The AB and D to C of Medicare

For those of you living in the United States, are you, yourself, or someone you know nearing retirement? If yes, then health coverage might be of concern. Afterall, healthcare costs average approximately 30% (and progressively increases with age due to higher rates of contracting long-term illnesses) of a retiree’s yearly expenses. The good news is that there are many health coverage choices for those 65+. The downside, however, is that health coverage for seniors is a complex system consisting of both public and private insurances. Since roughly 95% of retirees rely on Medicare for health coverage and it is currently Medicare’s open-enrollment season, this article will discuss the various options available to help enlighten those who may be confused.

Traditional Medicare

Traditional Medicare consists of Part A and Part B. Part A covers hospital bills, and Part B covers the expenses of doctors’ visits amongst other services. There is no cost to Part A, while Part B averages $100-$325/mo (higher rates will apply to those with higher income). The pro of traditional Medicare is that the plan is accepted at almost all hospitals and medical offices. The cons are as follow:

1. Prescriptions are not covered.
2. There is a $1,156 deductible charge per benefit period for hospital stays.
3. There is a 20% coinsurance charge on most doctors’ bills.
4. There is currently no annual limits on out-of-pocket expenses that the patient will be responsible for.

Thus, most individuals will usually add Part D to his or her traditional Medicare plan. Part D will cover prescriptions costs for a monthly premium ranging from $10-$70 (depending on income) on top of the Part B premium. Retirees also have the option of supplementing the above costs with retiree benefits if their companies offer them OR with a Medigap policy, which covers some or all deductibles and coinsurances (costs range from $200-$500/mo).

Medicare Advantage

Medicare Advantage, otherwise known as Part C, consists of a list of private health insurance plans that retirees can choose from. Most of the plans in Part C offer vision, dental, and prescription coverage. Monthly premiums range from $125-$175/mo (depending on plans), and there is an annual out-of-pocket cap of $6,700. So, what’s the downside?

1. Only expenses with in-network providers are covered, and providers are usually regional, which means that one can usually only see providers in his/her county of residence. For example, if one resides in San Jose but has to see a specialist in Palo Alto because of a specific condition, Part C may not cover any of the fees.
2. Out-of-pocket costs vary depending on plan. For instance, some of the offered plans charge nothing for hospital stays while others may charge a copayment, deductible, or coinsurance.

Hence, when it comes to choosing between the traditional Medicare Part A+B+D or the Medicare Advantage Part C, it is important to calculate all out-of-pocket costs and check to see if desired providers will accept the specific insurance plan. Hopefully, this article have helped those who are struggling to differentiate between the varying parts of Medicare. Don’t forget: the deadline for Medicare open-enrollment this season is December 7, 2011!