HealthTech

A Brief Overview of Medicare

The recent bombardment of TV commercials pitching Medicare plans can be overwhelming. To provide a more realistic explanation of Medicare, and to help you understand the basics, let’s take a short walk through the Medicare system, so you can enjoy your retirement.

What is Medicare?

First, let start by explaining what Medicare is. Medicare is a federally run insurance program that was originally created to provide health insurance for those aged 65 and older. It has since been expanded to provide insurance for those also under the age of 65 with disabilities and certain illnesses.

Once enrolled, Medicare covers Hospital costs (known as Part A) and Medical costs (known as Part B). It can also cover prescription drugs which is known as Part D. So, lets break down these “Parts” of Medicare a little more:

Part A – Hospital

Part A, which covers hospital expenses, was fully funded with your tax dollars, as long as you paid into the system for at least 10 years. There are out of pocket costs still, a deductible of $1,632 in 2024, which is subject to change from year to year. This deductible can also be met several times in one year.

Part B- Medical

Part B of Medicare covers your Medical costs but was not fully funded with your tax dollars. As a result, it has a monthly premium of $174.70 in 2024, which is also subject to change from year to year. The monthly premium also can change with your income bracket, if you fall into higher income brackets the premium could be as high as $594/mo.

Part B also has a deductible of $240/year, and then an 80/20 after the deductible. Medicare covers 80% and the beneficiary pays 20% of the costs. There is no maximum out of pocket with Medicare.

Part D – Prescription Drugs

Part D of Medicare covers prescriptions, and also has a monthly premium which is dictated by the plan you choose. The premiums typically range from about $20/mo to $60/mo. Like Part B, the premium can also change with your income bracket. If you fall into a higher income bracket the additional premium (known as an IRMAA tax) can increase the monthly premium by as much as $81/mo.

Of course, there are also copays, which are paid when you pick up your prescriptions from your local pharmacy.

Is there anything available to help pay for the deductibles and coinsurance?

 Yes, you can buy a Medigap (Also known as a Medicare Supplement) or join a Medicare Advantage plan. Both of which are offered by private insurance companies.

Medicare Advantage (Part C of Medicare)

Part C of Medicare, also known as Medicare Advantage, is a privatized version of Medicare. You are essentially sub-contracting the health insurance out to an insurance company from the Federal Government.

These plans often have $0 monthly premiums, combine all parts of Medicare (PartA hospital, Part B medical, and Part D prescriptions) into one plan – similar to insurance you most likely have had through an employer or individual health insurance plan.

Medicare Advantage plans replace the large deductibles of Part A, and the 80/20 split of Part B with the insurance company’s own schedule of copays. They often have $0 copays for Primary Care visits, and low copays for things services specialists and lab visits. The plans are also usually HMOs and PPO, which means you will have doctor networks, and in some cases referrals for specialist visits.

By law, Medicare Advantage plans must offer coverage at least as good as Original Medicare, and often offer coverage above and beyond what Original Medicare offers.  The plans often offer coverage for things that Original Medicare doesn’t cover, such as dental, hearing, and vision.

Medicare Supplements (Medigap)

If you opt to stay with Original Medicare you may want something to help with the large Part A deductible, and to cover the 20% coinsurance of Part B. Medigap plans, which are offered by insurance companies, can accomplish this in return for a monthly premium, which usually averages in the range of $130 -$300 per month.

Depending on the supplement plan, there may be little-to-no out of pocket costs in addition to the monthly premiums. There is also no real network of doctors or hospitals. You will be able to go to any doctor, any hospital, anywhere in the United States, that accepts Medicare. Nationwide, that is about 94% of all doctors and hospitals.

These plans, however, do not cover some needed health benefits such as dental, vision, hearing, and prescription drugs. You will need to buy a separate Part D plan to cover prescriptions, which average between $20 – $60 per month, and if desired, a stand alone dental, vision, and hearing policy.

Which is better? Medigap or Medicare Advantage?

Unfortunately, with insurance, there is no blanket answer.

Everyone has different needs, and a different budget. For many Medicare Advantage feels like a natural transition, similar to an employer-provided insurance. The low copays, low or no monthly premium, and extra benefits appeal to many people. But the networks and referrals can, at times, feel restrictive.

The high monthly premiums of a Medicare Supplement can a high hurdle for many retirees to clear. But the low out of pocket costs when using the insurance, and flexibility of minimal networks and no referrals can be a major appeal to many.

The important thing is to consider your needs, budget, and do not let any scare tactics or freebie incentives motivate you into a plan that is not appropriate for your individual situation.

Comments
To Top

Pin It on Pinterest

Share This