Before selecting a Medicare plan, a good place to start is looking at all of the options that are available to you—and there are a lot of them.
How do you know what’s the best Medicare option for you, your lifestyle, and your health needs? We’re breaking down a few options for Medicare coverage and what you need to know about each to help you decide what type of coverage you need.
Option 1: Original Medicare Only
Original Medicare helps to cover the big stuff in Part A (like hospitalization, skilled nursing facility, and hospice care) and in Part B (like doctor appointments, outpatient care, many preventive services, durable medical equipment, occupational/physical therapies, and home health care). But Original Medicare only covers 80% of your Part B expenses; you are responsible for the remaining 20%, which can add up. Learn more about the different parts of Medicare here.
Option 2: Original Medicare Plus a Part D Prescription Drug Plan
If you have Original Medicare and need coverage for prescription drugs, you may need to enroll in a Medicare Part D Prescription Drug Plan, often called a “stand-alone PDP.” That’s because Original Medicare doesn’t cover prescription drugs. Prescription drug plans are only offered by private insurance companies, so you will need to pay an additional monthly premium. There are 4 phases of Medicare Part D. Let’s take a look at each of them.
What Are the 4 Phases of Medicare Part D?
- Deductible phase. You pay for your prescriptions until you meet your deductible. Once you reach your full deductible, if any, the initial coverage phase begins.
- Initial coverage phase. You’re only responsible for a copay/coinsurance for each prescription, usually a fixed amount. Once you and your plan spend a combined amount determined by Medicare, the coverage gap phase begins.
- Coverage gap phase. You’re responsible for a higher out-of-pocket payment in this phase, which is also known as the “donut hole.” Once your out-of-pocket costs reach the upper limit of the coverage gap, you’ll enter the catastrophic phase.
- Catastrophic phase. This one sounds scary, but all it means is that you’ll pay a much smaller portion of your prescription drug costs for the rest of the year.
Option 3: Original Medicare, Medigap, and a Prescription Drug Plan
Original Medicare only covers 80% of your Part B expenses. To help cover the remaining 20%, you can buy Medicare Supplement Insurance, also known as “Medigap,” from private insurance companies. Medigap plans cover some or most of the costs that Original Medicare doesn’t pay. These plans come with an additional monthly premium. You can’t have prescription drug coverage in both your Medigap policy and a Medicare drug plan.
People buy the Medigap policy that best meets their coverage needs and budget. Usually, the more coverage you want, the higher the monthly plan premium you’ll pay. This could add up to several hundred dollars per month in premiums.
With Option 3, you would need to pay an additional monthly plan premium for both your Medigap plan and your prescription drug plan, and you would have to carry 3 cards: an Original Medicare card, a Medicare Supplement Insurance (Medigap) card, and a prescription drug card.
But what if you also want benefits like dental, hearing, vision, and wellness? Medigap plans do not include prescription drugs, dental, vision, hearing, wellness, over-the-counter items, and non-emergency transportation. You can purchase additional plans to cover prescription drugs, dental, vision, and hearing.
Things to keep in mind if you are considering a Medigap plan: Medigap plans are known to have high premiums, and rate increases are common. And a Medigap plan can only be combined with the Original Medicare plan.
Option 4: Medicare Advantage
There may be a better way to get your Medicare: through a Medicare Advantage plan. Medicare Advantage plans always include all Medicare Part A and Part B benefits. These plans are offered through private companies that contract with Medicare, and they’re reviewed and approved by Medicare.
With many Medicare Advantage plans, you get a health plan, prescription drug coverage, and additional benefits like dental, vision, hearing, wellness, and more—all with $0 or low monthly premiums. Plus, Medicare Advantage plans usually have lower out-of-pocket expenses, and there’s a limit to how much you pay out of pocket each year. With Medicare Advantage, you wouldn't need a high-premium Medigap plan.
Medicare Advantage is convenient and easy: one plan, one card, one plan premium, and one company. And you’re still enrolled in Medicare. That's why more than 22 million Medicare beneficiaries already have one.
Want to learn more about Medicare? Check out the following articles to answer your questions.