Know the difference before you choose
Original Medicare is the familiar program that’s been around since 1965. In original Medicare, the government pays Medicare’s share of your medical bills directly to doctors and hospitals. You can go to any doctor or hospital anywhere in the country that accepts Medicare reimbursement. That is nearly all of them.
But original Medicare is not free. You will still be required to pay some health care costs out of your own pocket. For instance, people on original Medicare must pay a $1,216 deductible for every hospital stay (rising to $1,260 in 2015). They must also pay 20 percent of the cost of most kinds of outpatient treatments, including doctor visits. And unlike the private insurance you’re used to from your working years, Medicare does not have any limit on what you can spend out of your own pocket. The bills can mount up quickly, especially if you need costly treatments such as outpatient chemotherapy.
You may have a retiree or TRICARE plan that helps pick up some or all of those costs.
If not, you have two options for limiting your exposure to excessive out-of-pocket costs.
1. Medicare Supplement (Medigap) plans
These private plans cover most or all of original Medicare’s out-of-pocket costs. If you select this option, you will continue to be covered by original Medicare. After Medicare has paid your claims, it will automatically forward them to your Medigap plan. The Medigap plan will then pay its portion of the bill.
Medigap plans do not cover prescription drugs. Therefore you must also purchase a stand-alone Part D plan if you want drug coverage.
How to pick a Medigap plan.
2. Medicare Advantage
Anyone on Medicare can choose to receive their Part A and Part B benefits through one of these private health plans instead of through original Medicare. Medicare Advantage plans now cover nearly 3 in 10 Medicare recipients. Most Medicare Advantage plans also include Part D prescription drug coverage.
With a Medicare Advantage plan, you continue to pay your Part B premium as usual. You may also pay an extra premium for the plan. You are not allowed to have a Medigap and Medicare Advantage plan simultaneously.
Medicare Advantage plans typically come with deductibles and co-pays. But unlike original Medicare, they have an annual out-of-pocket limit. That means that once you have paid deductibles and co-pays that add up to the annual out-of-pocket limit, the plan will pay 100 percent of your medical bills for the rest of the year.
Medicare Advantage plans work like the managed care plans you may have had during your working years. You will have to receive your care from doctors, hospitals, and other providers within the plan’s network.
If you have a retiree plan, check with your plan administrator before signing up for a Medicare Advantage plan. It may affect your eligibility for your retiree benefits.
Once you are enrolled in Medicare, you can join, switch, or drop a Medicare Advantage or Part D plan once a year during the annual open-enrollment period, which runs from Oct. 15 through Dec. 7.
How to pick the best Medicare Advantage plan for you.
Here’s a chart that summarizes the two choices.
Medigap
Medicare Advantage
How it relates to Original Medicare Parts A & B
Private supplemental coverage that pays all or most Part A & B out-of-pocket costs.
Private health plan that provides Part A & B benefits directly in place of Original Medicare.
Premium
Average of about $150 to $200 a month. Can vary by age, health history, or both.
$0 to more than $100 a month depending on the plan. All plan enrollees pay the same regardless of age or health history.
Out-of-pocket costs
Low to none (not counting premium).
In-network medical deductibles and copays of up to $3,400 to $6,700 a year, depending on the plan.
Choice of doctors and hospitals
Any that participate in Medicare.
HMOs: Plan providers only.
PPOs: Any provider, but out-of-network providers cost more.
When you can buy
First six months after you sign up for Part B and are at least 65 years old. After that, in most states you can be turned down or charged extra for pre-existing conditions.
When you first enroll in both Medicare A and B and annually thereafter during Open Enrollment (Oct. 15-Dec. 7).
Part D (drug) coverage
Not included. You must buy a separate Part D plan for this.
Most plans include Part D coverage.
Quality information available
No. There are no standardized ratings for Medigap plans.
Yes. Medicare.gov has star ratings (5 stars are the best). Consumer Reports has Medicare Advantage quality rankings from NCQA.
Cards in your purse or wallet
Three. 1. Red, white, and blue Medicare card. 2. Medigap card. 3. Part D card.
Usually just one Medicare Advantage card. The red, white, and blue Medicare card can stay in your desk drawer.
Paperwork
Little to none. Medigap almost always automatically cuts a check to providers after Medicare pays its share.
Some, because you pay deductibles and copays directly to providers.
How to pick the best Medicare Advantage plan for you
There’s a lot to consider when picking a Medicare Advantage plan. What will you have to pay out of pocket? Are your doctors in the plan? What would your drugs cost? We explain exactly how to use Medicare.gov’s search tool to research the best plan for you.
How to pick a Medigap plan
Shopping for these supplemental plans that pick up Medicare’s out-of-pocket costs can confuse the savviest consumer. We explain how Medigap work, how they are priced, and how to go about finding a plan that will work for you.
Which Medicare plan do you have?
You may be uncertain whether you have original Medicare or a private Medicare Advantage plan. The name on your insurance card probably doesn’t say “Medicare Advantage.” Instead, it might list a plan name, like “Secure Horizons.” Here’s how to find out which Medicare plan you have:
1. Call 800-MEDICARE (800-633-4227).
2. The system will ask you to say your “Medicare number.” That’s the number on your red, white, and blue Medicare card (see example). Everyone has this card, even those enrolled in Medicare Advantage plans.
3. The system will give you some options. Select 0 for a customer service representative.
4. When the representative comes on the line, you will be asked for your Medicare number again, as well as some other identifying information such as date of birth and full address.
5. Once your identity has been confirmed, ask the rep: “Could you tell me whether I have original Medicare or Medicare Advantage”? You will be told either: “There’s no Medicare Advantage plan on file” OR the name of your Medicare Advantage plan.
Caregivers can make this call on behalf of a Medicare enrollee, if they have the identifying information.