Health Insurance can be a very confusing topic. When it comes to Medicare, it can be even more confusing. My purpose here is to help simplify this and help you gain some basic understanding of these topics.
Let’s talk about a few general terms, some of which you may understand and some which can be a bit more confusing. Do not forget that this is an introduction, and therefore, it is very important to sit down to discuss your particular options when choosing a Medicare Advantage, Prescription Drug or other Health Insurance plan.
General Terms
- Premium: The amount you pay for your Medicare Advantage/Health Insurance plan.
- Deductible: This is how much you pay out of your pocket for your healthcare services before your health insurance or plan starts to pay for anything. If, for example, your plan has a $1,000.00 deductible, you must pay the first $1,000.00 before your plan starts to cover any costs.
- Co-payment: A fixed amount (for example $20) that you pay for a certain healthcare service (such as a doctor’s appointment or ER visit). This amount varies according to the medical service provided and the plan you have.
- Co-insurance: Think of this as sharing the cost of the healthcare service with the health insurance/plan. It is usually a percentage of the allowed amount for the service (let’s use 10% as an example). If a certain procedure costs $1000, you would share the cost and pay 10% of the cost of that procedure. In this example, you would owe $100.
- Out of pocket Limit: This is the most amount of money that you would pay in a policy period(usually one year). After you have met this limit($5,000 for example), the health insurance plan would cover 100% of the allowed amount of any other covered medical costs. Your premium(what you pay for your health insurance) is not included in this amount. To make it more confusing, some plans may not count certain co-pays, co-insurance or deductibles towards this out of pocket limit. Again, this is why it is best to sit down and go over the specifics of the health insurance plans that are available to you.
- Coverage gap(donut hole): This is concerning your prescription drug plan. It runs from January 1st to December 31st of each year. The donut hole is a period of time where, you will pay higher cost sharing towards your drug costs. This is where, after you and your plan have paid a set total dollar amount for your prescriptions you will enter the donut hole. When in the donut hole, you will pay 25% of the cost of brand-name and generic drugs. You will stay in the donut hole until your total out of pocket costs reach $7,400 (in 2023). In addition, in the donut hole you will get “credit” by the drug manufacturer for brand name drugs which works towards fulfilling the total out of pocket limit. Once you exit the donut hole, you enter the Catastrophic Coverage phase where you will pay the greater of 5% or $4.15 for generic drugs or $ 10.35(in 2023) for brand/non-preferred drugs.
Medicare Advantage Plans
A Medicare Advantage plan, sometimes called Part C, is a “bundled” plan that includes Medicare Part A, B and usually Part D. This plan is an alternative to Original Medicare. This plan will cover all of the same Medicare services of Original Medicare with some extras such as vision, dental and hearing benefits . There are different plans available with different premiums, co-pays, deductibles, doctors, etc, so it is important to sit down to go over your specific situation to see which plan is right for you. There are time frames for when you are allowed to sign up for one of these plans. In addition, these plans will offer a limit on your yearly out of pocket expenses.
Medicare Supplemental Plan
A Supplemental Plan (Medigap) will help to pay some of the healthcare costs that Original Medicare will not such as co-pays, deductibles and coinsurance. You must have Medicare Part A and B in order to sign up for one of these policies. You cannot have both a Supplemental Plan and a Medicare Advantage Plan at the same time. You will pay a monthly premium to have one of these policies in addition to paying your Part B premium. These plans are guaranteed renewable as long as you pay your premium. You will need to sign up for a stand-alone prescription drug plan if you choose this route as these plans do not cover prescription drugs.
Your situation is unique to you, so please reach out with any questions and I can help guide you towards the right decision.