Medicare is a federal health insurance program that caters to individuals 65 and older, people with disabilities, or those with End-Stage Renal Disease. The goal of Medicare is to make medical costs for these groups of people more affordable. However, there are many rules and limitations that come with medicare, which will be covered below.
How Does Medicare Work?
At a basic level, to receive Medicare, an individual must be 65 or older and have been a U.S. citizen or permanent legal resident for a certain amount of time. As mentioned, other groups that are eligible include those who receive Social Security disability Insurance or have certain illnesses.
Those who have reached 65 or older have a rigid window to sign up for coverage – that period is called an initial enrollment period. If that window is missed, it can lead to long wait times, gaps in coverage, or late enrollment penalties. There are exceptions to these rules, which can be found on the Social Security’s website. Outside of the initial enrollment period, people can sign up for medicare and switch plans during open enrollment.
Types of Medicare
There are three main types of medicare and those include Medicare Part A, B, and D. These types can be mixed and matched to create comprehensive healthcare coverage that meets an individual’s healthcare needs.
- Medicare Part A: This type of Medicare can be seen as hospital insurance since it covers stays in the hospital, hospice care, and other types of home-related health care. Most people don’t have to pay for a premium on Part A, but some people do. There are also deductibles and copays.
- Medicare Part B: Care covered within this category includes select doctor’s services, preventative services, outpatient care, and medical supplies. Medicare Part B requires a monthly premium, deduction, and coinsurance.
- Medicare Part D: This helps with prescription drug coverage, shots, and vaccines. A premium is required and most plans charge a deductible. You must enroll in medicare Part A and B before signing up for Part D.
People can sign up for medicare Part and A and B once a year, with exceptions for special circumstances.
There are two primary ways to get medicare coverage and that includes through original medicare or medicare advantage.
Original Medicare
In terms of how original Medicare works, Part A and Part B are mentioned above and are managed by the federal government. People with original Medicare can see any doctor who accepts Medicare. It sometimes works out cheaper since the government pays a noticeable portion. They may also choose to include medicare Part D in their coverage, which is helpful to pay for prescription drugs. Medigap, or Medicare supplemental insurance policies, can also be added to help cover out-of-pocket costs, but it requires a monthly premium.
Medicare Advantage
Medicare Advantage, on the other hand, is offered by private healthcare insurance companies and offers Part A, B, and sometimes D. Also known as Medicare Part C, this type of coverage may offer benefits not available with original Medicare, like dental, vision, and hearing services.
There are various types of medicare advantage plans and each offers a different level of coverage and flexibility. They include HMO, PPO, PFFS, SNPs and HMOPOS plans. You must live in your plan’s service area and have Medicare Part A and B to join medicare advantage and live in your plan’s service area. In terms of the cost, it’s usually a one monthly premium in addition to a medicare Part B payment.
Original Medicare vs Medicare Advantage
An individual’s healthcare needs often determine whether original Medicare or medicare advantage is a better option. Some of the main differences are in areas of flexibility, cost, coverage, and foreign travel.
Doctor & hospital choice: With original medicare, people can use any doctor around the country that accepts medicare, while with medicare advantage, you’re limited to providers that are within the plan network.
Cost: There are no annual out-of-pocket costs with original Medicare unless you have Medigap. However, there are annual limits on out-of-pocket costs with medicare advantage. Medigap can also help with out-of-pocket costs for original Medicare, whereas that isn’t the case for medicare advantage. Out-of-pocket costs are more predictable with original medicare, but vary greatly with medicare advantage.
Coverage: Original medicare covers most services with the exception of vision, some dental, and some routine exams. Medicare advantage mostly covers those services. Likewise, Medicare Part D is usually included in Medicare Advantage plans, whereas that isn’t the case with original Medicare since you need to sign up for a separate plan to get prescription drug coverage. Lastly, services and supplies don’t typically need approval with OM, while MA often needs approval.
Foreign travel: Those who have medical needs outside of the U.S. usually don’t have coverage with original Medicare. However, there is an option with some Medigap plans for foreign coverage. Medicare Advantage is similar, but instead of offering Medigap plans, some plans offer benefits that extend coverage beyond the U.S.
Paying For Medicare
Trying to calculate overall medicare costs can get pretty complicated because so many factors influence how much an individual pays out-of-pocket. That includes age, health status, and income to mention a few. To decide which medicare plan is best, it’s important to think about immediate and long-term healthcare needs. This can help determine which plan will be most affordable long-term and provide the best coverage.
