How Original Medicare works

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Source: the official U.S. government site for Medicare

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Choosing Between Traditional Medicare and a Medicare Advantage Plan 

Costs in MA plans vary.  You must pay the same monthly premium as those enrolled in traditional Medicare Part B.  Additional out-of-pocket costs in an MA plan depend on what type of MA plan you choose and may include the following: whether the plan charges an extra monthly premium; whether the plan has a yearly deductible; how much you pay for each visit or service (copayments or coinsurance); the type of health care services needed and how often; and, whether network providers are used.  MA plans may charge cost-sharing for a service that is above or below the traditional Medicare cost-sharing for that service.  However, MA plans cannot impose cost-sharing for chemotherapy administration services, renal dialysis services, and skilled nursing care services that exceed the cost-sharing for those services under traditional Medicare.  All MA plans must have a maximum allowable out-of-pocket (MOOP) limit on the amount of cost-sharing they can charge for all Part A and Part B services, after which you will pay nothing for the rest of the year.  MA plans may also change benefits, premiums, and copays every year.

Traditional Medicare…Disadvantaged?

Craig’s experience raises important issues for consumers and policymakers.  Health insurance choices facing Boomers aging onto Medicare are complex, and may be hard to undo as medical needs and preferences change over time.  Craig’s story illustrates how current rules may disadvantage seniors who prefer traditional Medicare because they want greater control over their health care, but feel they need the financial protection of an out-of-pocket limit.  Under current rules, seniors are entitled to an out-of-pocket limit only if they sign up for a Medicare Advantage plan, but not if they choose traditional Medicare.  And, while seniors have the opportunity to switch from Medicare Advantage to traditional Medicare for any reason during an open enrollment season, they may be unable to protect themselves from unforeseeable costs by purchasing supplemental coverage if they have a medical problem.

What is ‘traditional’ Medicare?

MEDICARE PART A (In-patient Hospital Insurance) pays for your medical care while you have a hospital stay. Part A also pays some of the costs if you stay in a skilled nursing facility which has 100 day benefit, hospice, or if you receive home health care. The Part A deductible for 2012 is $1,156 and can be used six times or six deductibles in a year. Yes, Part A has a benefit period of 60 days, so every 60 days; there is a new deductible of $1,156. If you go back in the hospital after a 60 day period, then you can have another deductible of $1,156. Skilled nursing has a $0 co-pay for days 1-20, but from days 21-100, there is $144.50 co pay per day. After day 100, you pay all of the cost for each additional day. And yes they do bill you the additional cost.

How Traditional Medicare Keeps Costs Down

How does traditional Medicare work? Traditional Medicare is designed to cover whatever care people need. Whether you need a lot of care or a little care, you can get it, from almost any doctor or hospital, and you are covered. And, you pay the same premium* and have the same out-of-pocket costs. (*Six percent of people with Medicare with incomes above $85,000 pay a higher premium than everyone else.) Medicare protects people with complex conditions from exorbitant costs; it ensures they can afford their care, so long as they have supplemental coverage. With traditional Medicare and supplemental coverage, unlike with a commercial Medicare Advantage plan, people do not pay more when they need more care. That’s why people in Medicare Advantage plans often switch to traditional Medicare when they need costly care.

Does Medicare Advantage Cost Less Than Traditional Medicare?

The costs of providing benefits to enrollees in private Medicare Advantage (MA) plans are slightly less, on average, than what traditional Medicare spends per beneficiary in the same county. However, MA plans that are able to keep their costs comparatively low are concentrated in a fairly small number of U.S. counties. In the 25 counties where the cost differences between MA plans and traditional Medicare are largest, MA plans spent a total of $5.2 billion less than what traditional Medicare would have been expected to spend on the same beneficiaries, with health maintenance organizations (HMOs) accounting for all of that difference. In the rest of the country, MA plans spent $4.8 billion above the expected costs under traditional Medicare. Broad determinations about the relative efficiency of MA plans and traditional Medicare can therefore be misleading, as they fail to take into account local conditions and individual plans’ performance.

Related posts:

  1. How Original Medicare works
  2. How Part D works with other insurance
  3. Why the F Medicare Supplement Plan Works Best
  4. How Part D works with other insurance
  5. How Part D works with other insurance

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