Medicare Basics
Medicare is widely considered the best health insurance you can have in the United States. Over 60 million Americans from different backgrounds are on Medicare. There are beneficiaries with employer insurance, beneficiaries who have veteran benefits, some only have one or two “parts” of Medicare, some have Medicare & Medicaid, or other state subsidy programs. The list goes on. Consequently, everyone needs a different solution. In this article, I will discuss the 2 main options most beneficiaries choose between.
There are 3 parts to Medicare to have complete coverage. Part A, which covers inpatient hospital expenses, Part B which covers outpatient medical expenses, and Part D, which covers prescription drugs. Part A is premium-free, and issued automatically once someone qualifies for Medicare. Part B and Part D however, cost a premium each month, beneficiaries must choose and apply to enroll in them, and failure to enroll on time can result in a late enrollment penalty (unless you qualify for the low income exception). Medicare Part B costs $174.90 per month in 2024, and Part D plans vary on the company and the plan you choose.
In any case, having just parts A, B, and D (a.k.a. Original Medicare) is usually not enough. In addition to having to pay 20% of medical bills, and sizeable deductibles, original medicare has no limit on out-of-pocket costs—meaning if your hospital bill is $100,000 you pay $20,000.
There are 2 main ways to mitigate the drawbacks of Original Medicare—the first way is the Medicare Supplement, or Medigap plan. These plans pay for part or all of the 20% that Medicare doesn’t pay. These plans range in price from about $75 to $400 per month depending on which of the 9 plans you choose. Intuitively, the cheaper plans have higher deductibles and coinsurance rates whereas the more expensive plans (Plan G for example) has almost no coinsurance at all. Plan letters are regulated and standardized by the federal government, so a plan K from one insurance carrier is the same product as a plan K from another carrier, even if their price is different.
If Supplement Plan G is the all inclusive buffet of Medicare plans, Medicare Advantage (Part C) plans, are the alla carte option—members of these plans pay copays as they use them. Medicare advantage plans can usually save beneficiaries money (unless you have expensive and frequent medical needs). Part C plans combine the benefits of Part A, B, and D and become the primary insurance. Premiums are usually $0 per month, and include extras like dental, vision, hearing, and some other perks. Part C plans have networks, so it is important to study an advantage plan’s hospital/doctor network when considering that company’s plan.
After your Medicare Part A and B are both active, the first major decision you need to make is whether you will buy a Medicare Supplement Plan, or enroll in a Medicare Advantage Plan. In general, I recommend my low utilizing clients Advantage plans and my higher utilizing clients the Supplements, if they don’t mind the premiums.
