How Does Medicare Work?

The Advantage of Medicare Advantage

If you’re entitled to Medicare chances are that you’re regularly bombarded with advertisements aimed at selling you Medicare insurance. But isn’t Medicare itself insurance? Why do you need more? Why are there so many choices? What are they covering that Medicare isn’t? What’s the difference between them? Can I afford MORE insurance now that I’m retired?

These questions and more are the type that prevent otherwise smart and savvy consumers from making a well-informed decision when it comes to their choices with Medicare. Hopefully the following discussion on Medicare Advantage (MA) and Medicare Advantage Prescription Drug Plans (MAPD) can help to alleviate some of the stress that comes along with purchasing a Medicare plan.

Original Medicare

Let’s start with the basics. Original Medicare has two parts. Part A covers you for hospital services and Part B covers you for medical services outside of the hospital. Since practically every physician takes Medicare this is great news for your ability to access the physicians and hospitals that you prefer. The downside is that Medicare is far from free. This is, unfortunately, a common misconception that many new Medicare beneficiaries have to figure out the hard way. After a lifetime of subsidizing the Medicare endowment fund through paying taxes you would think that little red, white and blue card would be free, but that is far from how it works. Medicare Part A doesn’t have a monthly fee, but if you use it to go to the hospital you will be responsible for paying a substantial deductible (around $1,500!). Part B, which is the bulk of your healthcare, does charge a standard monthly premium of $104.90. Additionally, when you use your Part B to go to the doctor you will be responsible for 20% of doctor bills after you’ve already met your Part B deductible for the year (which is around $150). Original Medicare (A and B) doesn’t cover prescriptions either so you’re on your own for those costs if you don’t pick up a Part D prescription drug plan.

If the thought of paying premiums, deductibles, and a 20% coinsurance every time you go see your doctor makes you anxious, perhaps it’s time to explore the MAPD plans in your area.

How do MAPDs work?

Medicare Advantage Prescription Drug Plans are insurance plans that are run by private insurance companies and regulated by Medicare. MAPDs combine Part A, Part B and often times Part D prescription drug coverage into one streamlined plan. Competitive MAPD plans should offer lower costs than original Medicare itself. For example, on some MAPD plans your Part A and B deductibles will be eliminated and it will be free to see a primary care physician. There is a catch when it comes to access however. Most MAPD plans use a HMO network, so in order to pay the lower cost you must use the plan’s network of physicians. Additionally, while you are on a MAPD you cannot use your Original Medicare card anywhere you want. The plan becomes responsible for your Medicare coverage. You also will be required to follow the rules of the plan, which could be more restrictive than Medicare. For example, most MAPD HMO plans require a referral to see a specialist (like a cardiologist) and the plan’s approval before you get surgery.

What are some of the “extra benefits” to MAPD?

The benefits offered by MAPD should outweigh what you lose in convenience and access to certain doctors. Many plans are offered without a premium and will even pay some or all of that Part B premium that Medicare charges. That means you may be able to get Part A, Part B and Prescription Part D coverage without paying a monthly premium. Because the MAPD carriers compete with each other for your business don’t be surprised if you find plans in your area that include “extra benefits” that Medicare itself doesn’t cover like Dental, Vision, Non-emergency medical transportation, Free Over-the-Counter Items, and Fitness Club memberships.

What do I look for in a plan?

Start with doctors and prescriptions. Just because a plan is offering great benefits, doesn’t necessarily mean it’s a good fit for you. Ask for a “Provider Directory” so you can see whether or not your physicians are covered under the plan. Additionally, you should request a “Formulary” to make sure the prescriptions you take are also covered by the plan and what they would cost. The plans should have this information available on their websites to make your search that much easier. Once you’ve narrowed down the choices based on doctors and prescriptions you can look at the “Summary of Benefits” for the plans and decide for yourself which plan is the best for you based on your preferences. For example: if you find two plans in your area that each cover your doctors and medications and one offers extra dental but the other offers a free gym membership you would have to decide which benefit is more appealing to you.

3 Notes to keep in mind

1. There are only certain times when you can enroll into a MAPD plan and many of them are annual contracts so you’re stuck with your selection until the next enrollment period.
2. Don’t cancel your Medicare because you have enrolled into a MAPD. You must keep A and B Original Medicare for a MAPD plan to cover you.
3. Talk to an agent. Agents are licensed professionals who can sit with you and go through the plan details in great depth before you enroll. Working with a trusted agent can be the difference between a series of headaches and a great fitting plan for you.