Earlier Medicare how-to/why-and-why-not posts on this web site concentrated on the big picture and pluses and minuses of private Medigap insurance (the left hand side of the "Medicare and You" decision tree--see image below) as a supplement to your Original Medicare coverage.
About half of you who buy Medicare supplement insurance individually (not through a former employer or union) are under the gun to make a capitated-fee Part C managed care vs. traditional fee for service unmanaged Medigap decision by December 7th. The other half of you are either on Social Security Extra Help/LIS or a state pharmaceutical assistance program and can make a decision at a later time if you wish (but it makes sense to do it now).
If you are thinking of Part C (make sure your doctor and a nearby hospital accept it) let's start with the pluses and minuses of zero-premium Part C plans. For 2015, there are fewer than in years past because of the Patient Protection and Affordable Care Act but they are still out there and a good option for some beneficiaries, How can the insurers charge no premium you ask? What's the catch?
The answer is that insurance companies that administer Part C Medicare plans receive a capitated payment for you and pass that money on to your providers according to rates they have negotiated with their network of providers ahead of time. (That's the way all capitated plans -- mostly HMOs -- work; it has nothing to do with Medicare.) Conversely the insurance companies that administer Original Medicare Parts A and B and private Medigap supplemental plans pay providers only each time a service is provided and they have to pay a rate set by the government. (Of course, these are all the same insurance companies administering traditional Medicare, Medicare Advantage, Medigap, Medicaid, Obamacare, fire insurance, and so forth.)
The plans with zero premium usually get to that price by offering you a higher annual out of pocket (OOP) limit and/or higher copays than most Part C plans. But traditional Medicare has no OOP limit and much higher co-pays. For example, some zero-premium plans in Massachusetts where I live have a $6700 OOP max whereas the same insurer's other Part C plans cap annual OOP expenses at more like $3400 (do not confuse OOP limits with deductibles; OOP limits are good things; deductibles might be bad things). Zero-premium plans have higher co-pays as well. Some Part C plans1 may or may not have more constricted provider networks for their zero-premium plans, particularly if they are PPO plans rather than HMO plans. That's another way they can afford to offer a Part C plan at no cost to you.
1There are also plans with no built-in drug coverage, designed for people on Medicare who get their drug coverage from a former employer or the VA or some other "creditable" source. The word is "creditable" not "credible" and it's important.
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