People enrolling in a Medicare plan have several options. Choosing the most appropriate plan depends on an individual’s preferences, circumstances, overall health, and budget.
In this article, we explain the types of Medicare plans available and the coverage they provide.
We also offer advice for people who care for family members with disabilities or illnesses and wish to handle their Medicare affairs.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
The two primary types of Medicare coverage are original Medicare and Medicare Advantage.
There are subtypes under original Medicare. The government manages original Medicare under a fee-for-service arrangement, while Medicare Advantage plans are government-approved but offered by private insurers.
Medicare plans consist of different parts, including:
Medicare Part A
This plan covers inpatient hospital care. Part A also includes hospice care, skilled nursing facility care, and home health care when the person meets specific criteria.
As long as the person paid Medicare taxes during their working life, they do not pay monthly premiums. Those who did not pay sufficient Medicare taxes may purchase this coverage.
Medicare Part B
This optional coverage does require a monthly premium. Part B covers doctor and other healthcare provider services not covered under Part A. Deductibles and co-pays apply.
Medicare Part C
Also known as Medicare Advantage, private insurers sell and administer these policies. However, Medicare must approve any Medicare Advantage plan before insurers can market them.
Medicare Part D
This plan provides prescription drug coverage for a monthly premium, which a person pays in addition to premiums for any other type of Medicare plan they have.
A Part D plan’s coverage depends on its cost, drug formulary, and the insurance provider.
Medicare does not typically cover 100% of medical costs, and most plans require that a person meets a deductible before Medicare pays for medical services.
Part B also charges a 20% coinsurance on many outpatient services, such as doctor consultations and physical therapy.
Part D often has an income-adjusted premium, with higher premiums for those in higher income brackets.
Medicare Advantage plans offer various options that vary based on the network of healthcare providers they offer and how payment for services works.
Consumers may choose between the following:
Health Maintenance Organizations (HMOs): Typically, the plan holder can only receive care from providers in a specified network, except for emergency treatment and out-of-area urgent or dialysis care.
Some plans may have Point of Service (POS) options in which the individual can receive out-of-network treatment.
Preferred Provider Organizations (PPOs): A PPO allows people to visit any doctor or hospital they want in most situations.
This applies to both in-network and out-of-network healthcare providers. However, out-of-network care incurs additional costs.
Private fee-for-service plans (PFFS) Administrators determine what the insurer pays for doctor and hospital coverage, and what the plan holder must pay.
There is no need to choose a primary care doctor or receive a referral to see a specialist in this type of plan. If the plan has a network, costs are lower than seeking treatment out-of-network.
Medicare savings accounts (MSA) MSAs consist of two parts, a high-deductible plan and a tax-free savings account dedicated to healthcare costs.
The deductible depends on the individual plan, and a person must purchase Medicare Part D to receive prescription drug coverage.
Medicare supplement insurance, commonly known as Medigap, covers some out-of-pocket expenses for people with Medicare Parts A and B.
Medigap covers deductibles, co-payments, and coinsurance. A person must have Parts A and B to qualify for a Medicare supplement plan.
Those enrolled in Medicare Advantage should not have a Medigap plan. A person cannot use their Medigap policy to pay their Medicare Advantage Plan copayments, deductibles, and premiums.
Private insurers sell Medigap policies, so coverage varies according to the insurance company. These policies may cover services that are not available under Medicare.
Medigap is a single user policy, so spouses must buy their own coverage.
The costs and benefits of different Medigap policies depend on the insurance company. When it comes to pricing Medigap plans, insurance providers may use one of several methods. These include:
- Community pricing: Premiums are the same regardless of age.
- Issue age-related: When a person starts the policy, the insurance provider factors their age into the premium. That means buying the policy promptly after reaching 65 years of age is more cost-effective.
- Attain age-related: The insurer bases the original premium on the person’s current age, but premiums rise as time passes.
The price of Medigap plans varies by state. As noted, prices are lower when the person buys a policy as soon as they reach the age of Medicare eligibility. Individual insurance companies may also offer discounts.
Medigap does not cover:
- private caretakers
- nursing home care
- vision testing and care
- dental care
- hearing aids
Those with pre-existing conditions should be aware that it may take up to 6 months from the date of buying a Medigap plan before it covers pre-existing health problems.
Those with a Medicare Advantage plan are ineligible for Medigap insurance.
The time may come when a Medicare plan holder can no longer make their own decisions for psychological or health reasons.
Before that time, the person should designate a trusted individual to serve as their power of attorney. A lawyer can prepare this document.
A power of attorney permits an individual to conduct business and make decisions on behalf of the insured person.
This enables them to pay bills, file taxes, collect Social Security benefits, and choose or change healthcare plans on an individual’s behalf.
An alternative is naming a person as a healthcare proxy. This person would make decisions regarding medical treatment but not other financial issues.
This form advises Medicare that the insured person allows the named individual or group to access their medical information.
According to Medicare.gov, approximately 44 million people care for chronically ill or disabled family members nationwide.
These caregivers may benefit from resources that the Centers for Medicare & Medicaid Services (CMS) provide in association with caregiver organizations.
Many caregivers may find that their family members qualify for some form of Medicare home health care. A doctor must certify that such home health care services are necessary.
If a person cannot leave the home and has a care plan that suggests the need for intermittent skilled nursing care, speech and physical therapy, or continuous occupational therapy, Medicare covers home health care.
Caregiving is a demanding task, and the caregiver often spends much of their time meeting the family member’s needs.
Programs that provide financial assistance for caregivers are available. While such payments generally compensate those caring for U.S. military veterans or people on Medicaid, other options are available.
Every state, as well as the District of Columbia, has programs that allow qualifying Medicaid recipients to manage their long-term care.
Depending on state regulations, that may include hiring relatives for the provision of care.
Since each state’s regulations are different, those seeking payment for caregiving must look into their state’s requirements. Many states will not allow a spouse to receive payment for caregiving.
It is often the case that caregivers who live in the same home as the person they care for are not eligible to receive payment for providing care.
If the person in need of care has sufficient resources, they may pay a family member to provide the same services as a home healthcare worker.
They will need to draw up a formal agreement defining services, compensation, and employment terms, among other important factors.
It is best to consult other family members and have an elder law attorney draw up or review the contract.
The lawyer will ensure that the agreement is legally binding and does not affect inheritance or estate planning.
Caregivers must report this income to the Internal Revenue Service (IRS) for taxation reasons.
Original Medicare and Medicare Advantage are the two main types of Medicare.
Original Medicare is available in parts A, B, and D, and Part C takes the form of a bundled plan called Medicare Advantage.
For any of these policies, a plan holder can grant power of attorney to a trusted party or caregiver in case they become unable to manage their affairs.
This means that they can administer the policy on behalf of the plan holder and view information. In some states, caregivers can receive payment for looking after relatives.