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Ask Farnoosh: How Do I Choose a Medicare Plan?

This week, Farnoosh helps a reader break down his Medicare plan options.

Hi Farnoosh,

With all the confusion the presidential candidates provide through their speeches about Medicare and the impending cuts, there is nothing but confusion for an expected retiree about the Medicare plans. Can you enlighten the subject matter of Medicare (Parts A, B, C, and D), Medicare Supplement Insurance, and Medicare Advantage Plans? Thank you for your response.

-Walter


Hi Walter,

Medicare’s complexity is no secret. Between the numerous private policies, supplemental drug coverage and doughnut holes, it’s no wonder so many seniors feel overwhelmed during open-enrollment season. You’re certainly not alone: A recent Kaiser Family Foundation survey found that around 40% of seniors said that the number of Medicare private plan choices available to them is confusing, while another 40% said it was helpful.

Add the fact that Medicare is one of the hot-button issues dominating this election, with both candidates promising to support the program, it’s hard to know what’s what. (For details on what the candidates have said about Medicare, AARP is a good source.)

The following is a simple breakdown of the various Medicare options, as you requested. With open enrollment currently underway until Dec. 7, now’s your chance to make a switch for the New Year if your current plan fails to meet your needs. You can take part in a new plan by visiting Medicare.gov or calling 800-MEDICARE (800-633-4227). You can find more comprehensive information on Medicare’s website, as well as on AARP’s Medicare Education page.

The first step in choosing the right plan is deciding between Original Medicare and Medicare Advantage.

Original Medicare (Parts A and B)
Americans 65 or older who are receiving Social Security automatically qualify for Original Medicare, also known as traditional Medicare. This also applies to those who’ve been on disability for more than two years or have permanent kidney failure requiring dialysis or a transplant. It’s offered directly through the government and carries two components: Part A, hospital insurance, and Part B, medical insurance. 

More specifically, Part A covers inpatient care services in hospitals, intermittent patient care in nursing facilities, hospice care and some home-health services for those who are eligible. The premium is free for most people, assuming you’ve paid Social Security taxes during your working years.

Part B helps to cover necessary medical services, such as doctor visits, outpatient care, physical or occupational therapy and other services not covered by Part A. It’s not free. Recipients pay a monthly premium based on income, but most paid roughly $100 a month this year. You can opt out of Part B if you want.

Medicare Advantage (Part C)
If you’d prefer to receive all the above services through a private health-care organization (HMO, PPO, POS, or PFFS) approved by Medicare, then opt for Part C.  This program requires that you keep your enrollment in Parts A and B. It includes all the benefits of Original Medicare, but your out-of-pocket costs and rules about how to receive service may vary, depending on the health-care provider you choose. You’ll usually receive a prescription drug plan, as part of Medicare Advantage, too. If not, then you can sign up for Part D, the Prescriptions Drug Component of Medicare. You may also be able to sign up for supplemental benefits such as routine eye doctor visits through Part C.

Note that if you sign up for Medicare Advantage, you’ll have to continue paying your monthly premium for Part B, in addition to other out-of-pocket costs required by your health-care provider.
 
Prescription Drug Component (Part D)
If you choose to get Original Medicare or don't receive prescription drug coverage through your specific Medicare Advantage Plan, you can sign up for Part D, the Prescription Drug Component to Medicare offered through a private insurance company. This covers both brand name and generic drugs prescribed for medically accepted reasons. Monthly premiums vary, depending on the insurance company. But the Centers for Medicare & Medicaid Services projected the average premium to hold steady at $30 in 2013.

Supplement Insurance (Medigap)
For those enrolled in Original Medicare who need assistance paying for the gaps in their benefits (e.g. copays, deductibles, etc.), they can sign up for Supplemental Insurance offered by private insurers. For example, in Part A, you still need to pay deductibles for hospital stays and in Part B, doctors may charge more than what Part B Medicare refunds – and you need to make up the difference. Some Medigap policies also cover heath care services and needs while traveling overseas. You can shop around and find a Medigap policy on the Medicare website.

Got a question for Farnoosh? You can reach her on Twitter @Farnoosh or email her at farnooshfinfit@yahoo.com

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