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Traditional Medicare vs Medicare replacement policies

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Deciding rather to subscribe to traditional Medicare or go with a Medicare replacement plan can be very confusing. So where do you start? By first understanding what the benefits and costs of traditional Medicare are.

Medicare is a federal health insurance program established in 1965. It is available to all persons over the age of 65, persons under the age of 65 with certain disabilities, and persons of any age with renal failure.

To apply for Medicare visit your local Social Security office.  The Medicare program is managed by The Center for Medicare and Medicaid Services (CMS). There are three basic types of Medicare. Medicare Part A, Medicare Part B, and Medicare Part D. In this article, we will only be covering Part A and Part B.

Medicare Part A is the part you pay for via payroll tax deductions. In order to receive Part A benefits at no additional premium cost you must have 40 quarters of Medicare covered employment.  Part A is the insurance that covers hospital stays, skilled nursing care, hospice, and certain home health care. The 2010 deductible for Part A is $1100.00. Additionally, for an inpatient hospital stay, a recipient would be responsible out of pocket for $275.00 per day for days 61-90 of inpatient care. In a skilled nursing facility, Medicare Part A pays 100% for the first 20 days of covered services. For days 21-100 there is a daily co-pay of $137.50.

Medicare Part B is is an elective insurance. A person can elect not to enroll in the Part B portion, however, should they choose to enroll at a later date, there will be a 10% premium penalty for each 12 months of non coverage. The exception to this penalty is if the person was covered by other insurance thru their or their spouses current job. You must pay a premium for this coverage. The 2010 premium remained at $96.40 for 73% of those covered. Of the additional 23%, which includes new enrollees, those with income related increases, and those who do not have their premiums withheld from their Social Security check, the premiums increased to $110.50 per month. Medicare B covers physician services, out patient services such as Pt/Ot/St, durable medical equipment, ambulance and certain home health services. The 2010 Part B deductible is $155.00. Additionally, Part B only pays 80% of covered charges. The recipient would be responsible for the additional 20%.

Medicare replacement plans can be beneficial, if you know what to ask and what to look for in considering a policy. The sales pitch can be very misleading. While it is true that in some cases, your premiums are lower with a replacement plan, the main thing to look at is coverage. Make sure the benefits are also better, or at least equal to what you would receive from traditional Medicare. Key areas to compare are:

  • Does the replacement require pre-authorization for skilled care. Traditional does not.
  • Are you required to use contract Doctors, hospitals, or skilled nursing facilities – with traditional you are not.
  • With Part B coverage, is the payment amount at least 80%?
  • Under Part A coverage, at minimum, are the first 20 days of skilled nursing covered.?

Know what benefits you are entitled to. Know what to look for in comparing coverage.


  • Réne Girard (Ft. Worth Christianity & Culture) 5 years ago

    I specialize in Medicare Supplements, also known as Medigap policies. I don't sell the Medicare Advantage plans because as one of my clients told me "all that glitters is not gold." Her husband could not use his new insurance at Baylor Hospital because they would not take his Medicare Advantage plan unless it was an emergency. He had scheduled surgery so it was going to be 100% out of their pocket. I've had to rescue people like him and it can not always be done.

  • not true 4 years ago

    I sell medicare supplement and advantage. Different policies exsits for different situations...don't ever buy from an agent the refuses to look at the other. Most of the time they have their own interests (pocketbooks) in mind, and not the customers interest

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