Understanding Your Medicare Options: Medicare A&B, Supplemental, and Replacement Plans Explained
With the annual Medicare open enrollment period fast upon us, it's important to know all of the options that you have when it comes to your health care. The choices seem almost limitless, and can really be a it overwhelming. You would be surprised to learn that many individuals don't research their options and don't bother to learn about alternatives available to them. Of course we can't cover every single option, as they vary from state to state, and location to location, but with just a bit of knowledge, you can make an educated decision about your health care coverages. With so many companies actually stepping up their sales and marketing efforts, you'll be able to finally make sense of the medical jargon!
The term "medicare" actually refers to multiple coverages. Broken up into parts, you may be eligible for some parts and not others. The two most common parts are A&B. Generally offered to individuals aged 65 or older, Medicare parts A&B are a staple of the health care industry. Part A covers patients for inpatient stays in medical facilities, where part B refers to out patient procedures and visits such as Emergency Room services as well as doctors visits.
The advantages of Medicare A&B is that it can be an easy choice, and since there is no additional charge for it, these are coverages worth having. Now this isn't to say that you get FREE health care after age 65, but instead you get a pretty good discount. If you have read my other article about deductibles, and co-insurances, this plan actually has both.
When it comes to an inpatient stay or part A, Medicare covers 80% of the charges after your deductible has been met. At almost $1500, this deductible can be a substantial amount of money for any retiree. To make matters worse, this isn't an annual deductible like most insurance carriers, instead it resets quarterly. So lets say you experience an inpatient visit in January and again in May, you would have to pay the deductible twice as well as be responsible for 20% of the charges! If you however experienced inpatient services in January, then again in March, you would only owe the 20% if you consider your deductible was already met.
Part B is a bit of a different animal. With an annual deductible hovering right around $150, this covers the patient for out patient services such as doctors visits and out patient services. While the deductible isn't an absurd amount of money, you'll still be billed your fair share of services which can add up quickly if you need repeat treatments such as wound care or out patient therapy.
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Not too thrilled about the potential out of pocket expenses you may have with regular plain ole' Medicare? Then you may wish to actually replace medicare all together. These so called "Replacement Plans" do just that, they take the place of your medicare benefits and you are services by the health care provider of your choice. With PPO and HMO options available from all sorts of different providers, you certainly have options.
Replacement plans generally cost extra, and in most cases are automatically deducted from your social security check. The amount that is deducted depends on the provider and plan you choose. While many replacement plans still have things like deductibles, they can introduce you to the world of copays! That's right, you get to pay the facility providing you services a nominal fee for each and every time you visit. The advantage to this system is that the copays are usually reasonable fore outpatient services, but can vary drastically for inpatient stays. Inpatient works a bit differently, and usually feature a "Daily Copay". It is very common to have a daily copay with a maximum number of days.
For example, if you have a daily copay for days 1 through 10 of $100, you would pay $10 for each day you are actually in the hospital. If you were there for say seven days, you would owe $700 as your copay. However, if you were a long term patient and you were hospitalized for 17 days, you would stop being billed for the copay as of day 10, leaving a maximum co-payment of $1000. On the flip side, I have also seen plans that have a higher daily rate, but cap out earlier. For example, a $375 daily rate for days 1-3. This could leave you with a maximum copay of $1,125. Either plan could be beneficial to a patient depending upon their medical history and average length of stay that they have had in the past.
Remember just because you have a copay, doesn't mean you won't also have a co-insurance as well where you're also expected to kick in a contractual percentage towards the bill! It's also interesting to note that if you elect for a replacement plan, you will be asked to essentially sign over your Medicare administration to a completely independent health care company. They will receive payments from the federal government wether you use their services or not. Because this is a guaranteed revenue stream, many companies have recently stepped uo the promotion and sales of replacement plans.
Have you ever taken vitamin supplements? You know what I mean, you already have a healthy diet, but just need you know, a little extra boost. Supplemental plans can fit the bill! Supplemental plans are generally added in addition to your Medicare A&B plan and help you cover the out of pocket expenses that you may have. Remember that quarterly deductible I mentioned as well as the 20% that you're expected to pay? Supplemental plans will generally take care of these charges for you. It's sorta like an insurance plan for your insurance.
While I'm sure someone will correct me on this one, I don't believe supplemental plans are automatically deducted from social security, but instead are added, or "bolted" on to your existing plan. It's up to the patient or consumer to pay for this plan on your own. While I'm not championing a particular plan here, I know a popular choice is the AARP supplemental coverage. Not only does it cover copays and deductibles, but may also offer prescription benefits that might not otherwise be available to you.
While it's important to not that not all supplemental plans are the same, it's good to watch out for limitations when it comes to coverages. Make sure you read the fine print, because you may have bought an ACME brand supplemental insurance for a really good monthly price, it may only cover you up to a certain amount in a given period of time.
Medicaid As A Backup
For individuals that are unable to afford their health care expenses, it's important to note that another secondary option might also be available to you. Not to be confused with Medicare, Medicaid is another federally funded medical program that is administered at your state level. Each state has different criteria, application processes, and hoops to jump through, but it's important to know that Medicaid might be able to pick up the slack. many people believe that they are mutually exclusive, but you can in fact have both! If you are fortunate enough to get approved for both plans, your Medicaid coverage would essentially be setup as a secondary insurance just like a supplemental plan. Although the benefits greatly vary for each state, this additional coverage may pay for all of the expenses that medicare leaves you with.
Some states have a Medicaid Share of Cost program that will only pay out if you reach or exceed a certain threshold. While this certainly isn't ideal for the patient, it is a nice safety net for those that otherwise would not be able to afford a catastrophic medical disaster.
But I'm Still Employed!
If you are still employed at age 65, you may have some different options. If you are offered commercial insurance from your employer, you may only qualify for Medicare part A, which again covers you only for inpatient stays, and not regular routine medical stuff. In this case Your emergency room and doctors visits wouldn't be covered by medicare, but must be picked up via your commercial insurance plan. This has its advantages, because your employer might actually reduce the cost you would have to pay for the insurance because Medicare part A could potentially be billed the brunt of your medical expenses.
So how do you ultimately make your decision on what type of plan to purchase? Well it's really a toss up. The only person who can make that decision is you. You must weight the advantages and disadvantages of each of your options. Be sure to take into consideration, your current health, as well as your family health history. If your family has a history of disorders that commonly hospitalize the patient, you may wish to minimize your out of pocket co payments, or you may want to save some cash and just use regular Medicare A&B if your a generally healthy person. Whatever decision you make, it's important to realize that it's not a life decision! You can always change your mind during the next open enrollment period.
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