How Do Medicare Plans Differ?
It’s easy to confuse the different types of Medicare insurance. But understanding the differences between them is good protection against hard sells and unscrupulous sales people. Here is what each type means:
- Traditional Medicare (also known as original Medicare) provides basic coverage for hospitals (Part A) and doctors and outpatient services (Part B). It doesn’t cover vision, dental or hearing care or outpatient prescription drugs. You can go to any doctor or hospital nationwide that accepts Medicare.
- Medigap supplementary insurance is not a government-run program but private insurance you can buy yourself. It covers some out-of-pocket expenses not paid by traditional Medicare and may cover extra services, depending on the individual policy. You can choose one of 10 policies that offer standard benefits but are sold by many insurers.
- Medicare stand-alone prescription drug plans (PDPs) cover only outpatient drugs and are mainly intended for people in traditional Medicare who have no other drug coverage. You can’t enroll in both a PDP and an MA plan even if the plan doesn’t include drug coverage, unless it’s a Private Fee for Service plan or a Medicare Savings Account. If you enroll in any other kind of MA plan, whether or not it covers drugs, you will automatically lose your current PDP coverage.
- Medicare Advantage plans (MAs) cover everything traditional Medicare covers, but may offer lower costs and extra services. Each plan has a different mix of costs and benefits and may or may not include prescription drug coverage.
Traditional Medicare will no longer provide your benefits if you enroll in any of the following MA plans:
- HMOs are managed-care plans that require you to go to doctors and hospitals in the plan’s network, except in a medical emergency.
- PPOs are managed-care plans that allow you to see specialists without a referral. You pay more if you go to a doctor or hospital outside the plan’s network, except in a medical emergency.
- PFFS plans are private fee-for-service plans that allow you to go to any doctor or hospital that accepts their terms. Not all providers agree to the terms, and providers are allowed to reject or accept a plan on a visit-to-visit basis. In an emergency the plans must cover treatment by any doctor or hospital.
- MSAs are Medicare medical savings accounts that put a certain amount of money into a bank account for you to spend on health care. Once this money runs out, you enter a deductible phase when you spend 100 percent of your health care costs out of pocket. After the deductible is met, the plan pays 100 per cent of your costs until the end of the year.
- SNPs are special needs plans that are only for people who live in long-term care facilities, receive both Medicaid and Medicare, or have certain illnesses.
Patricia Barry is a senior editor at the AARP Bulletin and the author of “Medicare For Dummies” (Wiley/AARP, October 2013).