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How to Understand Medicare Plans
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Just the Essentials...
Medicare offers Original Medicare for hospital and medical coverage.
Additionally, Medicare health plans like Medicare Advantage plans can exceed Original Medicare’s hospital and medical coverage, all while offering more benefits.
For prescription medication coverage, both stand-alone drug plans and Medicare Advantage plans can offer Medicare-approved drug coverage.
Medicare also offers gap insurance called Medigap to help fully cover out-of-pocket costs, like copays.
Original Medicare and Medigap offer a nationwide network of doctors and facilities, while Medicare Advantage typically uses local networks of providers.
Medicare leaves many choices to the individual, which can sometimes result in confusion or missed opportunities. Differences between Medicare health plans range from the dramatic to the very subtle.
Generally, the first choice lies between government-run Medicare or a private insurance plan that can offer greater benefits or savings.
Overall, most types of Medicare health plans boil down to the network of accepted providers, and the savings on out-of-pocket costs.
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Original Medicare is a Large Network
There are thousands of doctors and hospitals across the United States in the Original Medicare network.
The Center for Medicare and Medicaid Services (CMS) manages operations, sets prices and enlists doctors and facilities. CMS uses a large number of support organizations including functional contractors to manage the system.
Over time, this has increased available services to meet the needs of a growing and diverse population of older Americans.
By nature of CMS setting prices for Medicare, Original Medicare operates as a fixed-fee-for-services plan. In other words, this means you pay the same for a particular service, as long as the doctor or facility providing the care accepts assignment from Medicare.
Although Original Medicare’s nationwide network provides one attractive feature for Medicare enrollees, sometimes the fixed-fee-for-services model of paying for care results in hefty costs.
The Original Medicare System
For many, the question of where Original Medicare is honored becomes overshadowed by the question of cost. Perhaps the most glaring aspect of the Original Medicare system is its limitless burden of cost.
With Original Medicare, no out-of-pocket limit exists for either Parts A or B. In short, this means there is no end to financial loss for charges racked up in a year for hospital and medical services.
Generally, Medicare covers about 80% of approved services that meet today’s standard of medicine. Leaving 20% may seem small, but with hospital and medical expenses, this percentage may translate to thousands of dollars in charges, or more.
Original Medicare is a government-run health insurance program. The Centers for Medicare and Medicaid operate Original Medicare through a system of contractors. Called MACs and Carriers, these companies handle payments, billings, and maintenance of the system.
The wide presence of Original Medicare’s network is made possible by nature of being government-run. However, Part C of the Medicare program brings greater variety and savings in many cases.
While CMS still oversees and approves each insurance plan sold through Part C, these plans come from private insurance carriers.
More commonly, Part C plans are known as Medicare Advantage plans.
Medicare Advantage Managed Care
Medicare Advantage consists of private insurance plans that meet or exceed the coverage of Medicare Parts A and B or Original Medicare.
While each Medicare Advantage plan follows specific rules and standards approved by CMS, the private companies developed plans to compete with one another. Many of these plans attract Medicare enrollees through their benefits like dental, vision, and hearing.
Just as importantly, Medicare Advantage plans offer variety in terms of saving on medical and hospital services. In doing so, these Part C plans establish local networks of doctors and facilities to serve the community where each plan is offered.
Perhaps most notably about Medicare Advantage, every plan sets a yearly maximum out-of-pocket limit to protect members against excessive financial loss for medical and hospital care. Although generally smaller than Original Medicare’s network, many find that the tradeoff with savings works for their situation.
Essentially, a few Part C network types exist:
HMO is the health maintenance organization. It focuses on prevention and wellness in addition to keeping prices low using local operations. The HMO uses a primary care physician to provide care and referrals to network resources and specialists.
PPO is the preferred provider organization. This type of managed care does not use a primary care doctor, and clients can see any doctor or hospital in the network. Additionally, members can also use services from providers that are outside of the network. The PPO covers outside resources but at a higher price than those in-network, but still covers them to an extent.
EPO is the exclusive provider organization. This simple structure gets costs savings by using a network with no primary care physician. Clients choose their doctors and hospitals as they wish. However, the EPO network type does not give any coverage for outside resources.
HMOPOS is a variation on the HMO that uses a primary care physician to provide services and referrals to network resources. The POS “point of sale” option permits the primary care physician to refer clients to outside specialist, with additional cost sharing from the member.
PFFS is the private fee-for-services organization. This type of network does not use a primary care physician. It can also connect to other organizations, providers, and facilities. With that said, this network type can mean a provider may agree to accept the PFFS for one service, but choose not to accept it for another service.
Medicare Advantage and Prescription Drug Benefits
The Medicare Advantage program can build Part D Prescription Drugs into plan coverage. The advantages of such a combination are strong, because typically Medicare Advantage plans and separate Part D prescription policies do not go together.
To get Medicare Advantage, a person must enroll and keep both Parts A and B.
