Health Care in Retirement – Medicare Part C

In Part 4 of our Health Care in Retirement Series, we are going to review in-depth Medicare Part C.  To jump to any of the other parts of this series now, use the links below:

• Part 1: Health Care in Retirement – Options for Obtaining Health Insurance
• Part 2: Health Care in Retirement – Medicare Part A (Hospitalization)
• Part 3: Health Care in Retirement – Medicare Part B (Physician Services)
• Part 4: Health Care in Retirement – Medicare Part C (Medicare Advantage)
• Part 5: Health Care in Retirement – Medicare Part D (Prescription Drugs)
• Part 6: Health Care in Retirement – Medicare Medigap Plans (Medicare Supplemental Insurance)

What is Medicare Part C?

Medicare Advantage is another name for Medicare Part C and is an alternative way to receive Medicare Parts A and B, which is otherwise known as Original Medicare.

Part C plans are offered by private insurance companies instead of directly through the Federal government.  The insurance companies that sell Part C policies must follow the rules set by Medicare.

Most Part C plans include prescription drug coverage and may also provide additional benefits for vision, dental, and hearing.  These are benefits not included under Original Medicare.

Similar to health insurance plans that one buys prior to retirement, Part C plans come in a variety of types, including HMO and PPO models.  Deductibles and out-of-pocket maximums will vary by plan, and in most cases, you will need to receive services from providers who participate in the plan’s network and service area in order to minimize cost.

How Much is the Monthly Premium?  

The monthly premium you pay for Part C depends on a number of factors, including the following:

• The type of plan you select
• Whether the plan pays a portion of your Part B premium
• The plan’s annual deductible and out-of-pocket limit
• The plan’s copayment and coinsurance rates
• The additional services that are included beyond what is standard with the Original Medicare

Many Part C plans do not charge a monthly premium.  However, even if there is no monthly charge for Part C, you are still responsible for paying your Part B premium, which can vary depending on your income and tax filing status.

The Medicare website has an online tool for finding plans offered in your state.  Evaluating Part C policies and comparing the benefits and costs to the alternative of combining Original Medicare with Part D and a Medigap plan can be complex.  But evaluating these options could save you money in the long run and ensure you have proper health care coverage in retirement.

Does Part C have a deductible and out-of-pocket maximum?

Most Part C plans have a deductible for medical services and a separate deductible for prescription drugs if drug coverage is selected.  There are some plans that have $0 deductibles.

One key advantage of Part C compared to Original Medicare is that plans limit out-of-pocket expenses.  Whereas coverage under Parts A and B have no limit to the total amount of expense you pay for services, Part C plans do impose out-of-pocket maximums similar to those that apply to traditional health care plans.  In 2022 and in the State of Maryland, these limits range from $0 to $10,000 or more per calendar year and they can change each year.

For this reason, the combination of Original Medicare with a Medicare Part D plan and a Medigap policy should be compared to the benefits and costs of any Part C plan that you might be considering.

Does Part C have any copayments or coinsurance requirements?

It depends on the following factors:

• The type of plan you select
• The types of services you receive
• Whether the services received are from in-network providers

Part C cannot charge you more than you would pay under Original Medicare for certain services, like chemotherapy, dialysis, and skilled nursing care.  Charges for other common services are set by the insurer and may be different than what is charged under Original Medicare.

When am I eligible to sign up for Part C?

You are eligible for coverage under Part C once you enroll in Parts A and B of Original Medicare.  This can happen as early as age 65.  The Initial Enrollment Period is seven (7) months long and begins three (3) months prior to the month in which you turn 65.  It ends three (3) months after the month of your birth.

If you miss your Initial Enrollment Period, you can enroll in Part C between January 1 and March 31 during what is known as the General Enrollment Period.  Coverage obtained during this period will begin on July 1.

Additionally, there is an Open Enrollment Period each year from October 15 to December 7.  Coverage obtained during this period will begin on January 1.

Lastly, if you miss the general or open enrollment periods because you are still employed and maintaining creditable coverage, you will be eligible for a Special Enrollment Period that will begin in the month you stop working or lose your group coverage, whichever occurs first.  This enrollment period ends eight (8) months from the earlier of the two dates.        

Do I have to sign up for Part C?

No.  Part C is an alternative form of Medicare coverage, which means you are not required to sign up for it.  However, many Part C plans provide additional benefits that Original Medicare does not, including vision, dental, hearing.  Most policies also include prescription drug coverage.

Moreover, Part C plans put an annual limit on out-of-pocket expenses.  Original Medicare has no such limits and can only be limited if you obtain a separate Medigap policy.  Only by combining Original Medicare with Part D coverage and a Medigap policy will you obtain similar coverage to what is offered by most Part C plans.

Can I change plans once I have signed up?

Yes.  The Open Enrollment Period runs from October 15 to December 7 each year.  Changes made during this time take effect on January 1.  The changes to Part C coverage that can be made during this enrollment period include:

• Switching from one Part C plan to another
• Switching from a Part C plan that doesn’t offer drug coverage to a Part C plan that does
• Switching from a Part C plan that offers drug coverage to a Part C plan that does not
• Changing from a Part C plan back to Original Medicare (with or without a Part D plan)

Additionally, during the General Enrollment Period that runs from January 1 to March 31, you can switch between Part C plans or disenroll from Part C and sign up for Original Medicare with a Part D plan.  Coverage obtained during this enrollment period does not take effect until July 1.

Are there penalties for not signing up for Part C?

No.  Part C is an optional and alternative form of Medicare coverage, which combines elements of Parts A, B, D, and Medigap.

Are there disadvantages to signing up for Part C?

Possibly.  Part C services are restricted to those offered in your plan’s service area, which usually corresponds to a geographic region.  Original Medicare by comparison allows you to obtain services from any provider in the United States.  Therefore, traveling outside of the service area to obtain care could result in higher out-of-pocket expenses.

Moreover, coverage can change each year.  When this happens, the insurance company offering the plan is required to send out an annual notice outlining any changes in coverage, costs, service area, etc.  Coverage under Original Medicare paired with a Medigap plan rarely experience coverage changes.

Additionally, Part C has a history of higher out-of-pocket expenses compared to Original Medicare when paired with a Part D and Medigap plan.  According to a 2018 research study completed by the Kaiser Family Foundation, Part C enrollees were more likely than Original Medicare enrollees to experience cost-related problems.

Lastly, being enrolled in Part C may eliminate the option of obtaining a Medigap plan if you decide to disenroll from Part C and enroll in Original Medicare later.  This is because insurers offering Medigap plans are only required by law to issue you a policy during the first six (6) months after you enroll in Medicare Part B.  After this time period, insurers can generally require you to complete medical underwriting, which may result in you being charged higher premiums or being rejected altogether for pre-existing conditions.  Exceptions to this are very limited.

For these reasons, it is important to weigh the pros and cons of health coverage offered under Original Medicare to any Medicare Advantage plans you are considering.