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First, here is what Medicare is:

Medicare is a federal government program that provides health insurance to people age 65 and over. Like most government programs, it is complicated. I speak with people every day who are confused, frustrated and do not understand how it really works. This is an effort to simplify the essentials and you should always check with for any specific questions you may have.

If you are eligible for Medicare, your coverage includes:

  • Part A: Hospital Insurance—Part A covers inpatient hospital care, skilled nursing facilities and some home health care. Most people do not have to pay a monthly premium for Part A coverage. Part A does have annual deductible and additional co-payments. The annual deductible for 2018 is $1,340.
  • Part B: Medical Insurance - Part B covers doctor visits, medically necessary supplies and equipment, physical and occupational therapy, outpatient mental health services and other outpatient hospital services. It also includes certain preventive benefits like mammograms and cardiovascular screenings. While Part B is optional, most people enroll when first eligible as there are higher premium costs for those enrolling later. The standard Part B premium amount is $134. There is an annual deductible, which in 2018 is $183.00. Co-payments also apply to most Part B services.
  • Part D: Prescription Drugs— While Part D is an optional program, if you do not enroll in Part D when you choose Parts A and B, you may be subject to an annual penalty.

Part A and Part B cover ~ 80% of your expected medical expenses. Cover the remaining 20% with either a Medicare Advantage Plan or a Medicare Supplement.

Medicare Supplements versus Medicare Advantage Programs

1. Medicare Advantage is NOT Medicare.

Once enrolled in a Medicare Advantage (MA) plan, you turn your Original Medicare benefits over to a private insurance company, which in turn provides coverage, administers your plan and pays your claims. You no longer have “Medicare” but the equivalent of a private, commercial policy, subject to the guidelines and limitations chosen by the insurance company.

In an illuminating article by the non-profit Kaiser Family Foundation, the choice of a Medicare Advantage plan when a senior is turning 65 can prove disastrous for future healthcare choices for the rest of a senior’s life. See the article here:

Clients miss, or minimize the often $6,700 Maximum Out-of-Pocket PER YEAR exposure. Sadly, there are many situations that we have seen where a turning-65-senior has chosen one of these low cost Medicare Advantage plans only to have to experience the limitations and large hospital admission co-payments by having a serious illness that takes them into full usage of their chosen plan.

It is critical to understand that with a Medicare Advantage Plan, the insurance company decides whether to pay a claim or not. Plans from different insurance companies are dramatically different.

Finally, carriers have the right to cancel Medicare Advantage Plans at the end of any calendar year. Medicare guarantees access to an alternative MA Plan. However, the cancellation of your plan can leave you with difficulty ensuring that your preferred doctor is available in a new plan that you may choose during open enrollment.

2. Medicare Supplements – MediGap

MediGap Rules

      • You must have Medicare Part A and Part B.
      • Except during an Open Enrollment or Guaranteed Issue Period, you must be medically eligible to obtain a MediGap plan and each carrier has different eligibility requirements.
      • You pay the private insurance company a monthly premium for your Medigap policy in addition to the monthly Part B premium that you pay to Medicare (usually deducted from Social Security).
      • You can buy a Medigap policy from any insurance company or appointed agent that is licensed in your state to sell one AT ANY TIME.
      • Your Medigap plan renews automatically each year regardless of your health. The insurance company cannot cancel your Medigap policy as long as you pay the premium.

Medigap policies are standardized

Every Medigap policy must follow federal and state laws designed to protect you. Insurance companies can sell you only a “standardized” policy as defined by Medicare and different levels of coverage are available with plans identified by the letters A through D, F through G, and K through N. All policies offer the same basic benefits, but additional benefits for additional costs are available based on the specific plan type that you choose.

Medicare approves the claims

With a MediGap policy, Medicare Part A and Medicare Part B are your primary insurance. Your MediGap plan is supplemental. The claims procedure is that the provider submits the claim to Medicare, not your insurance company. Medicare reviews the claim to ensure that the procedure is a covered procedure. For covered procedures, Medicare has a set of amounts for each procedure. Medicare pays roughly 80% of the cost. The client and the insurance company receive a copy of the approved claim (called the Explanation of Benefits). When the insurance company receives the EOB, they are required to pay the claim promptly or they are in violation of their agreement with Medicare.

In short:

    • All Medicare Supplement Plans of the same type are the same regardless of carrier.
    • The carrier is required to pay their share of all approved claims promptly.
    • COST is the only difference between Medicare Supplements of the same plan type regardless of insurance company.


Individuals may purchase Medicare Part D prescription drug coverage if they are either eligible for Medicare Part A or enrolled in Medicare Part B. An individual’s initial enrollment period for Medicare Part D prescription drug coverage is usually the same as his or her initial enrollment period for Medicare.

The Medicare Part D initial enrollment period for an individual without Medicare Part A who enrolls in Medicare Part B during the general enrollment period for Part B is April 1 to June 30.

For individuals who do not obtain Medicare Part D prescription drug coverage during their initial enrollment period, there is an open enrollment period each year from October 15 to December 7. There are also special enrollment periods triggered by certain types of events during which an eligible individual may obtain Medicare Part D prescription drug coverage.

Premiums for Medicare Part D prescription drug coverage vary from plan to plan, but higher-income individuals may be required to pay an extra premium charge in addition to their plan’s premium.

Medicare Part D Premiums

There is no single Medicare Part D prescription drug coverage plan. Plans must offer coverage that at least meets certain minimum requirements. However, plans are free to provide additional coverage and services that exceed the minimum requirements, and they may charge a premium that appropriately reflects the value of the plan. Therefore, premiums for Medicare Part D prescription drug coverage vary from plan to plan.

Late Enrollment Penalty

The amount of the late enrollment penalty is determined for each particular individual and varies depending on how long that individual did not have creditable prescription drug coverage.

Calculate the late enrollment by multiplying the 1% penalty rate times the 2018 Part D base beneficiary premium (which in 2018 is $35.02) times the number of full, uncovered months you were eligible to join a Medicare drug plan but did not and went without other creditable prescription drug coverage.

Add the amount of the late enrollment penalty to the premium for the individual’s Medicare Part D prescription drug coverage.