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Medicare: Choosing insurance to cover what Medicare won’t pay

Seniors enrolled in Medicare Parts A and B often discover once they become ill that these two Medicare parts won’t pay for all their medical costs. Part A pays most hospital, skilled nursing and some home health care costs; Part B pays most physician, outpatient services and some other home health care costs – but both parts have deductibles, limits and gaps in coverage. Neither pays for any prescription drugs and many medical supplies are not covered.

The private insurance marketplace responded with products designed to cover many costs not paid by Medicare coverage. Products can be chosen to help with cost sharing depending on the need of the Medicare consumer, and seniors continue to be enrolled in Medicare Parts A and B. Plan design and scope are heavily regulated by both Congress and the Centers for Medicare and Medicaid Services to make certain that these plans and products pay exactly what they are required to cover. Seniors can choose from stand-alone supplemental plans and or prescriptions drug plans (Part D), chronic illness special needs plans, or a comprehensive HMO or PPO type plan (Medicare Advantage) that bundles Parts A, B and D together with additional coverage that covers all medical costs and is referred to as Part C.

Each Medicare product is designed to cover different services, and may not be available where you live. While Congress has passed many laws to make the design of these products uniformly specific and the sale ethical and careful, making a choice can be a confusing experience. Here are the basics of a few products:

Medicare Part D Prescription Drug Plan

Part D plans cover most all prescription drug costs, but insurance carriers will offer differing lists of covered drugs and pharmacies. You must be enrolled in both Part A and Part B of Medicare to be eligible for a Medicare Part D plan. The federal guidelines require insurance pays for a prescription after an initial deductible of $320. After this deductible, you pay only a small copay for each drug until drug costs equal an annual total of $2,840, including your copay charges and drug costs. After this $2,840 total is reached, you will will pay any subsequent drug costs for the year (the “donut hole”) up to a total drug cost of $4550, including all costs, charges and copays for the year. During this “donut hole” period, you receive a discount of 50% off the cost of generic drugs, and some insurance companies also offer a discount for brand name drugs. After drug costs have reached $4550, the insurance will pay all drug costs after a small copay for the rest of the year (called Catastrophic coverage). Carriers may enhance their plans to cover the deductible, copays or some of the donut hole but may not offer a plan with lesser benefits than the minimum required coverage. Part D coverage premiums range between $15 and $60 per month, depending on the plan’s design and where you reside.

Medicare Supplement Plans

Supplemental coverage pays some of the out of pocket medical charges (except drug charges) that are not covered by Original Medicare Parts A and B. Medical charges contracted to be covered and paid for by each Medigap plan have been outlined by Congress. The different plans are labeled A, B, E, F and so on up to N. For the outline of each plan’s covered services, go to: Medigap policies . In other words, if you buy a Medicare Supplement F or N from any insurance carrier, each carrier will pay exactly the same for each Medigap alphabet policy. Supplement plans are allowed to vary their premiums and the plan’s provider network, but must cover what the federal guidelines for that specific plan require: no more, no less. Monthly premiums range from $100 to $500 or more, depending on the plan you choose, age when you enroll, and where you reside.

Medicare Advantage Plans (Part C)

Advantage plans bundle Parts A and Part B (and usually D) costs along with other medical services into a comprehensive health insurance plan with varying but limited copays and deductibles. Insurance carriers receive payment from the federal government (through the Centers for Medicare and Medicaid Services – CMS) for covered medical services as well as the Part B premiums paid by members to the government. Plans can be offered as an HMO (Health Maintenance Organization) with gatekeepers and authorizations; a PPO (Preferred Provider Organization) plan, where you can visit any physician, but pay less with network providers; a POS (Point of Service) plan, which is a hybrid HMO/PPO type plan; or a PFFS (Private Fee for Service) type plan where you can see any provider who accepts the plan. Costs and available plans depend on where you live; HMO, PPO and POS plans are typically only available in metropolitan areas due to provider network requirements.

Special Needs and Chronic Illness plans

These plans help offset the significant medical costs related to certain chronic or serious conditions and offer a comprehensive care review and coordination not available in original Medicare. Many people with these long term conditions also may qualify for premium subsidies. Plans and coverages, again, will vary by state and by insurance company.

Review each plan’s options carefully and choose wisely as you may only be able to change your plan once a year. Finding the right Medicare product can offer financial security and save out of pocket charges once a serious illness strikes.