When you retire and qualify for Medicare at 65, you’ll need to decide how you’d like to receive your health care benefits.
Because you’ll be new to Medicare, you may not realize you have two options.
One is to join the government’s fee-for-service program that’s existed for 53 years. The other is to buy a Medicare Advantage plan from a private insurer.
The choice may seem bewildering at first, so let’s go over each option.
With traditional fee-for-service coverage, you may go to any doctor, hospital or other provider that accepts Medicare. Medicare pays the provider a fee for the service you receive. Once you meet your annual deductible, Medicare typically covers 80 percent of the cost for your care.
You have a few choices for covering the other 20 percent:
n You may use your retiree health plan from your former employer, if you’re retired and have such a policy. Some retiree plans may cost less or provide more benefits than other supplemental coverage.
n You may qualify for Medicaid, if you have limited income and savings. Besides helping with your out-of-pocket costs like deductibles and co-insurance, Medicaid may pay for your monthly Medicare premiums.
n If neither of those applies, you may buy a “Medigap” policy from a private insurer to cover what Medicare does not. There are 10 kinds of Medigap plans, with different benefits, so you’ll need to decide which is best for you.
If you choose the traditional fee-for-service program, you’ll probably also want to buy a prescription drug plan to go with your other coverage.
Traditional Medicare remains the favorite among people wanting the broadest possible access to doctors, hospitals and other providers. When coupled with a supplemental plan, it also makes your health care costs relatively predictable.
Still, 33 percent of all Medicare beneficiaries – including 33 percent of Texans with Medicare — now prefer to get their health care benefits through a private insurer. The number of people buying private Medicare Advantage plans has more than doubled over the last 10 years.
With Medicare Advantage, insurance companies contract with the government to provide care. Every private plan must cover all the benefits that traditional Medicare covers. In some cases, Medicare Advantage plans may offer extra benefits, like routine hearing or vision care.
Many plans charge a premium on top of the amount you’ll pay each month for Medicare’s Part B medical insurance, but there’s no need to buy a supplemental Medigap policy. Likewise, most Medicare Advantage plans include drug coverage with their other benefits.
The premiums, deductibles and co-payments will vary from one Medicare Advantage plan to another. But all plans, by law, must have annual limits on their overall out-of-pocket costs.
Unlike the traditional fee-for-service program, most Medicare Advantage plans require you to go to doctors and hospitals within their network of providers or pay more for getting care outside the network.
Still, the private health plans have been especially popular among people with low to moderate incomes. They provide relatively affordable supplemental coverage, with lower premiums than those for Medigap policies.
So, which is better — the traditional fee-for-service coverage or a private Medicare Advantage plan? That depends on your own circumstances and preferences. What’s best for one person may not work as well for someone else.
To find out more about your options, you can visit www.medicare.gov and browse through the “Medicare and You” handbook. The website will also give you detailed information about the Medigap and Medicare Advantage policies available in your area.
Becoming informed will help you select the health care option that best fits your needs. It will also help you avoid mistakes that may cost you money.