Medicare insurance helps millions of Americans pay for medical expenses, but understanding your coverage and out-of-pocket costs can help you manage your budget and prepare for the future. While Medicare helps cover many medical expenses, it does not pay for everything. Let’s discuss your Medicare options so you can enroll in the plan that will be right for you.

Original Medicare

Original Medicare is composed of Part A and Part B. Part A (Hospital Insurance) helps cover the costs of medical care when you are formally admitted as an inpatient in a hospital, skilled nursing facility, hospice, or home health care. Part B (Medical Insurance) helps cover the costs of medically necessary services and supplies you receive in an outpatient setting, such as a doctor’s office. Part B also includes preventive care that is crucial to your continued good health, such as vaccinations, annual wellness exams, and screenings.

Most people are eligible for premium free Part A due to paying taxes for a certain period of time, but Part B requires most Medicare recipients to pay a premium. Most people enroll in Part B when they are first eligible to avoid late enrollment penalties if they choose to enroll later on.

Supplementing Original Medicare with Medigap

Original Medicare covers many costs, but many Medicare recipients are concerned about potential out-of-pocket costs. If you face an unexpected medical crisis or are diagnosed with a chronic illness that requires continued care, your out-of-pocket expenses can be overwhelming. In order to supplement Part A and Part B, many Medicare recipients choose to purchase a Medigap policy to help pay for deductibles, coinsurance, copayments, or medical care you receive when traveling outside of the United States. Medigap, or Medicare Supplement, plans are sold by private insurance companies that are regulated by the federal government. Medigap plans are standardized and identified by letters. Each plan may vary in costs and benefits.

When you are 65 years of age and are enrolled in Medicare Part B, you will have a 6-month Medigap open enrollment period. During this period of time, you have a guaranteed issue right to purchase any Medigap plan sold in your state regardless of any pre-existing conditions. You cannot be charged more or turned down by a plan during this time, but if you choose to wait and want to buy Medigap after this period has ended, you will likely be subject to medical underwriting and can be turned down or charged more due to pre-existing medical issues.

How Do I Get Prescription Drug Coverage?

Unfortunately, Original Medicare Part A and Part B do not generally cover prescription drugs prescribed by your physician. Medigap does not include prescription drug coverage, so many Medicare recipients choose to enroll in Part D prescription drug coverage.

If you are enrolled in Original Medicare, you can enroll in a stand-alone Prescription Drug Plan (PDP). PDPs are sold by private insurance companies and each plan can have its own formulary, or list of covered drugs. If you are choosing a PDP, compare the formulary and tiers of pricing for the plans you are considering. Tiers of pricing may be based on whether you buy generic or brand name drugs, if you use a pharmacy within the plan’s network, or if you order your medications through a mail order service.

Medicare Advantage – With or Without Prescription Drug Coverage

As an alternative to Original Medicare, Medicare recipients can choose to get their Part A and Part B benefits through a Medicare Advantage (MA) plan. Medicare Advantage plans are offered by private insurance companies who contract with Medicare to provide the same benefits as Original Medicare, but many MA plans offer additional coverage, including vision and dental, hearing exams, prescription drug coverage, and wellness programs.

If you are nearing Medicare eligibility, compare your options and find the coverage that meets your personal needs and preferences.

Related articles:

What is Medigap?

What is Medicare Parts A & B

Medicare Part D: Medicare Prescription Drug Coverage