“Medicare can be a very complex, confusing subject. Still, it is an essential component of your retirement. A basic grasp of Medicare will help you make better retirement and income decisions.”-Bill Duggan
If you are nearing 65, you may be thinking about making the best choices concerning Medicare. Since it is a government program, you won’t be surprised to find out that Medicare is filled to the brim with confusing terminology, rules, regulations, and deadlines.
One concept that is often hard for pre-retirees and retirees to understand is that Medicare does not cover every medical procedure, prescription, or device you may need as you age. There are, in fact, enough coverage “gaps” that most seniors have to purchase Medicare Advantage Plans or Medicare supplements to ensure that out-of-pocket expenses are covered.
Among other things, Medicare does not cover
- Custodial care (long-term care)
- The majority of dental care
- Glasses and eye exams
- Partial or full dentures
- Hearing aids
- Prescription drugs
- Overseas emergency medical treatment
Even when Medicare does cover a procedure or service, enrollees are still responsible for a significant number of copayments and deductibles. If a person only has “Original” Medicare, they will wind up paying non-covered costs themselves. For this reason, many people with Medicare enroll in one of two types of plans design to cover these gaps in coverage. Medicare “Advantage” plans offer an alternative to Original Medicare. The second option, known as a Medicare “Supplement” (Medigap), is an insurance plan that works in conjunction with Original Medicare coverage. Medicare Advantage and Medigap plans have significant differences in benefits, costs, and how they work. Both choices have pros and cons, and a person nearing age 65 needs to understand the differences.
Essentials of Medicare Supplements and Advantage Plans
Medicare supplements (Medigap) may help you pay certain costs not covered by Original Medicare. Medigap is not, however, a stand-alone policy. You must continue enrollment in Original Medicare Part A and Part B. If you need prescription drug coverage, you will probably want to get a stand-alone Medicare drug plan.
When you purchase a Medicare supplement policy, you remain enrolled in Original Medicare. Your Medicare supplement coverage helps with certain costs, such as co-pays or deductibles. It may also cover Plan B excess charges or overseas medical emergency costs.
Medicare Advantage plans are another alternative to Original Medicare. Those with Medicare Advantage plans continue as enrollees in the Medicare program. However, instead of getting your benefits through the government, you will get them through your Advantage plan.
To purchase Medicare Advantage coverage, you must live in the service area of your chosen plan. You must also have Original Medicare parts A and B. With few exceptions, you won’t be accepted if you have end-stage kidney disease. Medicare Advantage provides most of the same coverages as Original Medicare. Depending on the plan you select, your Advantage policy may also cover routine eye exams, dental, and prescription drugs.
Medicare Advantage Basics
- You can make changes during the two open enrollment periods per year.
- Premiums can be as low as $0.
- Usually covers prescription drugs.
- May cover routine vision care, dental, and hearing.
Medicare Supplement Basics
- When you have a supplement, you can only make changes once per lifetime, with some exceptions for unique circumstances.
- Usually, supplement plans have a monthly premium.
- There is typically no coverage for prescription drugs with a supplemental policy.
- Medicare supplements do not cover routine dental, vision, or hearing.
- These policies may pay all co-pays and co-insurance.
Summary: Medicare does not pay all of a senior’s medical expenses. Gaps in coverage, which necessitate out-of-pocket payments, could be devastating to your budget. Purchasing a Medigap or Advantage policy is a wise idea if you want to avoid budgetary problems due to medical expenses. For long-term care (LTC) needs, some people may benefit from having an annuity with long-term care coverage.
