I will soon move onto the Medicare roles. It has been quite a journey to get here so that is what this and the following post will be about. I hope the post might help some of you out there who will be going through the same thing in the coming months or years.
I want to make it very clear that I am not by any means an expert in this area so what you will be getting is an ordinary guy’s view of these plans. In this post I will try to explain the options. The next post will give you my personal experiences with the process of choosing and enrolling in the system.
First the basic definitions (from a pure layman’s understanding):
- Medicare Part A – This includes coverage for Hospital stays and the like. This basic plan is provided at no costs to me and covers approximately 80% of most hospital charges. I am left to pay the remaining 20% of out pocket.
- Medicare Part B – This covers doctors, testing and things like that. Part B if I choose to enroll (which I and most others did) costs a little more than $100/month to new enrollee’s. Again it covers about 80% of the costs and I am left with the remaining 20%.
- Medicare Part D — This is the plan that was started in 1993. It focuses on prescription drug costs. Depending on which drugs you take it covers varying degrees of the total cost of my medicine. When I reach a certain level of costs it quits paying anything. At a future point beyond that is starts up again. This area where I would pay 100% of the costs is called the “doughnut hole”.
- Advantage Plans — These plans, which are intended to take the place of Part D plans and usually cover some of the uncovered costs of Part A and B or even replace Part B. These plans are sometimes offered by companies as part of the their pension plans. People who enroll in Advantage plans typically cost the Medicare system about 10% more than those who stick with the traditional plans. If a person chooses to enroll in an Advantage plan they are not eligible to enroll in Part D or any supplemental plan (see the next bullet).
- Medicare Supplemental Plans (also called Medigap Plans) — These are plans that are offered by private companies, under Medicare rules and reviews. They cover to varying degrees the uncovered parts of Part A and B. The Medicare system has defined almost a dozen options that companies can provide to those who choose to join them.
So that in my nutshell is what the Medicare system and plans are all about. Now on to some of the things I have learned about all these options. While Part A is basically free to me the 20% out-of-pocket can be very substantial. For instance when I had a heart event about five years ago the one hour spent in the angioplasty operating room and associated hospital stay and doctor’s charges cost about $40,000. So my out-of-pocket would have been $8,000! Since my event was somewhat minor I’m sure the costs of other procedures can exceed $100,000 in many instances. $20,000 out-of-pocket would put quite a hit on my or almost anyone’s retirement savings.
Given the above example of the costs for just one medical event I and most people choose to enroll in some sort of supplemental plan. Those plans vary in costs from about $100 to a few hundred a month depending on coverage. Like the Part D plan, the costs of the supplemental plans is pretty much left to the private insurers. They can raise their charges with little or no review by others.
There are literally hundreds of companies who offer various plans for supplemental insurance as well as Part D coverage. It is up to each senior to determine what plans to personally have.
With all these basic definitions now covered, next time I will be talking about my personal experiences with navigating this system and how I came out in the end.