When you first elect to take Medicare, you have three options. It is important to fully understand your options when you first enroll because what you choose today might mean that your choices are limited in the future. Also, many are surprised to find out that Medicare is not free. You must pay a monthly Part B premium which is $148.50 in 2021.
Option 1 - Medicare Part A & B alone - Few people elect to only have Medicare. The biggest out-of-pocket expenses with this option are the Part A deductible and the 20% Part B coinsurance. Part A of Medicare is what covers the inpatient hospital expenses. The Part A deductible for 2021 is $1,484, and it resets every 60 days meaning that you could pay it more than once in a calendar year. Part B is the part that covers doctors and outpatient services. Medicare will pay 80% of the Part B expenses leaving you with the remaining 20%. There is no cap on this amount. This option leaves you with a lot of potential risk.
Option 2 - Medicare Part A & B paired with a Medicare supplement - A Medicare supplement will help to limit your out-of-pocket expenses. These plans are referred to by letters. Plan G and Plan N are the most popular plans. They are purchased from private insurance companies, and they are all standardized. This means that a Plan G with one company must provide the exact same benefits as Plan G with another company. The only difference between the plans is the price you pay. With Medicare Supplement plans, it is easy to predict your out-of-pocket expenses. For instance, with a Plan G, you can spend a year in the hospital and it will not cost you anything other than your monthly premium. Most importantly, you have a six-month window when you are new to Medicare when the insurance companies are required to accept you regardless of medical conditions. If you later decide you would like to enroll in a Medicare Supplement, you will have to answer health questions and can be denied based on your health. These plans do not have prescription drug coverage. You will want to purchase a Part D drug plan to avoid paying a penalty.
Option 3 - Medicare Advantage - With this option private insurance companies contract with the government to provide your Medicare coverage. These plans are similar to employer-sponsored plans which require networks and pre-approvals for certain services. They are an all-in-one plan, providing both your medical and prescription drug coverage. These plans have lower premiums but require copayments when you utilize services. There are HMO and PPO plans. The HMO plans only cover emergency care outside of the plan’s network. The PPO plans have coverage outside of the network but will typically have a higher copayment. You are protected by a maximum-out-of-pocket limit set by the plan. These plans also have extra benefits such as some coverage for dental, vision, and hearing. These benefits change from year to year, so you should not choose this option based on the extra benefits. You will want to make sure that all of your prescription medications and doctors are covered by the plan you select. These plans do not require medical underwriting.
Ultimately, the decision is yours. Some like the peace of mind that the Medicare Supplements provide. Others are okay following the rules of the Medicare Advantage plans to have lower premiums and to receive the extra benefits.