The Medicare Plans (Yes, Plans)

What you need to know about Parts A, B, C and D

from: AARP, January 1, 2011

Medicare Part C — Your Private Insurance Option
Part C plans are offered through private insurance companies and approved by Medicare. They are also known as Medicare Advantage or Medicare Health plans.

Possible Part C Changes

The Medicare program currently subsidizes private insurance companies that offer Medicare Advantage plans. Because of these subsidies, Part C plans cost Medicare more per person than Original Medicare.

Beginning in 2012, Medicare will reduce these subsidies. Some of the savings will go toward helping to close the prescription drug coverage gap — the so-called doughnut hole.

Due to reduced subsidies some Medicare Advantage plans may drop services or raise premiums and copayments in the next year or two. Be sure to carefully review your Part C plan’s fees and coverage before signing on for another year during Medicare’s annual open enrollment period.

Before enrolling in a Part C plan, you must first enroll in Original Medicare — both Part A and Part B. If you decide to use Medicare Advantage, you choose the plan yourself and sign up directly with the private insurer.

By law, Part C plans must pay for at least the same health care services as Original Medicare. But they sometimes pay for things that are not covered by Original Medicare, such as vision and dental care. Most, but not all, Medicare Advantage plans also provide some prescription drug coverage.

Medicare Advantage plans are generally organized as health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Typically, in these types of plans you choose one doctor as your primary care provider, and your choice of doctors, hospitals and other health care providers is restricted. If you see providers outside of the plan’s network, you likely will pay more, or these providers’ care might not be covered at all.

You Need Parts A and B to Get Parts C and D

Medicare's various parts — or plans — are interrelated.

To join an optional Medicare Advantage (Part C) plan, you must first enroll in both Part A and Part B. To enroll in the optional Part D Prescription Drug plan, you must be enrolled in Part A or B.

(Since many Part C plans include prescription drug coverage, if you opt for one you probably won't need a Part D plan.)

Depending on your decisions, your Medicare selections might have you enrolled in only Part A; or Parts A and B; or Parts A, B, C and D; or another variation. And you might have a Medigap plan on the side.

Keep in mind that when using a Part C or D plan, you continue to pay a monthly Part B premium to Medicare as well as to your Part C and/or Part D plan provider.

But people with Part C coverage typically incur only a small copayment when visiting a doctor or other provider, while those with Original Medicare pay 20 percent or more of the cost of services.

Private fee-for-service Medicare Advantage plans, which allow for the regular use of out-of-network providers, are available in some areas.

You can check with Medicare for availability near you. For more detailed information, see the Medicare publication Your Guide to Medicare Private Fee-for-Service Plans.

Medicare Part D — Your Prescription Drug Plan
The newest addition to the Medicare alphabet, Part D, helps you pay for prescription drugs.

Part D is optional and available to people who are enrolled in Original Medicare (Parts A and B) and most Medicare Advantage plans.

Part D plans are offered by private insurance companies that are approved by Medicare. You sign up for them directly with the private insurer.

If you are enrolled in a Part D plan, you will pay a monthly premium and sometimes a deductible, as well as copayments for your drugs.

Each plan varies in the cost of premiums, the price of drugs and its list of covered drugs or "formulary" under the plan.

The Doughnut Hole

A disadvantage of Part D is the coverage gap — known as the "doughnut hole" — that's reached when the combined cost of your prescriptions in a given year, as paid by both you and your insurer, exceeds a certain amount ($2,840 in 2011). At that point, you essentially start paying for your medicines as if you have no insurance. At the same time, you’re also paying your Part D premiums.

To ease the pain of falling into the doughnut hole, the new health care law provides that, starting in 2011, people with Medicare Part D will receive a 50 percent discount on most brand-name prescriptions and biologic drugs, and a 7 percent discount on generic prescription drugs while they are in the coverage gap.

After your prescription drug costs reach a certain amount over the course of the year (in 2011 that threshold is $4,550), you will qualify for low-cost catastrophic coverage. This takes you through to the end of the year, at which point the calculus starts all over again. The Part D "doughnut hole" coverage gap will gradually narrow until it disappears in 2020.

To get a sense of how the coverage gap might affect you, use the AARP Doughnut Hole Calculator. For more information, see "Paying Less for Drugs in the Doughnut Hole."