Something many people don’t know about Medicare is that it’s customizable. Medicare comes with parts and plans that you can piece together to create the most cost-effective coverage for your needs. With all the variations of Medicare coverage out there today, there are also numerous opinions on which coverage options are the best. 

The Original

Medicare Part A and Part B make up Original Medicare. This is the most basic option available as it doesn’t require any added-on plans unless you buy a Part D plan for prescription drug coverage. Medicare Part A covers your inpatient hospital stays, while Medicare Part B covers your medical services. Part A has a $0 premium for most people and a $1,408 deductible per benefit period in 2020. Part B costs most people $144.60 per month and has a $198 deductible in 2020. 

In addition to premiums and deductibles, Part A and Part B also have copays and coinsurance expenses. For example, after the Part B deductible has been met, Part B covers 80% of your outpatient medical costs, and you cover 20%. Your portion of the bill is called the Part B coinsurance.

Original Medicare covers medically necessary services and procedures. Dental, vision, and hearing aren’t considered to be medically necessary. Therefore, Part A and Part B don’t cover routine dental, vision, or hearing services. 

Due to the cost-sharing elements and the coverage limitations that Original Medicare has, more times than not, people will add on a Medicare plan to lower out-of-pocket spending and increase benefits. Very rarely does someone choose Original Medicare without supplemental coverage. 

The Medicare Supplement option

A Medicare Supplement is a type of plan you can add on to your Original Medicare coverage. With a Medicare Supplement plan, you can lower your out-of-pocket expenses substantially. You may have heard these plans referred to as Medigap plans. 

One of the most popular Medigap plans in 2020 is Medigap Plan G. Plan G covers every cost-sharing expense Part A and Part B leave behind except the Part B deductible. Therefore, with Plan G on your side, you wouldn’t spend more than $198 on covered Medicare services in 2020. 

Like Part B, Medigap plans have monthly premiums. Premiums are based on factors such as age, gender, zip code, carrier, plan, and tobacco usage. While premiums can vary greatly from person to person, the average starting premium is usually between $100 and $200. 

Here’s an example to demonstrate the cost differences between Original Medicare and Medigap. Let’s say Sue had Original Medicare only. If Sue had to have surgery in 2020 that cost $50,000, her portion would be $198 for her Part B deductible, $1,408 for her Part A deductible and 20% of the surgical costs, which could be several thousand dollars. However, if Sue had Medigap Plan G at $150 per month, her 2020 expenses would be $1,800 in premiums and $198 for her Part B deductible. In this scenario, Plan G could save Sue thousands in her first year.

As you can see, Medigap plans can immensely lower your out-of-pocket spending. However, a few downfalls beneficiaries see with Medigap plans are the higher premiums and the fact that they only cover what Medicare covers.

The Medicare Advantage option

Medicare Advantage plans are also called replacement plans as they replace Part A and Part B. Although you still must have Part A and Part B to enroll in a Medicare Advantage plan, the Medicare Advantage plan will be in charge of your coverage. For a usually low premium, Medicare Advantage plans can give you additional benefits such as prescription drug, dental, vision, and hearing. Because of this, most beneficiaries save money overall. 

Although Medicare Advantage plans have lower premiums, sometimes as low as $0, they can end up costing you more in the long run due to the copays and coinsurance expenses you pay for covered services. Also, Medicare Advantage plans often have networks you must use when accessing your benefits; Medigap plans do not. 

It’s hard to present a cost demonstration for Medicare Advantage plans as they all have their own cost-sharing structures. However, in 2020, the maximum out-of-pocket for a Medicare Advantage plan is $6,700. Therefore, if you expect you will spend that in one year, a Medigap plan will likely be more cost-effective. 

There is usually a clear-cut option for most people. However, some people think they’d be happy with either option, which can be true. What it comes down to is your budget, your health status, and the type of access you want for your benefits. In the end, what matters is that you choose the option that is the most cost-effective for your lifestyle, not your neighbor’s.

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