AARP Medicare Plans: A Comprehensive Overview
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Getting Into the Details of AARP Medicare Plans
AARP is a trusted name for many people, but especially for retirees. AARP is not an insurance company, but it does endorse Medicare insurance plans from UnitedHealthcare. These are the only plans AARP endorses.
AARP's mission is to enhance the quality of life as people age. Because many people need coverage beyond Original Medicare, AARP endorses both major types of private Medicare coverage: Medicare Advantage and Medicare Supplement insurance.
Gaps in Original Medicare
Since people choose AARP Medicare plans to supplement or even replace their Original Medicare coverage, we'll quickly review some of the gaps in Original Medicare before discussing AARP endorsed plans.
Original Medicare is provided in two "parts"— Part A, which covers inpatient services, and Part B, which covers outpatient services. You can expect to pay some costs out-of-pocket with both Parts. These expenses come in several forms: deductibles, copayments/coinsurance, and Medicare excess charges.
There is no cap on your out-of-pocket expenses during a year, or over your lifetime with Original Medicare. If you have a particularly bad health year, with multiple hospitalizations, or major surgery, you might have to pay tens of thousands of dollars.
In addition, prescription drugs are not covered by Original Medicare. Instead, you must pay for medications out-of-pocket, or enroll in a private prescription drug plan.
People are often concerned about the impact of these out-of-pocket costs on their finances, especially in retirement. In order to mitigate them, they often choose to enroll in Medicare Supplement insurance, or Medicare Advantage plans.
AARP Medicare Supplement Insurance Plans
Medicare Supplement insurance plans by AARP pay for some or all of the costs you would normally pay using Original Medicare. These costs are often called "gaps", so Medicare Supplement insurance plans are also known as Medigap plans or policies.
Medigap policies are issued in standardized "plans." There are 10 standardized plans: A, B, C, D, F, G, K, L, M and N. Each of the standardized plans covers a different portion of the gaps in Original Medicare.
The three most popular Medigap plans are F, G and N. As you can see, these three plans share certain features:
100% coverage of Part A deductible
Emergency coverage outside the United States
Part B coinsurance coverage
Skilled nursing care coinsurance coverage
Plan F is the most comprehensive Medigap plan available. This plan covers 100% of your costs for Medicare-approved services and procedures. In any given year, you can expect to pay no out-of-pocket costs with Plan F.
You may have heard about plan F going away in 2020. If you were already eligible for Medicare before January 1, 2020, you still have the right to stay in plan F, or enroll in it. However, if you become eligible for Medicare on or after January 1, 2020, plan F will no longer be available.
Plan G is the second most comprehensive Medigap plan available. It's very similar to plan F, except for the Part B deductible. Each year, you'll have to pay the first $198 of Part B services. After this, your plan will cover 100% of your Medicare-approved expenses.
Beginning in 2020, a new plan called High Deductible G (HDG) will be available. HDG is just like regular plan G, except there is a deductible of $2,180. You pay the first $2,180, and the plan pays the rest of your expenses. The premium for HDG is much lower due to the deductible.
Plan N is also very comprehensive. It is also more like traditional health insurance. With plan N, you will pay a small copay (no more than $20) to see the doctor. You'll also pay up to $50 to visit the emergency room. Plan N does not cover Part B "excess charges."
Excess charges are only charged by doctors and facilities that don't accept Medicare-approved prices. These providers can add no more than 15% to the Medicare-approved amounts, and this 15% is billed directly to you. Note that most doctors accept Medicare pricing so excess charges are somewhat rare.
No matter which standardized plan you choose, an important benefit is your ability to see any doctor or use any medical facility that accepts Medicare. You can use your Medigap plan anywhere in the nation, without a referral. This is a big reason people choose Medicare Supplement insurance.
AARP-branded Medicare Supplement insurance plans come with extra benefits. These are benefits beyond the requirements of the standardized Medigap plans. AARP plans offer these benefits to give members more value.
Extra benefits vary by the state you live in, but can include:
Discounts on vision exams and eyewear
Access to 24-hour nurse helplines
Prescription Drug Coverage
Medicare Supplement insurance plans do not cover prescription medications. You will need to enroll in a standalone prescription drug plan (PDP) if you want help paying for your medications.
Eligibility for Medigap plans generally follows the rules for Original Medicare, and in fact, you must be enrolled in both Part A and B to buy a Medigap policy.
