If you’re approaching Medicare eligibility, you have a number of decisions to make. But one decision is the most consequential of all: Should you sign up for the federally administered Original Medicare or opt for a privately run Medicare Advantage?
In today’s article, we’ll discuss Original Medicare. Next weekm we’ll do the same for Medicare Advantage.
Among the overall 67.7 million Medicare beneficiaries, 43.5 million are enrolled in Original Medicare and 24.1 million people elect Medicare Advantage.
Original Medicare is the original government program created by the federal government in 1965. Original Medicare and Traditional Medicare are used interchangeably.
Original Medicare has two parts.
•Medicare Part A is colloquially called your inpatient hospital insurance. Part A also covers hospice, skilled nursing and some home health care. If you have a qualifying work history, your Part A benefits are premium-free. For now, just keep in mind that Part A is free for people who have enough Social Security earnings (40 quarters) to qualify for Social Security retirement benefits. Note: If you don’t qualify on your own work history, you may be able to qualify on your spouse’s work history.
Original Medicare’s Part A deductible is $1,408 in 2020. This deductible applies to each benefit period that starts after you haven’t received inpatient care in a hospital or skilled nursing facility for more than 60 days in a row. This means that you could potentially pay the deductible multiple times in a year.
•Medicare Part B pays for many preventative and medically necessary outpatient services. Typical examples include doctor visits, some immunizations, lab tests, durable medical equipment, emergency rooms, and ambulances.
Medicare Part B has an annual deductible of $198 in 2020. This year, the monthly Part B standard premium is $144.60. Some high earners (fewer than 5 percent) pay an income-related adjustment in addition to the monthly Part B premium. Medicare Part B premiums are usually deducted from your monthly Social Security check. In general, you’ll be responsible for 20 percent coinsurance. There’s no maximum out-of-pocket limit, and that 20 percent can add up quickly. In addition, if you seek treatment from a doctor that doesn’t accept Medicare assignment, you may also be responsible for up to an extra 15 percent for the cost of the total treatment in the form of an excess charge.
If you’re 65 or older and receive Social Security benefits, you will automatically be enrolled in Original Medicare. You can opt out of Part B if you are working and have group health coverage. When you eventually retire, you will have a special enrollment period to pick up Medicare Part B.
Most people sign up for Medicare during their initial enrollment period (a seven-month window that starts three months before the month you turn 65 to three months following your 65th birthday).
If you want Original Medicare, you must decide:
•Whether you want Part D prescription drug coverage: Most people will need to enroll in a Medicare Part D prescription plan to get typical prescriptions covered. Anybody with Medicare Part A and/or Part B is eligible to enroll in a Part D plan. Each plan has its own list of covered prescriptions, called a formulary, so the plan that’s best for you will depend on the medications you take. Insurers can change their formularies each year so it’s always a good idea to shop your drug plan during the Annual Enrollment Period that runs from Oct. 15 through Dec. 7 every year. While Medicare Part D prescription drug coverage is actually optional, if you fail to sign up for it on time and lack creditable drug coverage, you will incur a late enrollment penalty. The typical premium for a Part D plan is around $35 a month in 2020.
•Whether you want Medigap supplemental insurance: This decision to take a Medigap plan is ultimately up to you. For many people, a Medigap plan provides a safety net against Medicare’s high costs. Medigap plans help cover the coinsurance, deductibles, excess charges, and copays that you would otherwise be responsible for if you had Original Medicare alone. Medigap plans are categorized by letter and vary in coverage, so that you can pick the one that you feel fits your needs best. Medigap Plan G is one of the most popular plans. Plan G covers all Medicare out-of-pocket expenses with the exception of the $198 Part B deductible.
Once you have Original Medicare, the best time to buy a Medigap policy is during your six-month Medigap Open Enrollment Period. During that time, you can buy any Medigap policy sold in your state, even if you have a pre-existing condition. This period starts once you’re 65 and have enrolled in Medicare Part B. If you go beyond the six months, please be aware that you still may buy a Medigap policy, but the insurer may impose a waiting period if you have a pre-existing condition And if you’re able to buy a policy, it may cost you more because of your past or present health condition.
As you can see, the obvious downside of Original Medicare is the cost. You may end up paying three monthly premiums – one for the monthly Part B premium, one for Part D prescription drug coverage and one for your Medigap policy.
If you are a dual eligible and have both Medicare and Medicaid, you really don’t need supplemental insurance with your Medicare. In essence, your Medicaid supplements your Medicare. If you have excellent retiree or union health benefits coverage, you may not need a supplement either. Before you transition to a Medigap policy, it’s very important to check with your former employer to see how their plan works with Medicare. Don’t drop your plan until you gather this information. You may not be able to get it back.
One of the principal reasons why people choose Original Medicare is that you enjoy access to see any nationwide health care provider as long as they accept Medicare. With Original Medicare, you don’t have to worry about getting a referral from your primary doctor to see a specialist. Preauthorization is not necessary. The flexibility of Original Medicare is appealing if you travel frequently or live a snowbird lifestyle.
Original Medicare rarely covers dental, vision, or hearing services. You will most likely need to pay out-of-pocket for routine services such as exams, hearing aids, glasses, dentures, cleanings, and other dental work.
Ultimately, it’s up to you to decide what level of risk you’re comfortable with. However, even if you have enjoyed good health so far, you can’t predict the future. Purchasing additional insurance can prevent one unexpected illness from derailing your retirement, and allow you to seek high-quality medical care, without worrying about your budget. Please consider all factors, including plan costs, access to care, coverage, convenience, and your personal lifestyle.
Remember to see next week’s column about your other option, Medicare Advantage!
(Joel Mekler is a certified senior adviser. Send him your Medicare questions at firstname.lastname@example.org.)