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How To Choose the Right Medicare Plan for You

Medicare is a complex program with many different parts and ways to get coverage. Some people opt for Original Medicare (Parts A and B) and may choose to supplement this coverage with a Medigap policy or a Part D plan. Others may opt for a Medicare Advantage plan instead. To choose the best Medicare plan to suit your needs and goals, you should consider your health history, anticipated healthcare needs, and your budget.

Consider Your Typical and Upcoming Health Coverage Needs

Health coverage helps you pay for the medical care you need through copays, deductibles, and coinsurance. Out-of-pocket costs for healthcare without insurance like Medicare is substantially higher. When selecting a Medicare plan, consider your typical health care needs, as well as any planned health expenses like scheduled surgical procedures.

If you are considering a Medigap, Medicare Advantage, or Part D plan, know that coverage may vary from one plan to another, so it’s important to select one that covers the specific services you usually need. For example, if you see a specialist like a dermatologist multiple times a year because you are at a higher risk for skin cancer, make sure the plan you choose will cover it. In addition, find out if your doctors and specialists are in its network to avoid out-of-network issues and costs.

As you shop for plans, also consider any upcoming procedures you have scheduled. For example, if you have a surgery set for later in the year, you may want to confirm that the hospital is part of a plan’s network, as out-of-network facilities may not be covered. This could result in significantly higher out-of-pocket costs.

What Original Medicare Covers

Original Medicare is also known as traditional Medicare. It consists of two parts: Part A and Part B, each covering a different set of services. However, it’s important to note that some types of care are not covered by Original Medicare. People eligible for Medicare may choose to enroll in one or both parts:

  • Part A (Hospital Insurance): Part A offers coverage for a variety of hospital-related services, including inpatient hospital care, short-term skilled nursing care, hospice care, and home health care.
  • Part B (Medical Insurance): Part B offers coverage for a number of medically necessary and preventive services. Covered services include doctor’s visits, ambulance services, and durable medical equipment

If you enroll in Original Medicare, you can get these covered services from any doctor, healthcare provider, or healthcare facility that accepts Medicare. If you see a provider who does not accept Medicare, you are generally responsible for the entire cost of your care, except in emergencies.

While Original Medicare offers coverage for many healthcare services, there are some exclusions to be aware of. Some services Original Medicare generally does not cover include:

  • Routine eye exams
  • Glasses and contact lenses
  • Dental care
  • Dentures
  • Hearing aids
  • Long-term care

What Medicare Advantage Covers

Medicare Advantage is an alternative to Original Medicare, and is also known as Medicare Part C. Medicare Advantage plans are required to cover the same benefits as Original Medicare, but they may offer additional benefits.

Medicare Advantage plans are sold by private insurance companies approved by Medicare. These bundled plans include Medicare Part A and Part B coverage, just like Original Medicare, and extra benefits may vary from one plan to another. These may include:

Medicare Advantage plans may have different rules than Original Medicare about how you get services. For instance, you may need a referral to see a specialist. If you join a plan that has a network, you may need to get care from doctors, healthcare providers, and healthcare facilities that participate in the plan, though there may be exceptions to these rules, such as emergency care or if you need to attend out-of-network urgent care.

What Medicare Supplement Insurance (Medigap) Covers

Medicare Supplement Insurance, or Medigap, is supplemental private coverage that helps fill the “gaps” in Original Medicare. It could help cover out-of-pocket costs, such as copays, coinsurance, and deductibles. However, Medigap policies are only valid additions to Original Medicare and cannot be used to supplement Medicare Advantage plans.

There are 10 standardized Medigap policies labeled A, B, C, D, F, G, K, L, M, and N. The lettered plans available to you may vary depending on when you became eligible for Medicare and what state you live in. Each standardized policy offers full or partial coverage for these basic benefits:

  • Medicare Part A hospital coinsurance
  • Additional 365 days of hospital coverage
  • Medicare Part A hospice coinsurance or copayment costs
  • Medicare Part B coinsurance or copayment costs
  • Blood transfusion (first 3 pints)

Some of the 10 standardized Medigap plans also offer full or partial coverage for additional benefits:

  • Medicare Part A deductible
  • Medicare Part B deductible
  • Medicare Part B excess charges
  • Skilled nursing facility coinsurance costs
  • Emergency care outside the United States

Medigap works a bit differently in Massachusetts, Minnesota, or Wisconsin. Each of these states has its own set of standardized Medigap policies, though they are not the only states with state-specific Medigap guidelines. You can contact your State Insurance Department for more information.

What Medicare Part D Covers

Medicare Part D is optional prescription drug coverage for people with Medicare. Many Medicare Advantage plans include Part D drug coverage, but there are also standalone Part D plans that can add drug coverage to Original Medicare.

Medicare Part D drug plans may cover both name-brand and generic prescription drugs. The list of covered drugs, known as the formulary, may vary from one plan to another. Each plan is generally required to cover two or more drugs in each prescription drug category. However, plans are required to cover more drugs in certain protected classes, including:

  • Antipsychotics
  • Antidepressants
  • Anticonvulsants
  • Immunosuppressants
  • Cancer drugs
  • HIV/AIDS drugs

If you take a prescription drug that your plan doesn’t cover, your doctor may recommend taking a similar drug that’s on your insurer’s formulary. If no similar drug is available, your doctor can request an exception for your plan to cover the prescription, though this does not guarantee coverage.

Medicare drug plans may provide a network of pharmacies where you can pick up your prescriptions, and so may not cover drugs you get from out-of-network pharmacies. Some plan networks also have preferred pharmacies where you may pay lower copays for your medication.

