A common misconception when it comes to Medicare is that once you sign up, you get all the health care coverage you need. While Original Medicare (Part A and Part B) covers hospitalizations and doctor visits, for many, there are still significant gaps in coverage, which is why there are products like Medicare Advantage and Medicare Supplement. To pick the right plan for you, you must first understand the difference between Medicare Advantage and Medicare Supplement. Here’s what you need to know.
What Does Medicare Cover?
Before you can decide if you need different coverage or supplemental coverage, you need to know what Medicare covers. Medicare consists of four different parts, with each part providing a different type of health care coverage. Part A and Part B are considered Original Medicare. This is the coverage that many people have since Part A is mandatory with Social Security.
Coverage provided by Part A includes:
- Inpatient hospital care
- Skilled nursing facilities
- Surgery
- Home health care
- Lab tests
- hospice
Individuals can opt-out of Part B, given they meet specific parameters, such as a spouse having qualifying insurance. Most people, however, will simply pay the Part B premium so they can add medical insurance to their hospital insurance (from Part A). Part B coverage includes things like:
- Doctors’ visits
- Outpatient Care
- Durable medical equipment
- Home health care
- Preventative services
To get prescription coverage, individuals will need to purchase a Part D plan offered by private insurers. The premiums and plans will vary by insurer and which prescriptions are covered. However, as of 2020, you won’t pay more than 25% of the cost of your medications with Part D.
Original Medicare and Part D do NOT include any kind of coverage for:
- Acupuncture
- Most chiropractic services
- Cosmetic surgery
- Dental care
- Dentures
- Eye exams (related to prescribing glasses)
- Foot care (routine)
- Hearing aids or any fitting appointments
- Long-term care/ custodial care
- Most traveling outside the US
This type of coverage requires either a Medicare Advantage plan (Part C) or supplemental Medicare insurance, offered through private insurance companies.
What is Medicare Advantage?
Essentially, Medicare Advantage is considered an all in one solution for Medicare. Medicare Advantage is an optional health care plan that combines coverage for all of the services covered by Part A and Part B. However, these plans also include additional coverage for services not covered by Original Medicare. In fact, many of these plans have prescription coverage (Part D) as well.
While federal programs manage Original Medicare, Medicare Advantage plans are sold via Medicare-approved private insurers. However, one of the issues with these plans is that they are often regional plans, meaning they will only cover services or care within a particular region or even a health care system. If you plan on traveling or relocating after you retire, your health care coverage could be affected.
Another issue with Medicare Advantage plans is that there are extra costs involved for the additional coverage. The monthly premiums for this coverage could be in addition to the Part B premium, depending on which plan you choose.
What is Medicare Supplement?
If you want better coverage but don’t want to pay the extra cost that comes with a Medicare Advantage plan, it’s time to consider Medicare Supplement or Medigap. Medigap provides coverage for services missing in Original Medicare. Some of the additional services that Medigap can cover include:
- Additional days for inpatient hospital care
- Skilled nursing
- Coverage when traveling out of the state or country, depending on the plan
- Medicare deductibles, copays, and coinsurance
The exact coverage provided will depend on the plan you select from a private insurer. Plan names range from A-G and K-N. However, most Medicare Supplement plans will not cover prescription drugs, routine dental, vision, or hearing appointments and services, or long-term care services.
As for pricing, you’ll have to pay two separate monthly premiums– one for Medigap and one for Part B. The actual premium for Medigap varies depending on your age, gender, location, and the specific plan you select. Additionally, pricing will vary depending on the deductible level you are comfortable with, as high deductibles have low monthly premiums while low deductibles have higher premiums.
Quick Recap
The bottom line is that Original Medicare does not provide comprehensive health care coverage. If you want to have better coverage as you head into retirement, both Medicare Advantage and Medigap are optional plans to help you achieve this. But you can only choose one or the other. You cannot choose both. Picking the best option for you depends on your budget and your long-term plans.
Additionally, you want to make sure that you always check the annual updates for the plan you choose to ensure your coverage still meets your needs. For more information on Medicare and how to get the best coverage for your needs, check out my free book: 10 Steps To Getting What You Deserve: A Guide To Your Social Security And Medicare Decisions.