Additionally, the premium costs may be lower with a Medicare Advantage Prescription Drug plan (MAPD) than the average premiums of Original Medicare combined with a Part D policy.
Part D Drug Plans
Prescription drugs are a vital component of modern medical care in the US. Many drugs have unique positions as only one of few effective treatments for certain conditions.
Prescription drug benefits in Medicare help reduce the burden of costly drugs on older Americans, and particularly those on fixed and limited incomes.
Medicare Part D is insurance that covers the costs of prescription drugs. These plans are private insurance plans approved by the Centers for Medicare and Medicaid. Based on location, plans offer wide varieties of premium prices, deductibles, coinsurance, and copays.
CMS must submit detailed and current formularies of the drugs covered by the plan. Members must stay aware of whether the plan covers drugs prescribed to them, as well as any restrictions.
Some plans limit the number of an item by price or require some extra steps such a permissions or pre-approvals. It is important for the consumer to know of any rules or availability issues for drugs they need.
Alternative and Demonstration Health Insurance plans
PACE is an all-inclusive program that helps people age 55+ stay as independent as possible through a network of support services. These program requires Medicare and Medicaid eligibility while living in an area served by a PACE organization. PACE services include detailed levels of support for persons that might otherwise need a nursing home.
Demonstration Projects can arise in a given area from time to time as CMS tests new methods for improved payments, service delivery, and customer selections.
Medicare Medical Savings Accounts: MSAs
Medical Savings Accounts can offer plans with low premium plans but that have high deductibles. Medicare deposits a certain amount of money into a special savings account to be used for medical services.
Funds in an MSA can be used to cover medical expenses, even for services that are not covered by Medicare. However, use of funds for services that are not Medicare-approved do not count toward the plan’s high annual deductible.
With that said, MSA’s involve a type of Medicare Advantage plan. Like many others, these can include additional benefits like dental, vision and hearing coverage.
There are two parts to any MSA:
A high-deductible Part C (Medicare Advantage) MSA plan that does not include prescription drug coverage.
The designated bank account called a Medical Savings Account allows beneficiaries to use its funds towards the high annual deductible.
These types of accounts use funds set aside to cover out-of-pocket expenses until the customer reaches the plan’s deductible, or the account itself runs out of money for the year. Once at the out-of-pocket limit, the health plan covers all expenses for Medicare-approved services.
Because MSA’s do not cover prescription drugs, many enroll in a separate Part D prescription policy. This is a rare case when Medicare Advantage mixes with a separate Part D policy.
Medicare Costs Plans
Members can only join a Medicare Costs Plan in areas in which they are available. However, these types of health plans can be joined or dropped at any time.
This regional type of plan, although rare, can accept persons with only Part B. Despite lacking Part A hospital insurance, Medicare Cost Plans still provide access to hospitals under Medicare assignment.
Of course, it also accepts those with both Parts A and B. Uniquely with Medicare Cost Plans, those with both A and B are able to see providers outside of the accepted network, but still only pay the Medicare-approved amounts.
This type of plan can also include built-in Medicare prescription drug coverage.
Medicare costs plans have no limits on enrollment periods and can accept members at any time. Enrollees have the advantage of leaving or joining when they are available.
Medigap Medicare Supplements
Medicare Supplements make other parts of Medicare work more favorably towards covering out-of-pocket costs. Medigap insurance covers the part of Original Medicare left uncovered by cost sharing.
When Original Medicare covers outpatient services, the typical share of cost with Part B leaves about twenty percent unpaid, and that is the customer’s responsibility. Medigap insurance covers that gap.
Medicare supplemental coverage follows the nationwide network set by Original Medicare. While some types of Medigap also offer overseas travel coverage, generally speaking Medigap policies only cover costs for Medicare-approved hospital and medical services.
Usually, Medigap plans require monthly premiums in addition to those of Parts A and B, as well as an out-of-pocket deductible for the year. At that point, the Medigap plan takes on charges beyond the deductible amount until the year ends, providing financial relief for hospital and medical services.
Each type of Medigap plan receives a letter A through N, with each letter designating a standardized coverage. In other words, when comparing Medigap plans of the same letter type, the only difference is the premium charged by insurance carriers.
Understanding Medigap Eligibility
The best time to buy Medicare Supplement is during the six-month period after one gets both Medicare Part A and Part B.
The value of signing up during this initial eligibility period means the Medigap insurance carrier cannot use medical underwriting to deny coverage. Nor can they charge higher premiums based on health history.
Outside of the initial eligibility period, Medigap insurers can deny coverage or raise premiums. They decide based on pre-existing health factors assessed through medical underwriting questions.
Understanding Medicare Plans is Not Easy to do Alone
Although a striking variety of Medicare health plans exists, facing it all alone is the hardest part. Whether you’re brand-new to Medicare, or if you think it’s time to re-evaluate your coverage situation, our resources and experts are here for you!
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