13 Sep 20190 Comments
It would be hard to find someone willing to give up their Medicare. More likely, people nearing retirement can hardly wait to enroll in the program. But as popular as Medicare is, the simplicity of the name is deceptive. There are two very different structures for receiving Medicare benefits — “Original Medicare” and “Medicare Advantage” — and understanding the difference between them is crucial to figuring out which one fits your healthcare needs and budget.
Many people enrolling on Medicare or already on it aren’t even aware that an alternative structure to the one they have might serve them better. Insufficient government resources (to properly inform people) and misleading advertising both contribute to a general fogginess on Medicare alternatives. The good news is that whatever Medicare coverage you currently have, you can switch it annually during Open Enrollment: from October 15 through December 7.
Original Medicare (OM) Parts A and B were established by the Social Security Act of 1965. Part A (inpatient hospital, some nursing facility and home care, hospice) is funded through FICA and employer taxes, federal monies, and any deductibles, coinsurance and copays you may have to pay once you’re enrolled. Most everyone gets Part A premium free. Part B (doctors, out-patient services, durable medical equipment, and much else) is voluntary, but there’s a penalty if you don’t enroll on time. In addition to federal monies and similar deductibles, coinsurance and copays, Part B is paid for by monthly premiums.
In OM, Parts A and B will leave you with out-of-pocket expenses, so you’d probably want to purchase a separate supplemental plan (Medigap) to cover some or all of these.
The second large structure for receiving the same Part A and B benefits is Part C, which was codified in the Balanced Budget Act of 1997 as Medicare+Choice and in the Medicare Modernization Act of 2003 as Medicare Advantage (MA). Medicare Advantage Plans (MAPs) are offered by private insurance companies such as HMOs and PPOs (health maintenance and preferred provider organizations), who must cover the same benefits as OM, but offer some extras (e.g., dental, vision, exercise programs, travel coverage options) as well.
Let’s not forget Part D (prescription drugs), which was also established by the 2003 act and comes with an additional penalty if you go without drug coverage and then want to get a plan later on. You’d get a stand-alone Part D plan if you have OM. Medicare Advantage plans can include drug coverage (MAPDs).
So, figure out which structure is best for you, and don’t necessarily stick with what you have:
Original Medicare (OM) + Supplemental (Medigap) + Stand-alone drug plan (Part D): far fewer restrictions nationwide on providers or facilities, but premiums for all three parts, and for the cheaper supplements, out-of-pocket costs as well.
Medicare Advantage plans (MAPs and MAPDs): more restrictive in nature, with networks of providers and facilities, and the need for referrals and prior authorizations, but these have yearly out-of-pocket cost caps; also, they generally include prescription drugs and these plans can even be premium-free.