to use your healthcare as to which one’s going to be a better fit for you. It’s really important to work with a local agent who will ask you key questions and help you narrow down what is good for you. The 800 numbers don’t have a good grasp on local plans and local networks. We’ve had several clients, prior to coming to us, who have been put in plans that cost them thousands of dollars more per year. Our agents are verified and our agency is listed on Google with five star reviews.
We would love to advise you - always with no obligation and no pressure.
Authored by Amanda Matthews, Agency Owner and 17-year Medicare Broker