How To Pick A Medicare Plan: 2023
Medicare may be confusing, but the good news is that the complexity means you have a lot of choices. The key to choosing a plan is to narrow down the options by focusing on your unique situation. Start your list of priorities by considering your current health plan.
- Are you on a group plan and wondering if you should keep it?
- Group plans considered “creditable” by Medicare can be protect you from Medicare Part B and Part D late enrollments penalties. That may offer you a choice about when to enroll in Medicare.
- Find out what your group plan costs you and what it pays for health care.
- Consider health care coverage for family members covered by the group plan.
- For a useful list of questions for your benefits manager, click the link at the end of this blog to download a copy.
- If you have an ACA plan or no current insurance, enrolling in Medicare A and B when you are first eligible is most likely your best option.
- If you have Medicaid, they will require you enroll in A and B. Your level of Medicaid health coverage will be a critical factor in what other health coverage you might want.
Once you know where you are coming from, it’s time to consider where you are going. The next segment will compare the specific types of coverage available. If you are looking for an overview on how all the plans and parts are set up, CLICK HERE for our “Medicare In Depth” blog, How Does Medicare Work: 2023.
Original Medicare VS Medicare Advantage
Medicare Part A (in patient care) and Medicare Part B (out patient care) are the first federal health care plans for seniors – signed into law in 1965. That’s why they are referred to as “Original Medicare”. They’re designed to cover about 80% of approved health care costs. That leaves about 20% for seniors to pay. Most people pay into the program during their working years but that still leaves a shortfall. To help cover costs, Part A and B have deductibles, copays and coinsurance. Part A does NOT have a premium but has a significant deductible. Part B has a premium and a small deductible.
Medicare is also a federal budget item. It’s managed by the Centers for Medicare and Medicaid Services (CMS). The CMS administers and monitors each transaction, every Medicare-related insurance plan, and the status of all members. All coverage other than Part A and Part B are provided by private insurance companies, including Part C (Medicare Advantage) and Part D (Prescription Drug Plans).
Medicare Advantage plans (signed into law in 1997) are regulated and monitored by the CMS. The private insurance company offering a Medicare Advantage plan takes over administration and billing for members of their Advantage plans. In exchange, the federal Medicare budget pays a monthly amount to the private insurance company for each member enrolled in their Advantage plans. That’s why so many Advantage plan do not charge an additional premium (you still have to pay your Part B premiums). Advantage plans are evaluated by the CMS before they can be offered to the public. They must prove to be “actuarially equivalent” during an average person’s lifetime to the medical costs that average person would have if they only enrolled in Part A and B. Keep in mind that Part A and B can cost a person 20% of all health bills.
The “advantage” to Advantage plans is that the out of pocket cost is limited by regulation to no more than $8,300/year in 2023. After that, the insurance company must pay a member’s approved health bills for the rest of the year. Advantage plans are also well-advertised for the additional benefits they offer such as some coverage for things original Medicare doesn’t cover like modest benefits for things like vision, hearing, dental, gym memberships and transportation to the doctor.
Original Medicare and Medigap Supplemental Plans
The first supplement plan released (in 1992) for Medicare was the Medicare Supplemental Plan (Medigap) designed to help members with the expenses that Original Medicare leaves behind. All of these plans restrict eligibility and may increase premium costs based upon underwriting (evaluation of health history and current health). However, if you enroll in a Medigap plan as soon as you are eligible, you will be guaranteed to be accepted at a Standard (or Standard Tobacco) rate without underwriting.
Since the Plan A was released new plans have been offered every few years. All plans of the same alphabet letter, A through N, must offer exactly the same percentage of coverage regardless of the insurance company that offers it. For example, the differences between Plan G offered by different insurance companies are restricted to premium costs, underwriting specifics, and free extras (such as discount memberships for vision, hearing, dental, and gym memberships).
Since Medigap plans are designed to cover all or part of your share of health care bills left behind by Medicare Part A and Part B they can be expensive for the insurance company. As you’ve probably already guessed, the more of your bills a Medigap plan pays, the more the premium costs. The premiums vary by location, age and health also, so it’s difficult to give concrete numbers. Just for a ballpark example let’s consider a nonsmoker aged 65, health rated as Standard, in Northern Colorado. That person could expect a premium of around $100/month for the Medigap Plan G. Plan G covers all of your share of Medicare approved health care except the annual Part B deductible (about $230/year).
Original Medicare Part A and B do not have limits on how much you pay out of pocket each year. Say a person goes to your doctor with a cough. The bill is around $100. She pays $20. Sounds reasonable, right? But what if that cough means she has a stage 3 breast cancer that’s affecting her lungs. The bill for treatment comes to $100,000. Now her share is $20,000. For many people, that would be a devastating expense to face. If she had a Medigap Plan, she would only pay about $200 (for the Part B deductible). Faced with a bill like that, paying $1200/year for Plan G sounds like a smart choice.
