Medicare Part D, the newest part of Medicare, is a prescription drug plan, which has some co-pays and deductibles. It is purchased separately or as part of another insurance policy. The cost of co-pays and deductibles and which drugs are covered varies from one insurance company to another.
There also are Medicare Advantage Plans (sometimes called Part C) and Medicare Supplement Plans (sometimes called Part F or Medigap).
Advantage Plans are administered by insurance companies but with subsidies from the federal government. They usually include prescription drug coverage. There are co-pays that the individual is responsible for but unlike regular Medicare, there are limits to the out-of-pocket costs that vary depending on the insurance company. Fifteen million people have Medicare Advantage Plans, Hanby says.
Supplemental policies are the most comprehensive, but they can be expensive, as much as $2,000 or more a year. Supplemental plans cover most or all of the co-pays and deductibles and any expenses above what Medicare allows.
Three types of people want a supplemental plan: the ones who can afford the best coverage; the ones who hate paying deductibles and co-pays every time they visit a doctor or hospital, and the ones who are in poor health and are going to require extensive doctor and hospital visits.
A person can switch from one prescription drug plan to another, or from one Advantage Plan to another, without health questions during open enrollment periods from Oct. 15 to Dec. 7 each year.
A person can also switch from an Advantage Plan to a supplemental plan during the first 12 months after purchase without health questions. After that, the insurance company can ask health-related questions to determine eligibility for the supplemental plan.
“I don’t think the first year’s premium on these policies is always the most important thing,” Hanby explains. “You have to consider how much a company’s rates go up each year because it can mean a lot of money over a period of years.”
“A financial advisor has to know his client has choices. If an advisor does not deal with Medicare all the time, he should call in someone who does or learn the details himself in order to best serve the client,” Hanby says.