Understanding Medicare

What Is Medicare?

Medicare is federal health insurance primarily for people age 65 and older and for certain younger people who qualify because of disability or specific medical conditions.

One reason Medicare can seem confusing is that it is divided into different parts, and those parts do different things.

You do not have to become a Medicare expert. But you should understand enough to make informed decisions about your healthcare.

What Is Medicare Part A?

Part A is hospital insurance.

It helps cover inpatient hospital care, skilled nursing facility care under qualifying circumstances, hospice care and certain home healthcare services.

Many people qualify for premium-free Part A based upon their work history or their spouse’s work history, although Medicare costs and eligibility rules should always be verified for the year in which you enroll.

What Is Medicare Part B?

Part B is medical insurance.

It helps cover services from doctors and other healthcare providers, outpatient care, durable medical equipment, certain home healthcare and many preventive services.

Most people pay a monthly Part B premium.

Part B is particularly important because your decision about when to enroll can matter. Depending upon your circumstances and other coverage, delaying enrollment when you are required to enroll can result in a late-enrollment penalty.

What Is Original Medicare?

Original Medicare consists of Part A and Part B.

With Original Medicare, you can generally use any doctor or hospital in the United States that accepts Medicare.

However, Original Medicare does not pay 100% of every covered healthcare expense, and it does not have an annual out-of-pocket maximum unless you have other supplemental coverage.

That is why many people consider additional coverage.

What Is Medicare Part D?

Part D provides prescription-drug coverage.

A person with Original Medicare can generally enroll in a separate Medicare prescription-drug plan. Most Medicare Advantage plans include Part D prescription coverage as part of the plan.

Prescription plans can differ in the medications they cover, pharmacy networks and costs.

That is why a plan that works well for one person may not be appropriate for another.

What Is Medicare Advantage (Part C)?

Medicare Advantage is another way to receive your Medicare benefits.

These plans are offered by private insurance companies approved by Medicare. They provide Part A and Part B benefits, and most include Part D prescription-drug coverage. Many also offer additional benefits not provided by Original Medicare.

Depending upon the plan, you may need to use network doctors and hospitals, and prior authorization may be required for certain services.

Medicare Advantage plans also have an annual limit on what you pay out of pocket for covered Medicare services.

What Is Medicare Supplement Insurance (Medigap)?

Medigap is private insurance designed to work with Original Medicare.

It can help pay certain out-of-pocket costs left by Parts A and B, such as deductibles, coinsurance and copayments, depending upon the Medigap plan selected.

A Medigap policy is not Medicare Advantage.

You cannot use Medigap to pay Medicare Advantage copayments, deductibles or premiums.

What If I Continue Working After Age 65?

Turning 65 does not automatically mean everyone should make exactly the same Medicare decisions.

Employer coverage, the size and type of employer, coverage through a spouse, Health Savings Accounts and other circumstances can affect when someone should enroll.

Do not assume that because you are still working you should automatically delay Medicare, or that you must automatically enroll in every part at 65.

Your individual circumstances should be reviewed before making that decision.

Is Health Sharing Another Option With Original Medicare?

Yes. In addition to Medicare Supplement insurance, some people with Original Medicare Parts A and B may want to explore a healthcare-sharing membership designed specifically to work alongside Medicare.

It is important to understand that health sharing is not Medicare, Medicare Advantage, Medicare Supplement insurance or traditional health insurance. It is a different approach in which members participate in sharing eligible healthcare expenses according to the program’s guidelines.

With a Medicare-focused health-sharing program, Medicare remains your primary healthcare coverage. Medicare processes the medical claim first and pays its portion of Medicare-covered expenses. The member can then submit the Medicare Explanation of Benefits (EOB) so eligible remaining expenses can be considered for sharing according to the health-sharing program’s rules.

How Can Health Sharing Work With Medicare?

Consider a Health Sharing Plan for Seniors as an example.

Members maintain Medicare Parts A and B. One such program’s current materials state that members have a $1,000 annual Primary Responsibility Amount (PRA) per person. The PRA is the amount the member is responsible for before eligible expenses become shareable.

