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Medicare Basics
Medicare is the federal health insurance program primarily for people age 65 and older, as well as certain younger people who qualify because of disability or specific medical conditions. Medicare has several different parts, and understanding how they fit together is the first step toward making informed coverage decisions.
Part A is hospital insurance. It generally helps cover inpatient hospital care, skilled nursing facility care under certain conditions, hospice care, and some home health care. Part B is medical insurance. It generally helps cover physician services, outpatient care, preventive services, durable medical equipment, and other medically necessary services.
Part C is another name for Medicare Advantage. Medicare Advantage plans are offered by private insurance companies that contract with Medicare and provide your Part A and Part B benefits through the plan. Part D provides prescription drug coverage through private insurance companies.
Many people also hear the term Medigap, or Medicare Supplement insurance. Medigap is private insurance designed to work with Original Medicare and help pay certain out-of-pocket costs. It is different from Medicare Advantage.
If you are approaching age 65, it is wise to begin learning about Medicare several months before your birthday. Your enrollment timing may depend on factors such as whether you or your spouse are actively working and what type of employer coverage you have. Enrolling in Medicare and choosing how you want to receive or supplement your Medicare coverage are related decisions, but they are not the same decision.
Original Medicare
Original Medicare is the traditional federal Medicare program and consists of Part A and Part B. With Original Medicare, you generally may receive covered care from any doctor or hospital in the United States that accepts Medicare.
Original Medicare does not pay 100% of every covered medical expense. Depending on the service, beneficiaries may be responsible for deductibles, copayments, or coinsurance. Original Medicare also does not include a yearly maximum out-of-pocket limit for Part A and Part B services.
Prescription drugs obtained at a pharmacy are generally not covered by Original Medicare, so many beneficiaries who remain with Original Medicare consider a separate Part D prescription drug plan. Some beneficiaries also choose Medicare Supplement insurance to help with certain costs that Original Medicare does not pay.
Original Medicare can offer broad provider access, but the right coverage arrangement depends on the individual. Provider preferences, prescriptions, travel, budget, health-care usage, and comfort with monthly premiums and out-of-pocket costs can all matter.
Medicare Advantage
Medicare Advantage, also called Part C, is another way to receive your Medicare Part A and Part B benefits. These plans are offered by private insurance companies that contract with Medicare. You must continue to be entitled to Part A and enrolled in Part B to participate in a Medicare Advantage plan.
Many Medicare Advantage plans include Part D prescription drug coverage and may offer additional benefits that Original Medicare does not provide. Benefits, provider networks, drug coverage, premiums, copayments and other costs can vary from one plan to another and can change from year to year.
Provider networks matter. HMO plans generally require members to use network providers except in certain situations such as emergencies. PPO plans typically provide more flexibility to receive covered services outside the network, but out-of-network care may cost more and not every provider will accept the plan.
Your costs matter. Depending on the plan and service, you may pay copayments or coinsurance when you receive care. Medicare Advantage plans have an annual maximum out-of-pocket limit for covered Part A and Part B services, although the amount varies by plan.
Prescription coverage matters. For plans that include Part D, formularies, drug tiers, preferred pharmacies and medication costs can differ. Reviewing your prescriptions and pharmacy is an important part of comparing plans.
Extra benefits should be viewed in context. Some plans may offer dental, vision, hearing, fitness or other supplemental benefits. These can be valuable, but they should be considered along with your doctors, hospitals, prescriptions and expected out-of-pocket costs - not instead of them.
Part D Prescription Drug Coverage
Medicare Part D helps cover prescription drugs and is offered through private insurance companies approved by Medicare. You can receive Part D through a stand-alone prescription drug plan when using Original Medicare, or through many Medicare Advantage plans that include prescription coverage.
Each Part D plan has a formulary, which is the plan's list of covered medications. Drugs are often placed into tiers that affect what you pay. A plan may also use rules such as prior authorization, step therapy or quantity limits for certain medications.
Pharmacy choice can matter. Plans may have networks that include preferred pharmacies where certain covered prescriptions can cost less. Mail-order options may also be available.Â
Drug coverage and costs can change from year to year. That is why it is important to review your current medications - including the exact drug name, dosage and frequency - when evaluating prescription coverage. A plan that works well for one person's prescriptions may not be the best fit for someone else's.
Medigap / Medicare Supplement
Medicare Supplement insurance, often called Medigap, is private insurance designed to work alongside Original Medicare. It can help pay certain out-of-pocket costs that Original Medicare does not pay, depending on the standardized Medigap plan selected.
With Medigap, Original Medicare remains your primary coverage. In general, you can see any provider in the United States who accepts Medicare. Medigap policies do not replace Original Medicare and generally do not include outpatient prescription drug coverage, so beneficiaries who need drug coverage typically consider a separate Part D plan.
Medigap plans are standardized by letter in most states, meaning the basic benefits for a particular lettered plan are the same regardless of the insurance company offering it. Premiums, underwriting practices, rate histories, customer service and other factors can still vary by company.
Enrollment timing can be especially important with Medigap. During certain protected enrollment periods, you may have rights that are not available later. Outside those periods, medical underwriting may apply in many situations. Because rules can vary by circumstance and state, it is important to understand your options before making a change.
Medicare Enrollment
Medicare has several enrollment periods, and they do not all serve the same purpose. Understanding which period applies to you can help prevent delays, penalties or an attempted change that Medicare rules do not allow.
Initial Enrollment Period (IEP). For most people who become eligible for Medicare at age 65, the Initial Enrollment Period is a seven-month window that begins three months before the month you turn 65, includes your birthday month, and ends three months afterward.
Annual Enrollment Period (AEP). From October 15 through December 7 each year, people with Medicare can make certain changes to Medicare Advantage and Part D coverage for the following year.
Medicare Advantage Open Enrollment Period (MA OEP). From January 1 through March 31, people who are already enrolled in a Medicare Advantage plan may have an opportunity to make certain changes. This period is not the same as AEP and does not allow every beneficiary to make every type of change.Â
Special Enrollment Periods (SEPs). Certain life events or circumstances may create an opportunity to enroll or change coverage outside the standard periods. Examples can include changes involving residence, employer coverage, Medicaid or Extra Help, or certain plan-related circumstances. Eligibility depends on the specific situation.
Enrollment rules can be detailed, so general website information should not be used to determine whether a particular person qualifies for a specific enrollment period. An AgeWise advisor can help you understand which rules may apply to your situation.
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