Those choosing Original Medicare with or without a Medigap plan will want to choose a stand alone prescription drug plan. Not having a prescription drug plan once you enroll in Part B (or qualify to enroll and do not have “creditable coverage” for prescription drugs) you will be subject to a Late Enrollment Penalty for every month you aren’t enrolled in a Part D plan. (SEE below for details.)
Consider staying on Original Medicare and buying a Medigap plan for more complete protection against the ever-rising costs of health care. If you’re the type of person who doesn’t want to worry about whether your health care is insured or have to bother with medical bills, this combination may be the right choice for you.
Original Medicare with Medigap is also a good choice for people who want the freedom to go to a specialist without asking permission. Being on Original Medicare means you can choose from any health care provider that is certified by Medicare anywhere in the country.
Furthermore, people with health conditions likely to become costly as they age are the most likely to come out well ahead with a Medigap plan. Some common conditions that tend to worsen with age are diabetes, heart disease, Parkinson’s, most types of dementia, rheumatoid arthritis.
NOTE: If you have a Medigap plan you cannot have an Advantage plan at the same time.
Differences Between Medicare Advantage Plans
On the other hand, Medicare Advantage may be a better choice for the following types of people. No health qualification is required and plans can be changed annually if you want.
- Those with generous budgets who can handle medical expenses capping out at $4,000 to $6,700 annually and would rather pay medical expenses as necessary.
- Those with tight budgets who only want to deal with medical costs as they come up.
- Those on Medicaid at a level that covers their share of medical bills.
Medicare Advantage plans used to be mostly Health Maintenance Organizations (HMOs). HMOs work well for people who want an economical, pay as you go, solution to health care costs. Most insurance companies offer at least one HMO with $0 premium costs with a prescription drug plan built in. (Of course you must pay your on Part B premium and, if you haven’t met your 40 quarters of paying into Medicare, your Part A premium, too.) If you want more of your expenses covered you can often find an HMO Advantage plan with lower copays and coinsurance but expect to pay an additional premium. The trick is to have a list of your prescriptions and your doctors in hand when you shop for plans.
With an HMO plan you must select a preferred provider. That physician becomes the hub of all your care since he or she will be responsible for referring you to specialists and testing facilities. You MUST get the referral in writing and make sure they are in network in order to be confident your bills are covered.
Preferred Provider Organization (PPO) plans became more and more popular over the years because they offer more freedom of choice. No primary care physician is required nor are referrals for specialists or testing. PPOs offer larger networks and some coverage for out of network health care providers—many times the network extends to other areas in the country! A few years ago, choosing a PPO plan rather than an HMO plan meant paying more for copays and coinsurance and, usually, paying a monthly premium.
Now almost every insurance company has a PPO plan with a $0 premium. Furthermore, those PPO plans are often very competitive with the HMO plans from the same company. The differences tend to show up in maximum out of pocket expenses and higher copays or coinsurance for more expensive procedures and tests. That makes a PPO Advantage plan a great choice for those who want freedom of choice with low or no additional costs on years without health care expenses.
You will find a variety of other Medicare Advantage plans. The most common are the Dual Special Needs Plans for those with more than one critical illness, Veterans plans which focus on medical care that compliments VA health care provisions, and PFFS plans which are common in low population areas. Set a time with one of our specialists to learn whether one of these less common plans might be right for you.
NOTE: If you have an Advantage plan you cannot have a Medigap plan at the same time. If you become ill or injured and decide you want to switch to a Medigap plan, you can do so within the proper enrollment period. Be aware that unless you have a Special Enrollment Period for Medigap plans you will have to go through medical underwriting and may be declined or charged a higher premium.
Picking A Prescription Drug Plan
If you decide that Original Medicare is the right choice for you, it’s time to buy a stand alone prescription drug plan. Avoiding the Late Enrollment Penalty isn’t the only reason for buy prescription drug coverage. Prescription drug costs have been exploding recently. Online discounts alone may not be enough to protect you from the costs. (For links to the top 5 online prescription discount plans check out our blog HERE)
Have a complete list of your prescriptions in hand along with dosages and how much you need per month. If you don’t have prescriptions, pick a plan with decent coverage for most medicine and a competitive premium. You can change prescription drug plans every year by selecting a new plan during the appropriate enrollment period. You can also change plans if you qualify for a Special Enrollment Period.
Reasons to consider changing your prescription drug plan:
- Your plan no longer covers your medicine.
- You have new prescriptions that you take regularly (but not necessarily if they are generic or preferred brand on your current plan).
- Your plan has increased the premium and you’d like a better deal.
NOTE: If you have an Advantage plan, even if it does not have a prescription drug plan included, you cannot purchase a stand alone prescription drug plan. Purchasing an Advantage plan will kick you off of your stand alone prescription drug plan. Purchasing a prescription drug plan will kick you off your Advantage plan.
NEWS: In 2023, the next level of regulations for prescription drug costs take effect. For details, check our blog “What Does the Inflation Reduction Act Do For Medicare Rx”