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What Does Part C of Medicare Do?

The four parts of the Medicare program (A, B, C, and D) give Medicare beneficiaries a choice in how they receive their healthcare benefits.

In this article, I will explain what Medicare Part C is used for and make some suggestions to make it easier to decide which parts will work best for you.

Key Takeaways

  • Medicare Part C provides private health plan options to Medicare beneficiaries.
  • Approved Part C health plans replace Medicare Part A and Part B benefits from the federal government.
  • Private plans may or may not cost less than traditional Medicare.
  • If you join a private Medicare plan, you must continue paying your Medicare Part B premium.
  • Private Medicare plans are not compatible with supplemental Medicare insurance (Medigap).
  • Private plans can offer extra benefits that traditional Medicare does not cover.
  • Some private plans work with Medicaid for dually eligible individuals.

What is Medicare Part C?

When the Medicare program was created, it had just two parts, A and B. Medicare Part A is inpatient coverage. Part B is coverage for medical care, including doctor visits, tests, supplies, and durable medical equipment.

From the beginning, this simple, two-part health insurance system had its challenges. It straps beneficiaries with 20% of all major medical costs. It doesn’t cover outpatient prescriptions. And, it does not cover routine healthcare, such as dental, vision, and hearing.

Medicare Part C (private health insurance) and Part D (prescription drug coverage) were created to help solve these problems. Medicare Part C is not necessary coverage. It is an option.

Who Can Get Medicare Part C and D?

The two new parts of Medicare are optional. They are overseen by the federal government, but they are provided by private insurance companies.

If you are enrolled in Medicare Part A and Part B, you can get a Part C private health plan. To get a Part D prescription drug plan, you must be enrolled in Medicare Part A and/or Part B.

What Does Medicare Part C Cover?

Although they are not all the same, every Medicare Part C plan must include all of the benefits provided by Original Medicare (Part A and Part B). That’s where all similarities end.

Although private Medicare plans must cover all Part A and B benefits, they can also offer their members additional benefits. Some of the more common extra benefits offered include:

  • Prescription drug coverage
  • Routine vision, hearing (including hearing aids), and dental care
  • Transportation to and from doctor appointments
  • Coverage for over-the-counter medications
  • Telehealth benefits
  • Wellness and preventive care programs, including gym memberships

These extra benefits, as well as access to a network of local healthcare providers, is why Part C was dubbed Medicare Advantage. For many Medicare beneficiaries, it offers a lot of advantages. But not for everyone.

How Are Original Medicare and Part C Different?

The point of a Medicare Advantage plan is to provide more options. They are as different in what they provide as they are in how they provide it.

Original Medicare is Private Fee-for-Service (PFFS) health insurance. Beneficiaries can use any healthcare provider that accepts Medicare assignment. The provider receives 80% of their payment from the government and the remaining 20% from the patient. Pre-authorization and referrals are not required.

Most Medicare Advantage plans are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) health plans. Both HMO plans and PPO plans use local provider networks to deliver care.

In the case of HMO insurance plans, members must use the plan’s provider network or pay all costs. PPO networks have a little more flexibility, which allows members to see providers outside of the plan’s network for an additional cost. And, except in the event of an emergency, members must receive care in the plan’s service area.

Both HMO plans and PPO plans require their members to use go through a primary care physician (PCP) for referrals and pre-authorizations. In essence, the PCP is the gatekeeper to care and the point of all coordination. This is why Medicare Advantage plans are called managed care plans.

For some people, a managed care plan works well. PCPs have working relationships with hospitals, specialists, surgical centers, and other care providers. They save patients time and frustration by making referrals and scheduling appointments.

For other people, the gatekeeper role of the PCP can be a nightmare. This is particularly true when it comes to getting second opinions and step therapy, which health plans love.

The most significant difference, though, is how much both types of health insurance cost and how you pay for those costs.

How Much Does Part C Cost?

What you pay to receive coverage in a Medicare Part C plan vs. Original Medicare is just as different as care delivery. For some people, it costs less and for others, it costs more.