Once that annual PRA has been met, eligible costs that Medicare allows but does not fully pay may be considered for sharing by the program.

This can include eligible expenses associated with the portion of Medicare-approved costs that Original Medicare leaves to the beneficiary.

What About the 20% That Medicare Doesn’t Pay?

For many Part B-covered services under Original Medicare, after the applicable deductible, Medicare generally pays 80% of the Medicare-approved amount and the beneficiary is responsible for the remaining 20%. Medicare also points out that Original Medicare by itself has no annual out-of-pocket limit unless the beneficiary has supplemental coverage.

This is one reason people with Original Medicare often consider additional protection for the expenses Medicare leaves behind.

Traditionally, that additional protection may be a Medicare Supplement (Medigap) insurance policy. A Medicare-focused health-sharing membership provides a different approach for eligible expenses.

Under the health sharing plan described above, for example, its materials state that after the annual PRA is met, the portion Medicare does not pay may be eligible for sharing according to the program guidelines.

What About Prescription Drugs?

A Medicare health-sharing membership does not replace Medicare Part D.

For the health sharing plan described above, Medicare Part D is required for prescription sharing. The member first has the prescription processed through Part D and then submits the Part D Explanation of Benefits to the program.

According to that program’s current materials, after the annual PRA has been met, generic prescriptions are shareable after the first $25, and brand-name prescriptions are shareable after the first $50 when no generic is available.

What About Pre-Existing Conditions?

This is an especially important question to ask when evaluating any health-sharing program because the rules can vary significantly from one organization to another.

The program described above currently states that it has no pre-existing condition limitations and says eligible expenses can be shared after the member’s annual PRA has been paid.

Consumers should always review the current membership guidelines rather than assume that every health-sharing organization follows the same rules.

What Should I Consider: Medicare Advantage, Medigap or Health Sharing?

Once you have Medicare Parts A and B, there are different ways to address your healthcare needs and the expenses Medicare may leave behind.

Medicare Advantage (Part C) is an alternative way to receive your Medicare Part A and Part B benefits through a Medicare-approved private insurance company. Plans may use provider networks, may require prior authorization for certain services, and have an annual out-of-pocket limit for covered Medicare services.

Original Medicare + Medigap keeps Original Medicare as your primary coverage. Medicare pays its portion first, and the Medigap insurance policy helps pay certain remaining Medicare-approved expenses according to the standardized Medigap plan you purchased.

Original Medicare + Health Sharing also keeps Original Medicare as the primary coverage, but health sharing is not insurance. Eligible remaining healthcare expenses may be shared among members according to the health-sharing organization’s membership guidelines.

So rather than asking:

“Which one is best?”

A better question is:

“Which approach best fits the way I want to receive and pay for my healthcare?”

Consider your doctors, hospitals, prescriptions, travel, monthly budget, expected healthcare usage, comfort with provider networks and prior authorization, potential out-of-pocket expenses, and whether you prefer an insurance-based supplemental solution or are comfortable participating in a healthcare-sharing membership.

Why Should I Understand All of My Choices?

Medicare’s official materials describe two primary ways to receive Medicare benefits: Original Medicare or Medicare Advantage. With Original Medicare, beneficiaries may also add Part D and supplemental coverage such as Medigap.

A health-sharing membership doesn’t change those Medicare rules and isn’t another Medicare plan. Instead, for someone who chooses Original Medicare, a Medicare-focused health-sharing program may be another healthcare arrangement to investigate for certain expenses Medicare leaves to the beneficiary.

Medicare Should Be Understood Before You Enroll

At Be Smart With Your Money®, we believe consumers should understand their choices before making a decision. That includes understanding not only Medicare Advantage and Medicare Supplement insurance, but also other healthcare solutions that may be available.

Our role is to help you understand how the different approaches work, what they may cost, what they cover or share, and what limitations apply, so you can make an informed decision based upon your own healthcare needs and financial circumstances.