Step #1 - Learn About Basic Medicare Coverage

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When you are new to Medicare, learning about basic Medicare coverage and Medicare Supplement Insurance (also called Medigap) should be your first step. Understanding the basics will ensure you get the coverage you need, at a price you can afford.

In this first step of this "Medicare Getting Started Guide" you will learn about:

  1. Basic terminology & original Medicare coverage
  2. Options available to people on Medicare
  3. Medicare Supplemental Insurance
  4. Medicare Part D Prescription Drug Plans
  5. Medicare Advantage Plans

1) Basic terminology & original Medicare coverage
One of the most confusing things about Medicare & Medicare Supplemental Insurance are all the confusing terms. Many of which sound completely differently, but mean the same exact thing.

"Basic Medicare" and "Original Medicare" mean the same thing. This refers to Medicare Part A & B (Basic Hospital and Medical Coverage). Most people are automatically enrolled into both Parts A & B upon reaching the age of 65. It is a good ideal to check with Medicare about 2-3 months before going on Medicare to ensure everything is going smoothly. Medicare can be reached by calling 1-800-MEDICARE. To learn more about this, you can visit our page on enrolling in Medicare.

Another confusing term is "Medicare Supplemental Insurance". This type of insurance is NOT a drug plan, and it is also NOT a Medicare Advantage Plan. "Medicare Supplemental Insurance" is also called "Medigap". This specific type of insurance is a secondary insurance policy that compliments Medicare, and many senior citizens will purchase this to cover the "gaps" in original Medicare benefits. Remember, Medicare does not pay everything; or even close to it.

A "Medicare Advantage Plan" is also called "Medicare Part C" or a "Medicare Replacement Policy", all meaning the same exact thing. Many people confuse this coverage with "Medicare Supplement Insurance". They are NOT the same, and are actually two completely different types of insurance coverage. Medicare Advantage Plans are a direct replacement of Basic Medicare, and when you sign up for a Medicare Advantage Plan, you must follow the rules and regulations set fourth by the Medicare Advantage Plan company that you signed up with. These types of policies have seen major regulation, which have had serious negative impacts within the past few years, both at the public and federal level. They are quickly becoming a less popular choice every year. Insurance companies try to boast that these policies are so "cheap", however the coverage on this type of plan is significantly below most people's "comfort" zone.

Medicare Supplemental Insurance

2) Options available to people on Medicare
Just about everyone that gets Medicare will have both Part A and Part B (Hospital & Medical). Most of the time, Medicare Part A is virtually free as long as you have worked 40 quarters (10 years). Medicare Part B is generally paid by you, and the monthly payment usually comes out of your Social Security check before you receive the payment.

Regardless of what type of "Medicare Supplemental Insurance" or "Medicare Advantage Plan" you purchase, either way you will have Medicare Parts A & B. This really makes your only two additional options either purchasing a Medicare Supplement Plan, or a Medicare Advantage Plan. Furthermore, most people will also purchase a separate "Medicare Part D Drug Plan" to help cover their medication costs.

There are not necessarily "all sorts of options" like many people think, and get overwhelmed about. There are really only 3 considerations you should have. The options below might help to make more sense. Keep in mind that most people will have both Medicare Part A & B (hospital & medical). You cannot purchase a Medicare Supplement Plan or a Medicare Advantage Plan without having both Part A & B of Medicare...

Option #1

  1. Basic Medicare Parts A & B Only
  2. *Optionally - Medicare Part D Prescription Drug Coverage

Option #2

  1. Basic Medicare Parts A & B
  2. A Medicare Supplement Policy (Pays After Medicare)
  3. *Optionally - Medicare Part D Prescription Drug Coverage

Option #3

  1. Basic Medicare Parts A & B
  2. A Medicare Advantage Plan (Replaces Medicare Parts A & B)
  3. *Optionally - Medicare Part D Prescription Drug Coverage

3) Medicare Supplemental Insurance (Most Popular Choice)
Most people who are on Medicare will purchase Medicare Supplemental Insurance. This type of insurance is designed by the centers for Medicare & Medicaid Services (CMS). Currently, there are 10 plans on the market. To make it easy, these plans are set up in a letter system ranging from Plan A to Plan N (there are Plans A, B, C, D, F, G, K, L, M, and N). That might seem like a lot of different plans, but most of them are very, very similar. So much so, that over 90% of the plans that people purchase are either the Plan F, Plan G, or Plan N. This type of coverage is sold by private insurance companies (like Mutual of Omaha and Gerber Life Insurance). However, with these plans, since they are designed by CMS, the coverage is identical from company to company. The only difference is price, so it is a good idea to compare rates before you make your final decision. "Plan F" covers 100% of the gaps left by Medicare, and has no co-pays, no deductibles, and no out-of-pocket expenses. On Step #3 of this guide you will be learning more about these types of policies.

4) Medicare Part D Prescription Drug Plans
"Medicare Part D" is also called a "Medicare Prescription Drug Plan". As the name suggests, Medicare Part D provides coverage for prescription Medications. Medicare Part D is the fourth "part" to Medicare. Medicare Part D is simply a drug plan. This type of coverage is not provided directly by Medicare. If you need prescription drug coverage, you can call Medicare (1-800-MEDICARE) and they will assist you with price & plan comparisons to help you find a drug plan that works for you. The prescription drug plans are sold by private insurance companies that are contracted with Medicare to provide the "Medicare Drug Plans". Each company might cover different medications for a different cost, some medications may not even be covered at all. You can view our page on Medicare prescription drug plans to learn more.

5) Medicare Advantage Plans (An Increasingly Unstable Option)
Medicare Advantage Plans are also called "Medicare Part C", or a "Medicare Replacement Policy". This type of coverage was introduced not too long ago and started off strong, however in recent times, the Medicare Advantage system has seen some serious negative problems. These types of policies can come in different forms, and can include either a HMO (Health Maintenance Organization), a PPO (Preferred Provider Organization), or a PFFS (Private Fee For Service). If you sign up for this type of coverage, you will be replacing your "Original Medicare" coverage, and will be locked into the rules and regulations set fourth by the Medicare Advantage Plan company you sign up with. Medicare Advantage Plans require you to only use certain doctors and certain hospitals (in network). They generally also require you to pay significant deductibles for hospitalizations. It is not uncommon for people to have to pay a $200 - $250 deducible per night for hospital stays.

Medicare Advantage Plans are also not guaranteed renewable like Medicare Supplement Plans are. The way Medicare Advantage Plans are funded is by subsidies (financial assistance) from the government. Medicare will pay on average $600 - $800 per month to the Medicare Advantage company if you decide to take the Medicare Advantage option as opposed to keeping your basic original Medicare. If you enroll in a Medicare Advantage Plan, you will replace your original Medicare coverage (Parts A & B). If you do this, Medicare will no longer pay any of your claims. Some Medicare Advantage Plans can include a Part D Drug Plan. Some plans even have very low premiums. However, most seniors want quality coverage, and an insurance plan that will be there to pay all of their claims if or when they have health problems. Many seniors do not feel that a Medicare Advantage Plan will provide adequate coverage, and often prefer Medicare Supplement Policies. Medicare Advantage Plans usually have significant co-pays, deductibles, co-insurance, and out-of-pocket expenses, making it extremely difficult to budget, and often too expensive for people on a fixed income to afford.


Continue to Step #2 | Understand

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