Consider the Costs of Each Option

When you’re considering health insurance options, cost may be an important factor. Some of the costs to keep in mind as you look at Medicare plans include:

  • Premiums: The monthly fees you pay to Medicare or to your insurance company for health coverage.
  • Deductibles: The amount you’re required to pay out of pocket before your health coverage kicks in. 
  • Coinsurance: The amount you’re required to pay as your share of the cost of covered services. Coinsurance is generally a fixed percentage, such as 10% or 20% of the service cost.
  • Copayments: Like coinsurance, a copayment refers to your share of your care costs. It’s generally a fixed dollar amount, such as $10 or $20.

You may also want to consider how each plan covers your specific doctors and drugs because if your doctors are out of the plan’s network or your drugs aren’t on the plan’s formulary, you may pay higher costs.

What Original Medicare Costs

If you enroll in Original Medicare, you may pay a monthly premium for Part A and/or Part B. Other costs in Original Medicare include deductibles and the coinsurance or copayments for your medical care.

Many people with Medicare don’t pay monthly premiums for Part A. You may be eligible for “premium-free Part A” if you or your spouse paid Medicare taxes while working. If you aren’t eligible for premium-free Part A, you may be able to purchase it. Costs for Part A in 2022 were either $274 or $499 a month, depending on how long you or your spouse have paid Medicare taxes while employed. But even if you choose to not enroll in Medicare Part A because you must pay a premium, you can still enroll in Medicare Part B for medical coverage. However, if you are eligible for premium-free Part A, it is best to stay enrolled.

The standard premium for Part B in 2022 is $170.10 per month, though those with higher incomes may pay higher premiums. This applies to people with individual incomes over $91,000 per year, or $182,000 per year for joint filers.

Your other costs may vary depending on the care you need. For instance, for Part B services, you may pay a 20% coinsurance for care after you’ve met the $233 deductible. 

What Medicare Advantage Costs

Medicare Advantage plans are offered by private insurance companies, so your costs may vary depending on the specific plan you choose. These costs may include supplemental premiums, deductibles, copayments, and coinsurance.

Because Medicare Advantage still includes Part A and Part B, you will still need to pay those premiums, and some plans charge a supplemental premium in addition to your Part A and Part B premiums. In 2022, the average premium for a Medicare Advantage plan is $19 per month. Keep in mind, though, that because Medicare Advantage plans are offered by private companies, costs will vary based on plan and insurer.

Deductibles, copayments, and coinsurance may vary from one plan to another, so check the plan details to find out what you might pay for your care. These amounts may be different than the cost-sharing requirements with Original Medicare. In addition, Medicare Advantage plans have an annual out-of-pocket maximum, which means there’s a cap on your share of covered medical expenses. This limit may vary from one plan to another as well.

What Medicare Supplement Insurance (Medigap) Costs

Private insurance companies set the prices for their Medigap policies. Your costs may vary depending on the standardized plan you choose — A, B, C, D, F, G, K, L, M, or N — and the company you buy it from.

There are three ways insurance companies can set their Medigap premiums. Learning what method a company uses can help you understand how your premiums might change in the future:

  • Community-rated: The premium is the same for each person who buys the Medigap policy, regardless of their age.
  • Issue-age-rated: The premium is determined based on your age when you buy the policy.
  • Attained-age-rated: The premium is set based on your age when you buy the policy, but it may automatically increase as you get older. 

Some insurance companies may offer lower premiums for certain people, such as nonsmokers or those who pay their premiums annually instead of monthly.

What Medicare Part D Costs

Your costs in Medicare Part D may vary depending on the plan you choose, as it is offered by private insurance companies. The average monthly premium is $33 in 2022. The drugs you take and how your plan covers them may also affect your costs. Insurers may place drugs in different tiers, and drugs in lower tiers may have lower copayments than drugs in higher tiers. While tiers may vary from one plan to another, here’s an example of what your costs might look like:

  • Tier 1: Generic prescription drugs, with a lower copayment.
  • Tier 2: Brand-name drugs, with a medium copayment.
  • Tier 3: Specialty drugs, with a higher copayment.

If you take drugs that aren’t on your plan’s formulary, you may need to pay for them out of pocket. However, you or your doctor could request an exception, and the plan may agree to cover your drugs.

Consider Your Schedule

If you’re eligible for Medicare, you can sign up or change your coverage at specific times throughout the year. Mark your calendar with these enrollment windows:

  • Initial Enrollment Period: This 7-month period starts 3 months before you turn 65, or 3 months before your 25th month of getting disability benefits.
  • Open Enrollment Period: From October 15 to December 7 each year, you can apply for Medicare Advantage or Part D plans. Changes take effect January 1.
  • General Enrollment Period: If you miss your initial enrollment period, you can sign up for Medicare from January 1 to March 31 each year. Coverage starts July 1. A late enrollment penalty may apply.
  • Special Enrollment Period: If you experience certain life events, such as losing your current coverage, you may be able to sign up for Medicare outside of the typical enrollment windows without a late enrollment penalty.

Putting It All Together

Medicare is a complex program, and it can be challenging to narrow down the options that are right for you. Carefully consider your typical and upcoming healthcare needs, your personal financial situation and budget, how soon you need your coverage to begin, and the enrollment periods when weighing your options. If you need more information about how to pick a Medicare plan, you can reach out to Medicare or a licensed agent.

You’re just a few steps away from seeing your Medicare plan options.

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You’re just a few steps away from seeing your Medicare plan options.

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