Original Medicare
With original Medicare, you can use any doctor, facility or provider that accepts Medicare. Most seniors don’t pay premiums for Part A, which covers in-patient care at a hospital or skilled-nursing facility. You’ll pay a monthly premium for Part B, which covers doctor visits, physical therapy, diagnostic tests and other out-patient care. In 2022, the standard Part B monthly premium is $170.10 (dropping to $164.90 in 2023); seniors who are subject to a high-income surcharge pay more.One of the biggest mistakes people make is assuming that Medicare will pay all of their medical expenses, says Tatiana Fassieux, education and training specialist with California Health Advocates. “Regardless of how they get their Medicare coverage,” she says, “there’s always a cost—premiums, deductibles, and coinsurance or co-pays.”
Medicare Part A, for example, has a hospital deductible ($1,556 in 2022) before benefits begin, and you’ll owe part of the cost for in-patient hospital stays longer than 60 days in a benefit period.
In addition to signing up for parts A and B, you’ll probably want to enroll in a Part D plan to cover prescription drug costs and a “medigap” plan to cover other out-of-pocket costs.
Most states offer 10 types of medigap policies with standardized benefits. The plans are designated by letter (A, B, C, D, F, G, K, L, M or N; plans C and F aren’t available for new Medicare beneficiaries). Plans with the same letter must offer the same benefits, but premiums can vary by insurer.
Medicare Advantage
This coverage comes from private insurers, but you must still sign up for Medicare parts A and B and pay monthly premiums for Part B. Some Medicare Advantage plans charge an additional monthly premium (averaging $19 in 2022), though many do not. Most Advantage plans include Part D prescription drug coverage, and many include some dental, vision and hearing care, which original Medicare doesn’t cover at all.Most Advantage plans have provider networks. Medicare Advantage HMOs typically don’t cover out-of-network providers except for emergencies. Medicare Advantage PPOs usually let you use out-of-network providers but charge higher co-payments for that care. You typically need referrals for specialists, which aren’t required for original Medicare.
In 2022, Advantage plans have an annual out-of-pocket maximum for in-network services of $7,550 or less; the maximum is $11,300 for covered services in and out of network, including deductibles and co-payments but not premiums or drug costs.
The premiums you pay for Medicare Advantage plans are usually lower than for a medigap policy plus Part D coverage, but your out-of-pocket costs may vary sharply depending on how much health care you use.
“Traditional Medicare beneficiaries with supplemental coverage may end up spending less than they would under a Medicare Advantage plan, even taking premiums into account, depending on the services they need,” says Tricia Neuman, executive director of the Kaiser Family Foundation’s program on Medicare policy.
(Kimberly Lankford is a contributing writer at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.)
