Medicare Insurance

There are three different types of Medicare insurance plans. Each is designed to fit different budgets and health care needs. Plans vary from state to state, and not all plans are available in all regions of the country, but every location has at least a few plan options in addition to Original Medicare (aka, Parts A and B).  Your options include:

  • Medicare Supplement Insurance (Medigap).
  • Medicare Advantage plans (Part C).
  • Medicare prescription drug plans (Part D).

How to Choose Medicare Insurance

The four steps below will help you identify the healthcare features that are most important to you. This will help you  when comparing the plan choices so that you can determine which Medicare insurance is ultimately best for you.

Step 1: Compare Medicare Parts A & B

The health benefits you receive depend on the plan or plans you choose. Medicare Parts A and B cover your hospital stays, preventive care and doctor visits. However, be aware that the federal government only covers 80% of the cost of these services. Plus, in addition to the 20% copay that you must pay (or purchase other insurance to cover) when you need health care, there are annual deductibles and excess fees.  Here’s how you incur medical costs with Original Medicare:

Part A (Hospital Insurance) — For each benefit period, you will pay:

  • A Part A deductible of $1,156 (in 2012) for a hospital stay of 1–60 days.
  • A $289 per day co-pay (in 2012) for days 61-90 of a hospital stay.
  • A $578 per day co-pay (in 2012) for days 91-150 of a hospital stay, as part of your limited Lifetime Reserve Days.
  • All costs for each day beyond 150 days
  • Coinsurance for a Skilled Nursing Facility is $144.50 per day (in 2012) for days 21 through 100 for each benefit period.
  • A blood deductible of the first 3 pints of blood needed in a calendar year, unless replaced. There is a 3 pint blood deductible for both Part A and Part B, and these separate deductibles do not overlap.

Part B (Doctor visits) — After you meet the annual deductible of $140.00 (in 2012), you pay a 20% co-insurance for all services covered by Part B with the exception of most lab services which are covered at 100%, and outpatient mental health which is currently covered at 55%. The copay for outpatient mental health, which originally started at 50%, is being stepped down over several years until it matches the 20% required for other services. You are also required to pay an excess charge of 15% for services rendered by non-participating Medicare providers.

Step 2: Estimate Costs

On average Medicare covers 75% of the cost of hospital services and 48% of average costs for all medical services (including preventative care and medications).  The current reality is that the typical retired senior citizen faces over $3,000 in annual medical costs (10% of seniors have over $8,300 in out of pockets costs). These are the figures cited by the Kaiser Family Foundation, 2010.  The latest figures from Medicare.gov push the out of pocket costs up even higher.

It’s not difficult to see, from the Part A and Part B co-pay information cited above, how easy it would be to have very high medical bills. This is why it is so important to have additional insurance.

There are several types of costs to consider when making your estimates:

Plan costs — Consider whether Medicare Parts A and B with a prescription drug plan and/or Medicare Supplement Insurance costs more or less than a Medicare Advantage plan with similar coverage. Medicare Advantage offers the same coverage as Medicare Parts A and B, typically with additional benefits, such as prescription drug coverage, vision and hearing care. Supplemental insurance simply covers the gaps (copays and deductibles) that you are required to pay when you use Medicare:

  • Monthly Premium
  • Copays and coinsurance
  • Deductibles

Drug costs — Original Medicare does not include any coverage for your prescriptions. If you require assistance you must purchase a drug plan and pay:

  • Monthly Premium
  • Copays and coinsurance
  • Costs within the coverage gap
  • Deductible

Step 3: Compare Your Provider Options

Think about how you want to access health care when you need it. Original Medicare and Medigap supplement plans are based on a fee for service model that does not restrict you to a specific provider network.  Medicare Advantage is a private, managed care system that limits and controls your use within plan guidelines.  If you are thinking about an Advantage plan:

  • Find out if the plan has a network you must use.
  • Determine whether or not your doctors are covered.

Step 4: Evaluate Additional Benefits

You can choose plans that provide additional coverage and benefits.

The Best Medicare Insurance

With so much information and so many decisions to make, it’s easy to see why most seniors ask “What’s the best Medicare insurance?”  We’re sorry that there’s no simple answer, because, it all depends on your situation.  Where you live, your finances, and your health condition are all significant factors.

In general, if you can afford Medicare Supplement Plan F you will have the best coverage possible with the least restrictions.  Second to a Plan F is Medicare Supplement Plan G.  The only difference is the Part B deductible.

If you can’t afford a high coverage Medigap policy, Medicare Advantage is the next best option (if it’s available). The best Advantage plans offer excellent coverage. The trade-off is that you must use network providers, which may be inconvenient or require you to change doctors.

With the exorbitant cost of prescription medications and their frequent use in maintaining good health, most seniors are well advised to purchase a Part D policy. Prescription drug plans are compatible with all Medigap policies and most Advantage plans bundle Part D coverage into their plan. Be sure to take the time to understand the Part D coverage gap (aka, “Donut Hole”) and how it could play into your healthcare budget.

Medicare Insurance Summary

While the thought of paying a couple hundred dollars a month for full coverage health insurance isn’t appealing to most seniors, the risk of being faced with tens of thousands in medical bills is down right frightening.  With the massive changes to the Medicare program in the past ten years, seniors have a wide range of choices that offer peace of mind:

  • Medigap — A range of policies offering everything from basic to full coverage of everything not paid by Original Medicare.
  • Medicare Part D — Prescription drug coverage.
  • Medicare Advantage — Managed care plans that replaces Original Medicare with privatized HMO/PPO insurance.

Our goal here at Medigap & You is to organize Medicare insurance plan information and present it in an unbiased format so that you can make the best decisions for your health care needs. You can learn more about the program on our Medicare Insurance History page. To learn how you can do your part to keep healthcare costs as low as possible, see Help Prevent Medicare Insurance Fraud.

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