One potential difference is that some states require you to be age 65 or older to enroll in Medigap, even if you qualify for Original Medicare at a younger age.
Cost of AARP Medicare Supplement Insurance
Medicare Supplement insurance plans from AARP charge a monthly premium. This premium is in addition to your Part B premium, which you must also pay. Premiums vary based on which standardized plan you choose; more comprehensive plans like plan F have higher premiums.
Premiums for AARP Medigap plans are affected by many factors but are generally set based on the demographics of the community you live in. This means your premiums are not set based on your individual age, but rather the relative age of the community as well as other factors.
AARP Medicare Advantage Plans
AARP also endorses Medicare Advantage plans. Medicare Advantage is also known as Part C of Medicare. Medicare Advantage is an alternative to Original Medicare; it does not supplement it like Medigap.
Although these plans are created by private insurers, Medicare Advantage plans must provide all the benefits of Original Medicare Parts A and B. In reality, they come with more comprehensive benefits.
Medicare Advantage plans function differently than Medigap. Instead of working with Part A and B and filling in most or all of the gaps of Original Medicare, you will have small copayments and coinsurance for most services and procedures.
These copayments and coinsurance amounts make Medicare Advantage look like the employer-provided health insurance you may already be familiar with. Other similarities include the fact that most Medicare Advantage plans are either HMO or PPO based.
You may need to choose from a network of approved physicians and facilities, and you may need a referral from a primary care physician to see a specialist.
Your out-of-pocket costs under Medicare Advantage will differ from Original Medicare in two important ways:
Copayments and coinsurance under Medicare Advantage are generally lower
Medicare Advantage plans have an annual out-of-pocket maximum (OOPM)
You will know the maximum you'll spend on Medicare-approved health care each and every year, unlike with Original Medicare.
Having a hard out-of-pocket cap is one of the primary reasons for Medicare Advantage's growing popularity. An OOPM can help you better budget for medical expenses and can give you some peace of mind in your retirement years.
Benefits Beyond Original Medicare
Another reason for the popularity of AARP Medicare Advantage plans is the number of extra benefits they come with. These extra benefits vary by state, but may include:
Optional affordable dental coverage
Vision coverage (exams, lenses and even coverage for frames)
Hearing coverage (exams and major discounts on hearing aids)
Transportation for medical services
Prescription Drug Coverage
Many Medicare Advantage plans come with drug coverage. In this case, they are referred to as MAPD plans. You may want to find an MAPD plan, because you generally cannot enroll in both a Medicare Advantage plan and a stand-alone prescription drug plan at the same time.
The drug plan portion of your Medicare Advantage plan has separate deductibles and copayments/coinsurance than the medical portion. There is no out-of-pocket maximum for the drug portion of MAPD.
AARP Medicare Advantage plans follow the eligibility rules for Original Medicare. If you are eligible for, and enrolled in, Part A and Part B, you can enroll in Medicare Advantage. There is one exception, and that is if you have end-stage renal disease (ESRD).
Most Medicare Advantage plans will not accept people who already have ESRD when they become eligible for Medicare. There are some plans, known as Chronic Special Needs plans (C-SNPs) that are designed for patients with ESRD.
AARP Medicare Advantage Plan Cost
AARP Medicare Advantage plans may have a monthly premium, and this depends very much on where you reside. Medicare Advantage plans are generally available by county; larger, more heavily populated counties tend to have lower premiums or even no premium at all.
In addition to any premium for your Medicare Advantage plan, you will need to continue paying your Part B premium to keep your Medicare Advantage coverage in place.
Moving Forward with AARP Medicare Plans
AARP offers many options for Medicare health insurance:
Medigap plans supplement coverage under Part A and B. Consider combining an AARP endorsed Medigap plan with an AARP prescription drug plan.
Medicare Advantage plans are more affordable than Medigap, but still lower your exposure to high out-of-pocket costs.
As you get close to entering Medicare, consider reaching out to an independent professional as a part of your research process. Licensed medicare insurance agents can assist you with comparing quotes on AARP Medicare plans, finding out which plans are available in your area, and identifying the plan that best fits your needs.
Joseph Arroyo is a licensed Medicare insurance agent who lives in Hilton Head, South Carolina. Arroyo is certified to sell Medicare products including Medicare Supplement insurance, Medicare Advantage, and prescription drug plans.