Medicare, Medicare Advantage and Medigap Plans

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When you sign up for Medicare, you have some choices to make. You can choose the original Medicare program, which is run by the federal government and allows you to go to any health care provider that accepts Medicare, or you can choose to use the Medigap Advantage Plans, which are discussed below. In the original program, not all services are covered, but you can pay an additional premium for one of the standardized Medigap supplemental policies sold through private insurance companies (see below).

Most individuals have Part A and Part B coverage. Part A helps cover the cost of inpatient care in hospitals, as well as some costs of skilled nursing facilities, hospice and home health care. Most people do not pay a premium for Part A coverage.

Part B coverage helps pay for doctors' and outpatient costs. The standard premium for Part B in 2013 is $104.90 a month, but the amount goes up for those with incomes above $85,000 (single filers) or $170,000 (joint filers).

You can also join a Medicare Prescription Drug Plan (Part D) to add drug coverage. Premiums will vary by the plan. Learn more about prescription drug coverage on the Medicare Web site.

Medicare Advantage Plans

Medicare Advantage plans are run by private companies approved by Medicare. They provide Part A and Part B coverage, but can charge different amounts for different services. They may also offer a prescription drug plan. With Medicare Advantage plans, you do not need a Medigap policy.

These plans typically involve a group of doctors, hospitals and other health care providers who give care to Medicare beneficiaries in exchange for a fixed amount of money from Medicare. They may be:

  • Health Maintenance Organizations (HMOs) – You must go to plan doctors and hospitals, but you have little or no out-of-pocket cost for covered services.
  • HMOs with Point of Service (POS) option – You may use providers outside the network, though with higher out-of-pocket payments.
  • Preferred Provider Organizations (PPOs) – You may choose doctors and hospitals outside the plan, though at higher cost.

Medigap Plans

Medigap policies are sold by private insurance companies to cover some of the uncovered medical expenses in traditional Medicare. These policies are standardized and regulated by Medicare, and must include specific benefits so you can compare coverage and costs. Generally, when you buy a Medigap policy you must have Medicare Part A and Part B. You will have to pay the monthly Medicare Part B premium.

You may be able to choose up to 12 different standardized Medigap policies (Medigap Plans A through L). Each plan has a different set of basic and extra benefits.

Summary of Benefits (PDF) document is available on the Medicare Web site.

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