How Original Medicare Relates to Other Plan Types
Original Medicare is made up of two parts: Part A and Part B. These two parts cover some inpatient hospital and outpatient medical costs, respectively, for people who are over the age of 65 or who have been on Social Security disability for 24 months or longer.
Because Medicare typically only covers about 80% of medical costs, most people who enroll in Medicare also purchase either a Medicare Advantage Plan or a Medicare Supplement. Supplements are typically purchased with a stand-alone Medicare Part D Prescription Drug plan (PDP).
Medicare Advantage Prescription Drug Plans (MAPDs)
MAPDs are offered by private insurance companies and essentially “take the place” of Original Medicare as your primary insurance and can include some extra benefits and coverage. These plans are required to offer benefits that are equal to or better than the benefits provided by Original Medicare, and usually offer “extras” such as:
- An out-of-pocket maximum (the most you can expect to pay in a given year for qualified medical costs)
- Prescription drug coverage
- Hearing Aids
- Fitness membership
Having an out-of-pocket maximum means that after you have spent up to a designated amount of money on approved medical expenses, the plan will protect you from additional costs by paying 100% of additional approved expenses through the remainder of the year.
This protects individuals from excessively high medical costs in catastrophic situations and is not built-in to Original Medicare. Usually, Medicare Advantage Plans have low, or sometimes no, monthly premium.
These plans, also known as “Medigap,” work differently than MAPDs because they work with Original Medicare to “fill in the gaps” where Original Medicare does not pay. For instance, when you visit the doctor, Original Medicare (your primary insurance) will pay its part of the covered costs.
Then, once Medicare has paid its share, your Supplement will pick up some or all of the remaining medical cost. Medicare Supplements can help to insulate you from high medical expenses, although the monthly premium for a Medicare Supplement is typically higher than a Medicare Advantage plan’s monthly premium.
While Supplements’ benefit designs are the same, the cost can vary depending on the insurance company and the amount of the coverage they provide.
Medicare Supplements & Prescription Drug Coverage
With Medicare Supplements, it is important to keep in mind that drug coverage is not included. While MAPD plans usually include drug coverage, people with Medicare Supplements must purchase a stand-alone Prescription Drug plan to have drug coverage.
Not buying a drug plan and going without creditable drug coverage (meaning coverage equal to or greater than Medicare’s minimum standards of coverage) may result in a Late Enrollment Penalty (LEP) the next time the individual tries to sign up for a drug plan – and depending on how long they went without drug coverage, the penalties can get expensive. For more on Late Enrollment Penalties, click here.