Medicare can be tricky to understand particularly with the rise of supplemental plans. Here we take some time to explain the differences in the various 'parts' of Medicare to help you better understand what might be right for you or your loved one.
Medicare has several different parts:
Part A - which provides coverage for inpatient and hospital services
Part B - which provides coverage for outpatient medical coverage
Part C - Medicare Advantage, which is an alternative method to receiving Part B and Part D
Part D - Prescription drug coverage
Part E, F, G, etc - are typically Medicare Supplemental Insurance programs
Medicare Part B - Traditional Medicare
Medicare Part B is also known as Traditional Medicare. If you have Traditional Medicare you are eligible to receive services from medical providers who accept assignment from Medicare. Traditional Medicare insurance cards look like the picture shown to the right. If you have Traditional Medicare Part B only, Medicare will cover 80% of your cost of out patient care and you, the patient, are responsible for the other 20%. All medical practices who accept Medicare accept Traditional Medicare part B. This includes 96% of the medical practices in the United States. These rates are set by the federal government on an annual basis. Additional coverage through Medicare Part E, F, G, etc or Medigap are discussed below.
Medicare Part C - Medicare Advantage
Medicare part C is also known as Medicare Advantage. Medicare Advantage programs cover part A (hospital), part B (outpatient medical), and usually part D (prescription drugs). They can also cover traditionally non-covered services such as vision and dental. Medicare part C companies include large insurance organizations such as United Healthcare, Blue Cross Blue Shield, Humana, as well as many smaller organizations. Medicare pays these companies on a monthly basis to manage all of their members healthcare needs. The company then determines how much they are willing to pay the medical service providers, such as physicians.
What does this mean for the member? The member should know if the medical provider they are seeing is In-Network or Out-of-Network with the insurance plan. If the provider group is In-Network, they have agreed with the insurance company to accept their payment as payment in full and they cannot request further payment for services rendered. If they are Out-of-Network they have not agreed to accept the insurance payment in full for the service and can request further payment from the patient up to the Medicare allowable amount. This amount is set by the Federal Government on an annual basis. Typically, Medicare Advantage companies pay medical providers less than the Medicare rate and therefore most Medicare Advantage beneficiaries will have increased out of pocket costs for Out-of-Network care. Please see the following examples:
In-Network Physician Visit Mrs. Jones goes to see a new physician. The physician’s staff requests the patient’s insurance cards and confirms that the physician is In-Network with the patient’s insurance carrier. Mrs. Jones has an agreed upon co-pay at each visit as indicated on her insurance card. In this instance the co-pay is $10. The physician’s staff requests the co-pay from Mrs. Jones and at the completion of the visit bills Mrs. Jones’ insurance company for the remaining payment. In this case, Mrs. Jones has Aetna. Although Traditional Medicare reimburses physicians $200 for the type of visit Mrs. Jones had, her insurance company Aetna only reimburses their In-Network physicians $100 total ($10 from the patient, $90 from Aetna).
Since the physician has signed a contract with Aetna to be In-Network they must accept the $100 dollar payment as payment in full. The physician cannot bill the patient for the remaining $100 that they would have otherwise received from Medicare. Patients are often unaware that these type of insurance reimbursement practices exist, however they have become a significant problem. Insurance companies often prey on vulnerable seniors offering incentives such as drug coverage, vision, and dental without informing of how limited their physician network can become. As a result, many physicians decide to not join insurance networks due to their lower rate of reimbursement which is often times not negotiable and thought to be unfair. In the event a Medicare Advantage member decides to see an Out-of-Network physician they may experience higher out of pocket costs as discussed in the following example.
Out-of-Network Physician Visit Mrs. Boggs goes to see a new physician. The physician’s staff requests the patient’s insurance cards and confirms that the physician is Out-of-Network with the patient’s insurance carrier. Mrs. Boggs has an agreed upon co-pay at each visit as indicated on her insurance card. In this instance the co-pay is $10. The physician’s staff requests the co-pay from Mrs. Boggs and at the completion of the visit bills Mrs. Boggs’ insurance company for the remaining payment. In this case, Mrs. JBoggs also has Aetna. Traditional Medicare reimburses physicians $200 for the type of visit Mrs. Boggs had, however her insurance company Aetna only reimburses physicians $100 total ($10 from the patient, $90 from Aetna) for the visit.
Since the physician does not have a signed a contract with Aetna the physician can bill the patient for the remaining $100 that they would have otherwise received from Medicare. In total, the patient will be billed for $110 for the visit and will be held liable for this payment. If the patient chose to keep their Traditional Medicare instead of opting into a Medicare Advantage program with a limited network, Medicare would have paid 80% of the visit and the patient would have to pay for 20%. In this instance Medicare would pay the physician $160 and the patient would owe $40. There is a type of insurance that will pick up the cost of the 20% patient responsibility. This is known as Medicare Supplemental Insurance or Medigap and is discussed in detail below.
Medicare Part E, F, G, etc. - Medicare Supplemental or Medigap
Medicare Supplement Insurance Card - Sample
Medicare Parts E, F, G, etc. are also known as Medicare Supplemental Insurance or Medigap. This type of insurance was designed to cover the cost of the 20% patient responsibility not covered under Traditional Medicare Part B. Medicare part E, F, and G, etc. companies include large insurance organizations such as United Healthcare, Blue Cross Blue Shield, Humana, as well as other organizations. Medicare Supplemental Insurance is fairly straightforward. The following example illustrates how Medicare Supplemental Insurance works. Mrs. Williams goes to see a new physician. The physician’s staff requests the patient’s insurance cards and confirms that the physician has Traditional Medicare Part B as well as Medicare Supplemental Insurance. Traditional Medicare reimburses physicians $200 for the type of visit Mrs. Williams had. Traditional Medicare reimburses the physician 80% of the cost, or $160. The remaining 20%, $40, is covered by the patient’s Medicare Supplemental Insurance. The physician’s office bills both insurance companies directly. The out-of-pocket cost for Mrs. Williams for this visit is $0. Mrs. Williams is not restricted by physician networks and will have lower out of pocket expenses regarding her medical care. If desired, Mrs. Williams could also enroll in a Medicare Part D program to assist in covering her prescription drugs. For more information on which insurance may be better for you or your loved one given their unique circumstance please click here.