What Makes Medicare so Complicated?

by Mary L. Flett, Ph.D.  November 19, 2017

You’ve seen the ads.  “Let us take the worry out of Medicare!”  “Medicare Made Simple!”  Don’t believe them.  They are just selling insurance.  What insurance?  Medicare.  Yes, Medicare is an insurance plan.  One that was put together during the LBJ administration and signed into law on July 30, 1965.  And it was simpler then.  Just coverage for a stay in the hospital and paying to see your primary care doc.  And it has gotten better in the 52 years it has been around.

What Does Medicare Cover?

Back in 1965, Medicare covered hospital costs (Part A) and some outpatient services (Part B).  Over the years, Congress has amended the law and now there are four parts:

  • Part A – inpatient hospitalization, limited skilled nursing home stay, home health care, and hospice
  • Part B – primary care and specialty care visits, durable medical equipment, some preventative services (for example flu shots), and lab work
  • Part C – Medicare Advantage Plans
  • Part D – pharmaceutical coverage

Note – neither dental or vision are included in Medicare coverage.  Same goes for hearing aids!

What are Medicare Advantage Plans?

Called “Part C” because they were never considered as part of the “Original Medicare”, Medicare Advantage Plans are a boon to private insurance companies.  According to the Centers for Medicare and Medicaid:

Medicare pays a fixed amount for your care each month to the companies offering Medicare Advantage Plans. These companies must follow rules set by Medicare.

Each Medicare Advantage Plan can charge different out-of-pocket costs and can also have different rules for how you get services, like:

  • Whether you need a referral to see a specialist
  • If you have to go to doctors, facilities, or suppliers that belong to the plan for non-emergency or non-urgent care

These rules can change each year.

Depending on which Medicare Advantage plan you are looking at, you may be able to pay extra for vision and dental coverage and even get a break on hearing aids!

What is Part D?

Costs for medications have been going up astronomically for years.  Back when George Bush was President in 2003, Congress was successfully lobbied to write a law to cover prescriptions drugs.  That’s when Part D was born.  Truth be told, this was more of a win for the insurance companies and the pharmaceutical companies than the people, but for those whose medicines are expensive, having Part D coverage was a huge benefit.  One of the problems with Part D, however, is that it changes.

Insurance companies call the medication list a “formulary”.  Each year, the insurance companies negotiate with the pharmaceutical companies for the best price on medications.  Patents on drugs last for 17 years.  After that, any pharmaceutical company can manufacture the drug.  This is called a generic and is usually quite a bit less expensive than the original.  So there is always negotiating going on to get the drug at the lowest price for the insurance company and then marking it up for the consumer.  Since patents are expiring all the time, the formulary changes.  Congress limited the insurance companies to changing their formulary to once a year, so it is possible that your insurance company has dropped or will be dropping one or more of your medications.

So, What’s All the Fuss?

The beauty of Medicare is that all Americans are eligible for health care coverage (Original Medicare) when they turn 65.  You do have to enroll and you do that three months before you turn 65.  Once enrolled, you are covered by Parts A, B, and D (see above).  No questions asked, no choices to be made, no problems.  And, once a year, if you want to change, there is an open enrollment period where you can switch plans.

medicare-a-b-c-d-basicsMedicare pays 80% of what is being charged for a particular service and you pay the other 20%.  If you want, you can buy a policy to pick up that 20%.  That is called a supplemental plan or Medigap policy.  Most large insurance companies (Blue Cross, Aetna, Anthem, etc.) sell these.

Or, you can bypass both Original Medicare and a supplemental plan, and just go with the Medicare Advantage (Part C).  You will probably have a lower monthly payment, but you will be subject to price changes annually as well as changes in covered services.  You will also be limited to seeing providers who are part of that plan.  So, if you what you need isn’t covered, or the person you want to see isn’t part of the plan, you will need to pay out of pocket for that.

What’s Best for Me?

Making a decision on what insurance plan works best for you starts with knowing and understanding what medications you are needing and what your physical and mental health needs are.  Here is a visual that can help you make your decision.

This first chart identifies three typical states of health – no problems, mild problems that can be managed through lifestyle changes and serious illness that needs lots of interventions

Medicare1

The second chart shows what kind of coverage you can feel comfortable purchasing.

Medicare2

The last chart gives you an idea about which Part D insurance coverage you will need

Medicare3

Bottom Line

Make your insurance coverage choices based on more than the monthly premium.  Pay attention to what your health needs are.  If you are relatively healthy, then you can get by with a Medicare Advantage Plan that has basic coverage.  If you are developing conditions such as hypertension and are trying to manage your weight, start to think about using Original Medicare and shopping around for the best supplemental coverage including checking out formularies to see if your current medicines are on them.  You can consult with your local pharmacist and get great information from him or her.

If you have serious physical and/or mental illness, don’t get a Medicare Advantage plan.

Get the best coverage possible using Original Medicare, a Medigap plan, and carefully compare formularies.  Ask your primary care provider for their preferences on medications and then consult with your pharmacist on whether or not there is already a generic available or will be soon.  Finally, consider putting money aside for long-term care insurance.

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