How can this be?

In general, the healthier you are the fewer major healthcare services you require. That means healthy people can take advantage of the extra benefits offered by private health plans without dipping into their budget for out-of-pocket costs on major medical services.

Conversely, individuals with chronic health conditions could end up paying more with a private health plan due to copays and high maximum out-of-pocket (MOOP) limits. There is a fine balance between paying more upfront (in premiums) vs. paying too much when you receive services (copays and/or coinsurance).

What About Medigap?

No discussion about Medicare costs is complete if you don’t bring Medigap (Medicare Supplement insurance) into the mix.

With a private health plan, you limit your risk by choosing a plan with a MOOP that’s appropriate for your health and your finances. With Original Medicare coverage, you limit your risk by purchasing Medicare Supplement insurance.

Supplemental insurance helps cover some of the deductibles and coinsurance in Part A and Part B. For instance, a Medigap Plan G policy covers all out-of-pocket costs, for Medicare-approved services, except the annual Part B deductible.

Why is that important?

Let’s say you have a Medicare Advantage plan with a $5,000 annual MOOP that has a $300 per day copay for the first 5 days of inpatient care. If you have a 7-day hospital stay, you’ll pay the plan’s monthly premium, plus a $1,500 copay for the Part A inpatient services, plus copays for all of your Part B doctor, testing, supplies, and medication services while you’re in the hospital. It isn’t difficult to see how you will easily reach the $5,000 annual MOOP.

If you have Original Medicare, and a Medigap Plan G policy at $200 per month, your total cost for a full year of coverage, including 7 days of hospitalization, would be $2,400, plus the annual Part B deductible. In most areas of the country, Medigap Plan G policies start well below $200 per month.

You should weigh your risks and decide how you want to budget for your healthcare. If you want to know most of your costs are fully covered every month, Original Medicare and a Medigap plan are the way to go. If you are healthy and can take a little more financial risk, Medicare Advantage may save you money in the long run.

What About Medicaid?

Medigap is how people who can afford it get the best coverage possible. These same individuals can afford a Medicare Advantage plan that offers more benefits and a lower MOOP, albeit with a higher monthly premium.

For financially disadvantaged people, the Medicaid program offers healthcare benefits. These benefits do not disappear when you get Medicare. In fact, they work together. You can be dually eligible for both programs.

In the case of Original Medicare, there are several Medicare Savings Programs (e.g., QMB, SLMB, QI) that help pay monthly premiums and certain out-of-pocket expenses. With Medicare Part C there are dual-eligible Special Needs Plans (SNPs) that coordinate the benefits available to individuals that qualify for Medicaid.

Whichever type of Medicare coverage you choose, Medicare covers the majority of your healthcare costs if you qualify for Medicaid. And, there are other benefits available through Social Security, such as the Extra Help program, which helps with prescription costs.

What About Prescriptions?

Most Medicare Advantage plans include drug coverage (Part D) benefits. These plans are known as Medicare Advantage Prescription Drug Plans (MAPD).

People who keep their Original Medicare benefits, and people who enroll in a health plan without prescription drug coverage, can add a stand-alone Medicare Part D plan.

What About Enrollment?

Another significant difference between Medicare Part C and traditional Medicare has to do with enrollment and enrollment periods.

In traditional Medicare, you separately enroll in Part A and Part B. You do not have to be enrolled in both. For example, if you are still working you can enroll in Medicare Part A and continue participating in your employer’s group health benefits.

To join a Medicare Advantage plan, you must be enrolled in both Medicare Part and Part B.

Both traditional Medicare and Part C have enrollment periods, starting with your Initial Enrollment Period (IEP) when you first qualify. After your IEP, you will need to use one of several Open Enrollment Periods. Each of these enrollment periods has different rules for switching to and from Original Medicare and Medicare Advantage. Medicare gives Part C plan members an additional enrollment period that allows them to jump from one plan to another, but only once.

Summary

Now you know that Part C is used for private health plans known as Medicare Advantage. These plans give you the opportunity to choose options that will better serve you and your individual needs.

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