Medicare coverage has three basic elements:
1. Original Medicare
Medicare began in 1966 with just two “parts,” which are still in place today. It is a pure single-payer plan with no private insurance involvement.
“Part A” is your hospital coverage. This pays for room and board at a hospital, nursing facility, or hospice, but does not cover long-term care.
“Part B” is your outpatient coverage. This pays for things like doctor visits, diagnostic tests, lab-work, surgeries, and durable medical equipment (like wheelchairs) etc.
2. Medicare Advantage Plans
In the 1990s, Congress brought in “Part C,” better known as “Medicare Advantage,” Medicare Advantage plans pay INSTEAD of Medicare. They were created to give a low-cost alternative to bridge the gaps in Original Medicare.
These plans are optional and provided through private insurance companies; Both PPOs (Preferred-Provider Plans) and HMOs (Health-Maintenance Organizations).
3. Prescription Drug Coverage
In 2006, Medicare began “Part D” which is your drug coverage. This is a pharmacy card which will allow you to purchase your prescriptions at a much lower price than retail. Part D is optional coverage but is important if you don’t want to pay out-of-pocket for all your medicines. The national average Part D premium is currently around $35/month.
Part D is also included in many “Medicare Advantage” plans if you choose to go that route.
Does Medicaid Matter?
Medicaid is a completely separate program from Medicare and is intended for low-income individuals and families. “Dual enrollment” in both Medicare and Medicaid is possible and quite common. If you are covered under Medicaid, look at the Medicaid rules for your state, and see how that coverage would work with Medicare before moving on to the next steps.
What Should You Sign Up For?
For most people, Part A’s insurance is free, and so enrolling in Part A is an easy decision. Part B comes with a premium cost, and some folks delay enrollment in Part B for that reason.
Bridging the Medigap
Original Medicare coverage remains a popular choice, especially when combined with Medigap coverage, which are private insurance plans designed to cover the out-of-pocket costs (the “gaps”) of Parts A and B coverage.
Others opt for the Medicare Advantage plans (Part C). Medicare Advantage plans generally have lower premiums than Medigap plans because you agree to share in the costs by paying co-pays for services as you get them. With a Medigap plan, you will often have NO copay, depending on the plan you choose.
NOTE: You cannot get BOTH Medigap and Medicare Advantage together.
Filling the Donut Hole
For Part D prescription coverage you will almost always have to pay a premium, whether as part of a Medicare Advantage plan, or as an addition to a Part B premium.