Kirk M. Hale

Understanding the Four Parts of Medicare

Medicare, the federal health insurance program for individuals aged 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease, is comprised of four distinct parts:

Part A (Hospital Insurance): This covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Most people don't pay a monthly premium for Part A if they or their spouse have worked and paid Medicare taxes for a certain period ( 10 Years or 40 Quarters). It's important to understand that while Part A helps with hospital costs, it doesn't cover everything, and there are deductibles and coinsurance involved. Claims are filed here when there is an an overnight hospital stay.

Part B (Medical Insurance): This covers certain doctors' services, outpatient care, medical supplies, and preventive services. Most people pay a monthly premium for Part B, which can vary based on income. Part B also has an annual deductible and coinsurance for most services. Claims are generally filed here for all other services covered by Medicare other than an overnight hospital stay.

Part A and part B are called Original Medicare

Part C (Medicare Advantage): These plans are offered by for profit private insurance companies that contract with Medicare to provide Part A and Part B benefits. Many Medicare Advantage plans also include Part D (prescription drug coverage) and may offer extra benefits like vision, hearing, and dental. When you join a Medicare Advantage plan, you're essentially choosing to receive your Medicare benefits through this private plan instead of directly through Original Medicare. These plans often have network restrictions, require referrals, and have different cost-sharing structures (copays, deductibles, and coinsurance) that can vary widely.

You must decide to either stay with Original Medicare or select an Advantage plan. You cannot have both. The default choice when getting Medicare benefits is Original Medicare. I call this the fork in the road.

Part D (Prescription Drug Coverage): This helps cover the cost of prescription drugs. It's offered by private insurance companies that have been approved by Medicare. Enrollment in Part D is voluntary, but if you don't enroll when you're first eligible and don't have other creditable drug coverage, you may face a late enrollment penalty. Part D plans have their own monthly premiums, deductibles, copays, and formularies (lists of covered drugs).

Original Medicare with Supplemental Insurance vs. Medicare Advantage: A Closer Look

The decision between Original Medicare with supplemental insurance (Medigap) and

 Medicare Advantage is a significant one with different trade-offs. Here's why many find Original Medicare with a Medigap plan to be a more viable choice:

1. Greater Freedom and Choice of Providers:

• Original Medicare: You can generally see any doctor or hospital in the United States that accepts Medicare. This provides unparalleled flexibility, especially if you travel frequently or have specialized medical needs that might be best addressed by out-of-network providers in a Medicare Advantage plan.
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• Medicare Advantage: These plans often have network restrictions (HMOs or PPOs). Seeing a doctor outside of the network may result in higher out-of-pocket costs or no coverage at all. While some PPOs offer out-of-network coverage, it's usually at a higher cost. Referrals from a primary care physician are often required to see specialists within an HMO.
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2. More Predictable Out-of-Pocket Costs:

• Original Medicare with Medigap: Medigap policies are designed to help pay some or all of the out-of-pocket costs associated with Original Medicare, such as deductibles, coinsurance, and copays. This can lead to more predictable healthcare expenses, as you may have little to no cost-sharing for covered services, depending on the Medigap plan you choose.
• Medicare Advantage: While Medicare Advantage plans may have lower monthly premiums than Original Medicare with a Medigap plan, they often have higher out-of-pocket costs when you actually use healthcare services. These costs can include copays for doctor visits, specialist visits, hospital stays, and other services. There's also an annual out-of-pocket maximum, but reaching it can still be financially burdensome.
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3. Simpler Administrative Processes:

• Original Medicare: Billing is generally straightforward. Medicare pays its share, and then your Medigap plan pays its share directly to the provider. You typically don't need pre-authorizations for most services.
• Medicare Advantage: These plans often have more complex administrative

   processes, including the need for prior authorizations for certain procedures and services. This can sometimes lead to delays in care or denials of coverage.

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4. Greater Stability and Less Frequent Changes:

• Original Medicare and Medigap: Original Medicare benefits are relatively stable, and while Medigap plan premiums can change, the core benefits of each standardized Medigap letter plan remain consistent year after year.
• Medicare Advantage: Plan benefits, provider networks, and drug formularies can change annually. This means you need to review your plan each year to ensure it still meets your needs. These changes can be disruptive and require you to switch plans if your doctors are no longer in the network or your medications are no longer covered.
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5. Better Coverage for Serious Illnesses and Complex Medical Needs:

• Original Medicare with Medigap: The comprehensive coverage provided by Medigap plans can be particularly valuable if you develop a serious illness or have complex medical needs that require frequent and specialized care. The lack of network restrictions and the predictability of costs can provide peace of mind during challenging health situations.
• Medicare Advantage: While Medicare Advantage plans can offer good routine care, the network restrictions and potential for higher cost-sharing for specialized or out-of-network care might be a disadvantage if you face significant health issues.

6. You may never get a chance to get a Medicare supplement policy if you go with an Advantage plan depending on how long you have been enrolled in one.

In Conclusion:

While Medicare Advantage plans can be attractive due to potentially lower monthly premiums and the inclusion of extra benefits, Original Medicare with a Medigap plan often offers greater freedom of choice, more predictable out-of-pocket costs, simpler administration, and more stable coverage. For individuals who prioritize access to a wide range of providers and want more certainty about their healthcare expenses, Original Medicare with supplemental insurance is often the smarter and more strategic choice in the long run.

It's crucial to carefully consider your individual healthcare needs, financial situation,

 and preferences when making this important decision. Consulting with a knowledgeable insurance advisor can also be beneficial.

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2025 Basic Benefits
•Hospitalization Coinsurance for days 61-90 is ($419 per day) and days 91 and after while using lifetime reserve days is ($838 per day)
• Payment in full for 365 additional hospital days
• 20% coinsurance for physician and other Medicare Part B services
 

Medicare Part A Hospital Deductible
• The 2025 deductible is $1676
 

Skilled Nursing Facility (SNF) Coinsurance
• $209.50 a day for days 21-100 in a Skilled Nursing Facility in 2025

Medicare Part B Yearly Deductible
• The 2025 deductible is $257

Medicare Part B Excess Charges
• Difference between doctor's charge and Medicare's approved amount
• Up to 15% above the Medicare approved charge which is the doctor’s maximum charge

Foreign Travel Emergency
• Pays 80% of the cost of emergency care during the first two months of each trip after you pay a $250 deductible
• Lifetime maximum of $50,000

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