Medicare 101

What is Medicare Part-A?

Medicare Part A essentially represents the allocation of your FICA taxes over your career. It predominantly offers coverage for hospital expenses, including overnight stays as an inpatient. Additionally, it extends to services such as inpatient skilled nursing, home health care, and hospice care.

What is Medicare Part-B?

Medicare Part B primarily covers your outpatient needs, encompassing services like doctor visits, outpatient surgeries, lab tests, X-rays, durable medical equipment (like wheelchairs and oxygen tanks), and ambulance services. It complements Medicare Part A by addressing what Part A doesn’t cover on the medical front.

What Does Original Medicare Not Cover?

Medicare excludes coverage for various essential items. It doesn’t include prescription drugs obtained from a pharmacy, nor does it cover dental, vision, or hearing expenses. Surprisingly, traditional physical exams aren’t covered after the first 12 months of enrollment. While Medicare offers a “Welcome to Medicare” physical in the initial year, subsequent years only include a less comprehensive “Wellness visit.

What Is Medicare Advantage?

Medicare Advantage plans have gained significant attention within the Medicare landscape. They are widely discussed due to the constant television commercials promising free benefits and the numerous mailings targeting Medicare beneficiaries with offers of $0 premium insurance plans. This popularity, however, comes hand in hand with controversy.

Medicare Advantage plans can be described as comprehensive all-in-one plans that combine medical coverage, prescription coverage, and additional benefits such as dental, vision, and hearing benefits. Essentially, individuals purchasing these plans have their Medicare coverage managed by a private insurance company, which assumes the responsibility and risk of covering them.

How Much Does Medicare Advantage Cost?

Ah, the question everyone wants answered: What’s the cost? To grasp the price and value of Medicare Advantage plans, it’s crucial to understand their funding structure. These plans are supported by payments from Medicare because private insurance companies assume responsibility for handling individuals’ claims. This arrangement significantly lightens the burden on Medicare.

 

Thanks to this funding, Medicare Advantage plans are often very affordable. In fact, many areas offer plans with no premium at all, hence the buzz around “$0 premium” plans. However, individuals enrolled in a Medicare Advantage plan must still maintain active Medicare Parts A and B (including paying the Part B premium) for their Advantage plan to function—something that’s often overlooked in commercials!

What's The Catch?

While Medicare Advantage plans offer many attractive benefits, it’s important to be aware of some significant drawbacks. Unlike original Medicare with a supplemental plan, Medicare Advantage restricts your choice of healthcare providers. Typically, you’re limited to a network of hospitals and doctors, and going outside this network may result in reduced benefits or none at all.

Moreover, Medicare Advantage plans often come with more rules and limitations, such as referral requirements and prior authorizations for certain treatments or procedures. Additionally, these plans usually involve higher out-of-pocket expenses due to copays for most services, which can accumulate quickly.

The two most common types of networks for Medicare Advantage plans are HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization). If you’d like to learn more about the differences between these two network types, check out our brief video explanation!”

What is a Medigap? (Medicare Supplement)

Medigap plans, also known as Medicare Supplement plans, have a long-standing history. Many people often associate these plans with what their parents had. While Medigap plans have evolved over the past 20+ years, the fundamental concept remains unchanged: they serve as secondary insurance that covers costs after Medicare has paid its portion. Medicare typically covers 80% of medical expenses, and the supplement plan—purchased from a private insurance company—covers the remaining portion.

The rule is straightforward: if Medicare covers a claim first, the supplement plan will follow with its coverage. Conversely, if Medicare does not cover a specific service or item, the supplement plan won’t cover it either. This includes services like Part D prescription drugs, dental, vision, and hearing, which must be obtained separately through Part D prescription drug plans and standalone Dental, Vision, and Hearing plans.

What Kinds Of Medigap Plans Exist?

Medicare Supplement plans are formulated by Medicare and then distributed to private insurance companies for marketing. This means that insurance companies have no control over the coverage benefits; they must offer the plans as specified by Medicare. The two aspects that insurance companies do influence are the monthly premiums they charge and the rate increases in the future.

