Anyone who has entered the Medicare world either when helping their grandparents, parents, or themselves, knows how confusing and stressful it can be. Sure, it's a government program but Medicare is particularly mystifying. Big insurance companies take advantage of the lack of information surrounding Medicare to sell their latest and greatest products to the next unsuspecting customer.
We have seen the results of this complexity within member families. Our CP Federal Medicare Team is dedicated to educating, explaining and demystifying the world of Medicare for our members. Long after you read this article, we will be there to confidently make Medicare decisions and at no cost to you.
Let's move on to explain the basics of Medicare and some of the key facts you need to know before making any healthcare decisions.
How Medicare Works
Traditional Medicare is broken down into two primary parts: Part A and Part B.
Medicare Part A: This is the hospital part of your insurance. Any inpatient, hospital stays, some skilled nursing care, some hospice care, and some general healthcare procedures are covered under Medicare Part A. This is one of the simplest parts of your Medicare coverage, however depending on hospital coding and labeling, it can get complex.
For example, the healthcare status used in hospital paperwork between triage and admittance, or between admittance and dismissal, is called "under observation" and can be trouble for a patient. When a patient is "under observation" they are not meeting the requirements of hospitalization by Medicare to engage their nursing care benefit. Medicare says you must be admitted to the hospital for three full days before you can engage the nursing care benefit. Just be careful to pay attention to your status if you are ever hospitalized under Medicare.
For now, a good way to remember is "Part A covers your stay" (in most cases).
Medicare Part B: This is the doctoring part of your coverage, your typical health insurance coverage. It covers two types of medical services:
- Preventive medical services such as vaccinations, illness screenings, exams, and lab tests are all covered under Part B. The lines here can become blurry, but essentially any sort of screenings or lab work done in an attempt to prevent major illness is considered preventive care under Medicare. Additionally, coverage can extend to necessary durable equipment like walkers or wheelchairs, when a diagnosis requires it.
- Necessary treatment is covered when patients require treatment and care to treat existing conditions and illnesses. Included in this category are x-rays, outpatient services, and routine doctor's visits that are necessary per the condition.
When you go to the hospital or doctor, the institution then turns around and bills Medicare for your procedures. So, let's say you had a knee replacement. The hospital says to Medicare "the knee replacement costs $10,000 here." Medicare says "No way- according to our DRG, (diagnoses-related groups, basically Medicare's master list of codes and amounts they cover) this procedure costs $5,000, so we will give you $4,000."
In this case, the hospital takes their $4,000 from Medicare and then bills you, the patient, for the remaining $1,000. Traditional Medicare only covers 80 percent of the approved amount, leaving you to pay for the remaining 20 percent.
Medicare Part D: This is the part of Medicare that helps to cover prescription drug costs. Though it is the smallest part of Medicare, it is incredibly important. The only time to change is during the Annual Election Period (Oct. 15- Dec. 7) and these plans require reviews annually. The plan costs and benefits can change each year, so it's always important to review your drugs and budget for the year with an advisor.
This is how Medicare works in a general sense. The remaining 20 percent that is left for the insured is the reason why people elect to buy Medicare Supplement or Medicare Advantage plans. Medicare supplement plans almost always cost more in monthly premium, but they have little to no out-of-pocket costs or co-payments. Whereas, Medicare Advantage plans have low monthly premiums (sometimes even $0) but high out-of-pocket costs.
Now we'll get into a breakdown of pros and cons to both types of Medicare insurance plans.
Medicare Supplement Plans (Medigap) Versus Medicare Advantage Plans (MAP)
We'll start with Medicare Advantage.
- Medicare Advantage monthly premiums are fairly inexpensive. Some can cost $0 per month.
- Part D drug plans are typically included. (*Note: This is a pro for convenience because it’s “all-in-one” but it is a con for efficiency because you can’t choose your plan based on your medication list.)
- Sometimes they include fitness memberships or other extra incentives/benefits such as dental, vision, etc.
- Designated medical networks determine your available medical providers. In many cases, you may have to change your doctor to become "in-network" before your plan will cover claims.
- You run the risk of high out-of-pocket costs (OPCs) when you start using your insurance.
- If your OPCs get too high due to illness or injury, you are unable to enter back into original Medicare with a supplement (due to medical underwriting) and can get stuck paying the high OPCs forever.
- Limited nationwide coverage due to network restrictions. Traveling becomes an issue because your insurance is usually not applicable at remote medical facilities. (*Note: The Mayo Clinic is one of those major hospitals that will NOT take Medicare Advantage plans, and there are many hospitals following this trend.)
- You can only change your plans during the Annual Election Period (October 15 through December 7)
Medicare Advantage plans may be cheap, but as my mother always told me "you get what you pay for." This is true with Medicare Advantage; the cons almost ALWAYS outweigh the pros when it comes to a Medicare Advantage plan. There are some cases when a MAP is a good option, when people are low income or on disability, but it is almost always a ticking time bomb.
Next, the Medicare Supplement or "Medigap" plan.
- Depending on your plan, almost everything is covered. Out-of-pocket costs (OPCs) are relatively low and easy to predict.
- You can change your Medicare Supplement programs any time of year but you must be able to pass medical health questions in order to qualify.
- Coverage is more predictable and easier to understand.
- You can keep your doctor! Chances are, he or she accepts original Medicare and your corresponding supplement plan. 98% of doctors accept Original Medicare with a Medigap/Medicare Supplement.
- Medicare supplement plans are more expensive than Medicare Advantage plans.
- Medicare Supplement plans require you to answer medical questions in order to qualify for coverage. You CAN be denied or charged a higher rate for preexisting conditions.
- Medicare Supplement plans do experience premium rates increases over time for many reasons including age, claims ratio, and removal of discounts. You should expect your premiums to rise overtime. Depending on the company, the rate at which premiums increase can be more slow and steady, or sooner and more frequently.
Medicare Supplement plans are more comprehensive, but come at a higher monthly premium. Anyone who likes to plan for every possible expense and avoid surprises belongs on a Medigap plan. Depending on which letter plan (the Medicare Supplement plans are lettered “A” through “N”) you choose, you may have little to no co-payments or out of pocket expenses other than your monthly premiums. For example, Plan G only requires you to meet a $185 deductible for your first non-preventive visit, then you are covered 100% for everything else you do that year. Anyone with preexisting conditions should choose a Medigap plan to be properly protected for the rest of their lives. Once you're out of traditional Medicare and enrolled in a Medicare Advantage plan, you must answer health questions to get back in
Important Medicare Facts
These are key takeaways from this article and things to remember:
- You can change your Medicare Supplement plan to another Medicare Supplement plan any time of year, NOT only during the Annual Election Period (AEP).
- Medicare Part A covers your stay, Medicare Part B covers who you see, and Medicare Part D covers prescription drugs.
- In the year 2020, Plan F is closing to new enrollees. This means that anyone who owns it can keep it, but no new, younger people will be able to purchase it. For this reason, plans that close to new enrollment tend to experience higher and more frequent premium rate increases. Anyone who has a Medicare Supplement Plan F should talk to someone ASAP to discuss options to move. In most cases, we can save people money without changing any coverage.
- We have CP Federal Credit Union Medicare Team advisors standing by to explain more about how Medicare works and to see if you could be saving money.