PICKING YOUR PLANS
How to combine the different types of Medicare
Use the table below to compare services, costs, and positive or negative aspects of the various plans:
| If You Have | What's Covered | Out-of-Pocket Costs (Excluding Premiums) | Pros | Cons |
|---|---|---|---|---|
| PART A & B ONLY (Original Medicare) | Inpatient care in hospitals, skilled nursing facilities, home health services Outpatient care | Deductible of $1,364 per benefit period for Part A and $185 per year for Part B | Care is covered anywhere in the country No need for referrals to see a specialist | Some healthcare needs, such as prescription drugs, aren't covered Limitless out-of-pocket expenses |
| PART A, B & D | Everything above, plus outpatient prescription drugs | Deductible of $1,364 per benefit period for Part A and $185 per year for Part B Deductibles/ copays for RXs vary by plan | Care is covered anywhere in the country No need for referrals to see a specialist | Limitless out-of-pocket expenses |
| PART A, B, D & MEDIGAP | Everything above, plus some out-of-pocket costs such as coinsurance and deductibles. Coverage varies by plan | Some Medigap plans cover your deductibles; all provide some coinsurance coverage | Same as above Medigap plans that cover deductibles can mean some care is completely free | No limit on out-of-pocket expenses • Changing Medigap plans can be hard after six months |
| PART C (MEDICARE ADVANTAGE) | All plans must cover everything that Parts A and B cover. Most include Part D Some plans also cover vision, dental and hearing services | Up to $6,700 | Out-of-pocket expenses are limited to
$6,700 per year Ability to switch between plans each year during open enrollment | Covered care limited to in-network providers Networks only cover certain geographical areas Specialists require referrals |
Health Services or Hospice
PART B
Outpatient Care
Everyone has to pay a monthly premium for Part B. The cost of these premiums usually goes up a little bit each year to account for inflation. In 2021, the standard monthly premium is $148.50.
However, those making more than $85,000 per year (or $170,000 as a couple filing jointly) will pay more. Medicare refers to this higher rate as the Medicare Income-Related Monthly Adjustment Amount (IRMAA). It applies for both Parts B and D, and Medicare will alert you if you need to pay it. For monthly Part B premiums adjusted for IRMAA, see chart below:
MEDICARE PART B IRMAA
| Individual Income | Joint Income for Married Couple | Monthly Part B Premium |
|---|---|---|
| $85,000 - $107,000 | $170,001 - $214,000 | $189.60 |
| $107,001 - $133,500 | $214,001 - $267,000 | $270.90 |
| $133,501 - $160,000 | $267,001 - $320,000 | $352.20 |
| $160,001 - $499,999 | $320,001 - $749,999 | $433.40 |
| At or above $500,000 | at or above $750,000 | $460.50 |
In addition to your monthly premium, you’ll also have a deductible, coinsurance, and copayments. Unlike Part A, you don’t need to worry about “benefits periods” since Part B’s costs are calculated annually. For example, the Medicare subscriber’s deductible for Part B is $185, which means you’ll have to pay $185 out-of-pocket each year before Medicare begins to pay the bills. After you’ve met your deductible, Part B will pay 80 percent of most of your outpatient health-care costs, and you’ll pay 20 percent.
However, there are exceptions:
- Preventive Care Many services are recommended by the US. Preventive Services Task Force is covered 100 percent by Medicare.
- Outpatient Hospital Care You'll pay coinsurance up to $1,364 (the same as your Part A deductible) If you seek outpatient care at a hospital.
- Qualifying Home Health Services If covered by Part B, these services are 100 percent covered and can include physical therapy, occupational therapy, and part-time home health aide services.
- Care Provided by a Non-Participating Provider Some providers accept Medicare but do not "take assignment." In other words, they may charge up to 15 percent more than the Medicare-approved amount for service. In this situation, you'll pay 35 percent of the cost of your care (the usual 20 percent, plus 15 percent of the Medicare-approved cost), and Medicare will cover the rest. Before the agreement, procedure or appointment, always check with your provider to understand what is and isn't covered.
PART D
Paying for Prescriptions
Because Part D plans are sold by private insurers, they have different monthly premiums. In 2021, the average monthly premium for a Part D plan is around $33.06
As with Part B, individuals with incomes over $85,000 per year (or $170,000 jointly) will have to also pay the IRMAA required by the government. The amount of your IRMAA depends on your income. (See the table below for the IRMAA amounts for 2021):
Part D premiums by income
If you filling status and yearly income in 2019 was:
| File Individual tax return | File joint tax return | File Married & Separate Tax Return | You pay each month in 2021 |
|---|---|---|---|
| $88,000 or less | $176,000 or less | $88,000 or less | Your plan premium |
| Above $88,000 up to $111,000 | Above $176,000 up to $222,000 | Not applicable | $12.30 + your plan premium |
| Above $111,000 up to $138,000 | Above $222,000 up to $276,000 | Not applicable | $31.80 + your plan premium |
| Above $138,000 up to $165,000 | Above $276,000 up to $330,000 | Not applicable | $51.20 + your plan premium |
| Above $165,000 and less than $500,000 | Above $330,000 and less than $750,000 | Above $88,000 and less than $412,000 | $70.70 + your plan premium |
| $500,000 or above | $750.000 and above | $412,000 and above | $77.10 + your plan premium |
Plans also generally have an annual deductible, which for 2019 could not exceed $415. Some Part D plans don’t have a deductible, in which case you won’t pay anything out-of-pocket before your coverage begins. Once you’ve met any deductible you need to pay, you’ll also pay coinsurance or copays as determined by your insurer.