 

So, to address what you may have been wondering—yes! Every insurance company that offers Medicare supplement plans provides the exact same coverage options, albeit at different prices. These plans are structured based on what Medicare does not cover, and they are designated by letters. Currently, the most popular Medicare Supplement plans are Plan G and Plan N. Below is a chart outlining the available plans.

What Plans Are Good?

Today and moving forward, the focus is on Plans G and N. Plans F and C are no longer available for purchase due to the MACRA bill that took effect on January 1, 2020. Under this bill, individuals eligible for Medicare before January 1, 2020, retain the option to purchase Plan F or Plan C from any insurance company. Plan G closely resembles Plan F, except it does not cover the Medicare Part-B deductible, which is an annual charge.

Plan N also requires payment of the Medicare Part-B deductible and does not cover Medicare Part-B excess charges. Additionally, it involves a copay of up to $20 for each doctor visit and a $50 copay for emergency room visits. Plans G and N are preferred over Plan F (even before its phase-out) primarily because they offer lower monthly premiums, with Plan N generally being more economical than both F and G in most areas.

What Is Medicare Part-D?

Today and moving forward, the focus is on Plans G and N. Plans F and C are no longer available for purchase due to the MACRA bill that took effect on January 1, 2020. Under this bill, individuals eligible for Medicare before January 1, 2020, retain the option to purchase Plan F or Plan C from any insurance company. Plan G closely resembles Plan F, except it does not cover the Medicare Part-B deductible, which is an annual charge.

Plan N also requires payment of the Medicare Part-B deductible and does not cover Medicare Part-B excess charges. Additionally, it involves a copay of up to $20 for each doctor visit and a $50 copay for emergency room visits. Plans G and N are preferred over Plan F (even before its phase-out) primarily because they offer lower monthly premiums, with Plan N generally being more economical than both F and G in most areas.

The Tier System & Formulary

Part-D plans establish their coverage through unique formularies, which are comprehensive lists comprising hundreds, or even thousands, of medications. These formularies dictate which medications the plan covers and the extent of coverage. Within the Medicare framework, formularies use a tier system, categorizing medications into different tiers that determine coverage levels. Typically, plans have tiers 1 through 5, with tier 1 representing the lowest cost and tier 5 the highest. Generally, tiers 1 and 2 cover generic medications, while tiers 3 and 4 cover brand-name medications, and tier 5 encompasses specialty medications.

An important distinguishing factor among Part-D plans is how they assign medications to specific tiers. For instance, one company (Company A) might classify a medication as tier 2, whereas another company (Company B) might categorize the same medication as tier 3, resulting in a significant cost difference between the two plans for the same prescription. This variance in tier placement can significantly impact out-of-pocket expenses for beneficiaries.

The Coverage Gap and The Different Stages of Medicare Part-D Coverage

Medicare prescription drug coverage includes different stages known as Medicare Part-D coverage phases, with each stage representing a distinct part of the coverage cycle throughout the year:

  • Deductible Stage: This initial stage requires you to meet any deductible specified by your plan before coverage begins. Deductible amounts vary by plan.
  • Initial Coverage Stage: During this phase, you pay a predetermined copay based on the tier of the prescription, while the insurance company covers the remaining cost.
  • Coverage Gap (Donut Hole): Formerly known as the Donut Hole, the Coverage Gap is triggered when the total cost of your medications (your portion plus the insurance’s portion) reaches a specific threshold—in 2023, this amount is $4,660 per year. Once in the Coverage Gap, you are responsible for 25% of medication costs.
  • Catastrophic Coverage: The final stage occurs after reaching a total out-of-pocket spending of $7,440 within the year. During this stage, you pay either a set amount (e.g., $4.15 for generics, $10.35 for brand-name drugs) or 5% of the drug cost, whichever is higher.

These stages reset at the beginning of each calendar year. Managing medication costs during the Coverage Gap can be challenging, but we’ve compiled a list of alternatives in the video below to assist Medicare beneficiaries during this period.

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Who is Christian Brindle?

Christian is the founder of Christian Brindle Insurance Services and a nationally recognized expert in the field.

He has published multiple books about Medicare, helped countless people with their plans all over the country, and hosts the extremely popular “Everything Medicare Podcast!”. 

Christian believes that understanding your choices is extremely important in making a good decision with your Medicare. Christian is also a father and loving husband.

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