In May of next year I will be eligible for Medicare, something I have been eagerly awaiting for the last several years. Being on the individual health care insurance market has meant yearly 15-18% increases, year after year. As reported a few weeks ago, I did purchase a policy under the Affordable Care Act that will save me $767 from January through April. Then Medicare starts on May 1st.
Because I am already receiving Social Security payments, I will be enrolled automatically when I turn 65. But, there is more to do if I want more expenses covered and a prescription drug plan. So, I have a lot of homework to do. I have some important decisions to make:
1) Will I stick with traditional Medicare or opt for an Advantage plan?
2) Will I buy Part D coverage for drug coverage?
3) Will I buy a Medicare supplemental plan (Medigap) that covers most of the 20% that Medicare doesn't?
Each choice brings with it a potentially large differences in cost, coverage, and health care.
What follows is what I have been able to determine from many searches on the web. WhileMedicare.gov is very helpful, it is only one of dozens of sites I explored. Considering how complicated it can become I am pretty sure I have some of the details and averages wrong or incomplete. I expect you to help me by setting me straight!
Traditional Medicare will cost $104.90 in monthly premiums in 2014 (unchanged from 2013). That covers Medicare Part A which is for inpatient hospital care, skilled nursing care, hospice care and other services. Part B covers doctors' fees, outpatient hospital visits, and other medical services and supplies that are not covered by Part A.
On average Medicare pays 80% of the costs generated by Part A or Part B services. I would be responsible for the rest. There is a $147 deductible for Part B that must be satisfied before Medicare pays anything. There are also copays to consider if the doctor I use doesn't accept what Medicare pays as the full amount.
Advantage plans (Medicare Part C) are plans approved by Medicare but run by private companies. They cover everything Medicare does plus offer extra services that include drug, vision, and dental coverage. Many of these plans offer $0 monthly premiums, $0 deductibles, and $0 copays. How do they make money? These companies are paid by the federal government to handle what Medicare usually covers as well as provide them with a reasonable profit.
Restrictions on these "free" or low-cost plans are substantial and must be approached very carefully. If someone is in good health and takes few drugs it may be one's best choice. It is easy to switch plans once each year (even back to original Medicare) if health issues begin to crop up or special care isn't covered by one's current plan.
Then comes the issue of Medigap coverage. These policies cover what Medicare doesn't. Often called supplemental policies, they average around $165 a month. Depending on the type of Medigap policy purchased and how old you are when you buy it, your monthly premiums will either remain unchanged or increase each year.
From what I can find, purchasing a policy that covers Part D (drugs) seems to average around $10-$15 a month. I pay a percentage of each drug cost in addition to that. More expensive drugs will mean substantial out-of-pocket expenses but nowhere close to what the cost would be without insurance coverage. There is also a deductible of just over $300.
Of course, I can't forget about the famous "donut hole" when I think about my costs. When Medicare drug coverage was added in 2003 there was a gaping hole in coverage for those who needed it the most: those who required expensive drugs were forced to pay the full cost when they could least afford it.
The Affordable Care Act finally addressed this situation: the donut hole will close completely in 2020. In the meantime it is shrinking. From what I can determine after roughly $2,900 of drug costs in a year I will pay a higher percentage of drug costs until I leave the coverage gap somewhere around $4,500 (it changes each year). After that I pay only about 5% of any additional drug costs.
So there I am. I still have the same three questions I had at the beginning of this post, but I think I am closer to answers. The next step will be finding exact pricing and coverage for each of my options and then looking at my budget for next year.