Part D plans can vary in how they structure cost-sharing. However, every plan must meet or exceed the standard of benefits set by the federal government. In 2021 a standard plan will have a $445 deductible , and you’ll pay a coinsurance rate of 25 percent (while they cover the rest). Non-standard plans can use other types of cost-sharing structures. Still, the federal government must judge that their benefits are “actuarially equivalent” to standard plans.
With any Part D plan, you’ll continue to share the costs of your prescriptions until you and your plan have jointly contributed $3,820 in total. At that point, you fall into the donut hole, and your cost-sharing will be determined by the government’s current standards. Once your total prescription drug costs get to $5,100, you’ll qualify for catastrophic drug coverage. If that happens, you’ll pay only 5 percent of the drug’s cost, or $3.40 for generic drugs, or $8.50 for brand-name drugs.
CHOOSING A PART D PLAN
When it comes to prescription drug coverage, the Medicare Plan Finder is your friend
When the government created Medicare Part D in 2003, many people worried there wouldn’t be enough plans available for seniors to choose from. The concept of prescription drug coverage for Medicare beneficiaries struck both lawmakers and insurance companies as an unprofitable prospect, so the law that created Part D also included a clause that guaranteed at least two plans would be available in every service area—even if the government had to create one.
Since then, the number of Part D plans has exploded, and many people find themselves with more than 20 plans to choose from. With so many options—and all the structural complications of Part D—choosing the most cost-effective plan can be difficult. Luckily, the government provides a useful tool to help you navigate them all: the Medicare Plan Finder (medicare.gov/find-a-plan).
Why the Medicare Plan Finder Is Important
The Medicare Plan Finder is the only online tool that can provide you with a complete, unbiased list of all the plans available to you. It’s run by the government and is not sponsored by an insurance company, drug company, or pharmacy. Everyone who has a stake in Medicare uses the Plan Finder, from beneficiaries to doctor to pharmacies, so Medicare officials continually update the information and monitor it for inaccurate or misleading details. It even includes a star-based rating system that ranks plans based on factors such as accuracy of information and customer satisfaction.
When searching for a Part D plan, many people initially avoid using the Plan Finder because it seems tedious and complicated. Sure, entering all your information—including the dosages and frequency of your medications—isn’t anyone’s idea of a good time. However, doing so can ultimately save you a lot of cash. It will definitely save you the headache of calling multiple insurers for quotes.
If you struggle to make sense of online tools, don’t despair. Social workers and health-care providers have access to the Plan Finder, too. They should be able to help you navigate it to determine which plan is best for you.
Determining the Best Plan that suits your needs
Suppose you’re choosing a stand-alone Part D plan (rather than getting Pat D through Medicare Advantage). In that case, you’ll use the Plan Finder to determine which plans are available to you based on where you live. Generally, the Plan Finder will show you all the plans available in your area and will typically rank them from lowest cost to highest.
But don’t stop there. Before you choose the least expensive option, it’s worth taking a closer look. For example, suppose money is not your top concern, and you’re more interested in having a top-quality plan. In that case, you can ask the Plan Finder to sort according to each plan star rating. You may find that for only a few dollars more, you can get a plan that ranks well above your least-expensive option.
Additionally, suppose you see a plan with a gold star icon (meaning that it’s earned a coveted five-star rating). In that case, you can switch to that plan at any time (except between Dec. 1 and Dec. 7). You don’t need to wait for open enrollment, which can be great news if it’s early in the year and you’re already unhappy with your plan.
You can also see which plans cover drugs nationwide if you use an in-network pharmacy chain. If you travel a lot or spend your winters elsewhere, this benefit could save you money when you need to refill a prescription away from your primary home.
Using the Plan Finder to Understand your Costs
Part of the Plan Finder’s magic lies in its ability to show you how much you’ll pay for your medications throughout the year. Since the prices of your drugs change based on how much you’ve spent in a given year. It’s helpful to see the bar graphs that the Plan Finder Provides. Each graph is based on the information you entered about your medications. For each plan, it will show you when you’ll reach your deductible, when you’ll fall into the donut hole, when you’ll qualify for catastrophic care, and how much you’ll pay out-of-pocket during each of these phases.
