Medicare basics
Types of Medicare plans
Original Medicare is Parts A and B. Everything else, Medicare Advantage, Part D, HMO, PPO, Special Needs Plans and Medigap, is a decision about how to cover what Parts A and B leave behind.
| Part | Covers | Premium |
|---|---|---|
| Part A | Inpatient hospital, skilled nursing, hospice, some home health | Most people pay none |
| Part B | Doctor visits, outpatient, home health, preventive services | Monthly, varies by income |
| Part C | Parts A and B, usually plus dental, vision, hearing and Part D | Some plans charge a nominal premium |
| Part D | Prescription drugs | Varies; a late-enrollment penalty applies |
Part A: hospital insurance
Medicare Part A is also known as hospital insurance. It primarily covers inpatient hospital care, skilled nursing facility care, hospice care and some home health services. Most people do not pay a premium for Part A.
Part B: medical insurance
Medicare Part B, also known as medical insurance, covers a range of medical services and supplies including doctor visits, outpatient care, home health care and certain preventive services. Part B requires a monthly premium, which can vary based on income. Part A and Part B together are referred to as Original Medicare.
Part C: Medicare Advantage
Medicare Part C is also called Medicare Advantage. It covers the services under Parts A and B and reduces copays and coinsurance in many cases. Medicare Advantage plans also cover things such as dental, vision and hearing benefits, and most include Part D prescription drug coverage.
Medicare pays a fixed amount for your plan every month to the companies offering Medicare Advantage plans. Some plans also require a nominal monthly premium that you would be responsible for. Your budget, where you live, your medical needs and your doctor preferences should all be taken into consideration before selecting a Medicare Advantage plan.
Part D: prescription drug coverage
The Prescription Drug Plan (Medicare Part D) helps cover the cost of your prescriptions. It is often included with Medicare Advantage (Part C) plans, and standalone Part D plans are also available. Not everyone takes prescription drugs. However, if you decide not to enroll in Part D there is a monthly penalty, applied from the time you first enroll in Medicare Part B until you finally enroll in a Part D plan, which will apply to your premiums for as long as you have coverage.
How Medicare Advantage plans are structured
If you choose a Medicare Advantage plan, the next question is what kind. The three structures below differ mainly in how much freedom you have to choose providers.
Health Maintenance Organization plans (HMO)
A Health Maintenance Organization is a network of doctors and hospitals. With an HMO you choose a Primary Care Physician from a list of doctors in your network for your care. Most plans allow you to see a specialist without a referral from your PCP. If you go outside the network, except for emergency care, you must pay for your own care.
Preferred Provider Organization plans (PPO)
A Preferred Provider Organization plan may offer more options than an HMO. These plans have traditionally offered more flexible usage and selection of doctors and the ability to see doctors in other states. Both of these benefits are now embedded in HMO plans. A unique benefit of PPO plans is the ability to go outside the network to any provider without having to pay the entire cost yourself, though you will usually pay a larger share of the cost.
Special Needs Plans (SNP)
Special Needs Plans are available for people who are eligible for both Medicare and the Medicaid assistance program in Arizona, called AHCCCS. There are also Special Needs Plans for those who live in nursing homes or a long-term care facility, or for those who have certain chronic diseases. We can help you determine if you qualify for one of these plans.
Medicare Supplement Insurance (Medigap)
Medicare generally covers 80% of medical costs. A Medicare Supplement plan covers the balance of the 20% not paid by Medicare, depending on the plan selected. You will pay a monthly premium for the plan and will not receive a bill unless it is for a service that Medicare does not cover. This plan allows you to see any doctor who accepts Medicare anywhere in the country. It is designed to cover the expenses Medicare Part A and Part B leave behind, but not Part D.
Medigap plans are identified by letters A through N, each with different benefits, costs and premium amounts. Each plan must offer the same basic benefits no matter which company offers it. Part D prescription plans are not covered with Medigap plans, so you will need a separate Part D plan as well. It is not uncommon for your Supplement premium to go up around 10% per year, so it is wise to re-shop your Supplement every two to three years to make sure your monthly premium is in alignment with current market premiums. You can re-shop your Medigap plan any time during the year; the Annual Election Period does not apply to you.
Comparing Medigap letters across carriers is exactly the kind of work an independent agent does at no cost to you. See when you can make changes, or ask us to run the comparison.
Medicare Supplement questions
- What is Medicare Supplement Insurance (Medigap)?
- Medicare generally covers 80% of medical costs. A Medicare Supplement plan covers the balance of the 20% not paid by Medicare, depending on the plan selected. You pay a monthly premium and will not receive a bill unless it is for a service Medicare does not cover. The plan allows you to see any doctor who accepts Medicare, anywhere in the country.
- How are Medigap plans different from each other?
- Medigap plans are identified by letters A through N, each with different benefits, costs and premium amounts. Each plan must offer the same basic benefits no matter which company offers it, so the difference between carriers is price and service rather than coverage.
- Do Medigap plans include prescription coverage?
- No. Part D prescription plans are not covered with Medigap plans, so you will need a separate Part D plan as well.
- Should I re-shop my Medicare Supplement plan?
- It is not uncommon for a Supplement premium to go up around 10% per year. It is wise to re-shop your Supplement every two to three years to make sure your monthly premium is in line with current market premiums. You can re-shop your Medigap plan any time during the year; the Annual Election Period does not apply to Medigap.
- What is the difference between Medicare Advantage and a Medicare Supplement?
- A Medicare Advantage plan replaces how you receive your Part A and Part B benefits and usually adds extras like dental, vision and drug coverage, but it uses a provider network. A Medicare Supplement works alongside Original Medicare to pay the share Medicare does not, and lets you see any doctor nationwide who accepts Medicare, but it needs a separate Part D plan.
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