If none of the plans seem affordable to you, there are ways to lower your costs. Once you’re looking at the Plan Finder page that details a plan’s costs, click the link at the bottom that says, “Lower your drug costs.” When you click on this link, the Plan Finder will offer you a list of potential resources for lowering your drug costs with that plan, including available generic versions of your medications, patient assistant programs from drug manufacturers, and local pharmacy assistance programs. Of course, you should consider all the charts shown by the Plan Finder to be estimates—the prices aren’t set in stone. And always check with your health-care provider about whether a generic or similar drug will work for you before you assume you can switch to the less expensive option.
Knowing Your Preferred Pharmacies
Part D plans generally have “preferred: pharmacies, which will offer a lower copay than other in-network pharmacies. When you initially enter all your information in the Plan Finder, you’ll also have to enter the names of some pharmacies in your area. Still, you won’t know at that point which are in-network for each plan.
When the Plan Finder displays you the details page for a given plan, it will show you which are in-network and not covered by that plan. This information can have a significant impact on the costs—or convenience—of getting your medications. For example, the closest pharmacy to you may not be in-network for the plan you want. Depending on the distance to the nearest preferred pharmacy and your medications’ cost, it may be worth considering whether the cost of a plan that includes your local pharmacy is worth it.
You may want to try filling out the Plan Finder a few times, choosing different pharmacies in your area each time. Remember, your least-expensive plan may change based on which plans prefer which pharmacies.
Staying on Top of Your Options
Over time, Part D plans can change the collection of specific drugs they cover, known as their formulary. Each September, you’ll receive a letter from your insurer alerting you to any changes in the plan. You may also get a letter at another point during the year if your plan drops a medication you take. If you don’t like your plan or are unhappy with the changes, you can change Part D plans during the open enrollment, which begins in October.
Even if you like your plan, it’s a good idea to reenter your information in the Plan Finder each year to make sure you’re still enrolled in the best Part D plan for you. Maybe you started taking a new prescription, or another plan has a new mix of benefits that could lower your total costs. Since you’re generally only able to switch plans during the open enrollment, you may want to mark your calendar to be sure you take stock of your prescription drug coverage options in time to make changes.
Medigap Plans
SELECTING MEDIGAP PLAN There are plenty of options for filling the holes
Those sticking with Original Medicare will almost certainly want to enroll in Medigap. Also known as Medicare Supplemental Insurance, Medigap plans help ease out-of-pocket costs, and sometimes they even cover deductibles. Medigap plans are standardized by the government, so the benefits will be the same regardless of which insurer you use. Prices vary among companies. However, so make sure to get quotes from several insurers.
Don’t forget that your right to join a Medigap plan only lasts six months after enrolling in Part B. After this six-month window, you can (and likely will) be denied Medigap coverage or charged a highest premium. For example, in some situations (if you move or if your state grants extra protection), you may be guaranteed the right to sign up for Medigap beyond that six-month window. If not, you can be denied a plan.
How Medigap Plans Are Priced
Insurers that offer Medigap plans have three options when it comes to pricing plans:
- Issue-Age Rating Plans priced by issue-age set their premiums based on how old you are when you first sign up. Your premium will not rise as you age (with small exceptions, such as accounting for inflation).
- Community Rating These plans charge the same amount to everyone enrolled in them, regardless of age. The premiums for these plans also won't rise over time.
- Attained-Age Rating Plans priced by attained age will go up each year on your birthday. Premiums may start out quite low, but they can end up becoming more expensive than other plans as you age.
The way insurers rate their plans can greatly affect what you pay. When you ask insurers for a quote, make sure to find out which rating system they use, so you understand whether your premium will change over time.
You should also ask insurers if they offer discounts for women, nonsmokers, or other groups of people. Many do, and those discounts can save you money.
Which Plan to Choose
Unfortunately, none of us can predict the kind of health care we’ll need or when we’ll need it.
Ideally, Medicare helps ensure that your costs will never be more than you can pay as you age. For maximum peace of mind (and long-term savings), experts recommend that you spring for the most comprehensive Medigap coverage you can afford. You’ll have fewer out-of-pocket costs down the line, and if you ever want to switch between plans, it will be easier to do.
Those planning to enroll in Medigap soon should look closely at their options before the end of 2019. Plan F, which offers the most comprehensive coverage of any national Medigap plan, will no longer be available for new enrollees beginning in 2020. If you want to get in on Plan F’s benefits (which include covering all of your Part A deductible and coinsurance), make sure to enroll while you still can.
Switching Medigap Plans
Generally, it’s against the rules to switch Medigap plans each year. However, some exceptions exist, and some states offer protections for those who want to switch. If you’re unhappy with Medigap, you can take advantage of the next open enrollment period and switch to a Medicare Advantage plan. Your first year on Medicare Advantage is considered a trial period when you switch. This is particularly useful if you’re unsure about how well your plan is working for you. It means if you don’t like it, you can switch back to your Medigap policy on the same terms with no penalty. However, this exception only applies the first time you try Medicare Advantage, so you can only take advantage of the opportunity once.