How Medicare works

What are Medicare options?

There are a wide range of Medicare plans that offer different ways to cover a variety of needs and budgets. Here’s a breakdown of the most popular options and what they do.

Original Medicare

Before Original Medicare pays anything, you need to meet a deductible — a set amount of medical expense that depends on your plan. After that, Original Medicare pays its share of covered services and supplies (about 80%), and you pay the rest. There’s no yearly limit for what you pay out of pocket, which means that a serious medical expense – like a $250,000 hospital bill – could cost you or your family well over $50K, especially if you have more than one extended stay in a given year.

Choosing only Original Medicare coverage could be an expensive decision

Average monthly costs for an average "Original Medicare" recipient in good health in 2017*


Medicare Advantage plans

Blue Shield Medicare Advantage plans, or Part C, cover everything Medicare Parts A and B cover, as well as emergency and urgent care, and prescription drugs (Part D).

When you enroll in Original Medicare and a Medicare Advantage plan, the Medicare Advantage plan covers your Part A and Part B coverage.

Often includes prescription drug coverage, with no added premium.

Provides the convenience of dealing with just one insurer for all your claims.

Often provides valuable extra benefits, like additional days in the hospital as well as dental, vision, and hearing coverage.

Limits your financial liability by establishing annual out-of-pocket maximums and by including coverage beyond Medicare lifetime limits on certain services (which can greatly increase your out-of-pocket costs).

Offers access to a specific network of doctors and hospitals in your area that are contracted with your plan.

Not all MA-PD plans are created equal

Medicare pays a fixed amount for your coverage each month to the private company offering your plan. Each insurer can modify the costs and coverage of their plans and benefits. For example, they can:

Charge different premiums, deductibles and out-of-pocket costs. It’s important that you understand ALL costs associated with a specific plan, so you’re not stuck with any unexpected medical bills.

Have different networks. Blue Shield of CA has some of the best doctors and hospitals in the state. See if your doctor or a doctor/hospital you’d like is in our network.

Have different rules about how you use your benefits (like whether you need a referral to see a specialist).

Each year you have the option to choose a different plan, keep your current plan, or switch to Original Medicare.
But you can only join or leave a Medicare Advantage plan at certain times during the year.

Medicare Supplement Insurance (Medigap) policies

Original Medicare does not cover all the costs for healthcare services and supplies, so Medicare Supplement, or Medigap, plans help pay your remaining healthcare costs like copayments, coinsurance, and deductibles.

Covers many of the out-of-pocket expenses that Original Medicare doesn’t cover.

Provides flexibility to choose any Medicare-approved doctor or hospital that accepts Medicare — even when you travel.

Provides benefits that are standardized by the government, with plan variations designed to cater to different needs and budgets.

Medicare Supplement Insurance (Medigap)

Medigap policies are standardized and identified in most states by the letters A-D, F-G, and K-N. Each lettered policy offers the same basic benefits, but some offer extra coverage, like copays for skilled nursing facilities and hospice care.

Some Medigap plans also offer coverage for services Original Medicare doesn’t cover at all, like medical care you receive outside the U.S. and enhanced benefits like gym members through SilverSneakers®.

Note: Starting January 1, 2020, Medigap plans sold to people new to Medicare will no longer cover the Part B deductible. Because of this, Plans C and F (Including Plan F Extra) will be discontinued. However, if you already have Plan C or F on January 1, 2020, you can keep it as long as you continue to pay your premium.

To join a Medigap plan, you must:

The best time to buy a Medigap policy is during your Medigap Open Enrollment period. This 6-month period begins three months before you turn 65 and are enrolled in Part B. After this, you may not be able to buy a Medigap policy or, if you can, it may cost more.

Prescription Drug Coverage

Most people get Prescription drug coverage (Part D) through a Medicare Advantage plan. But some plans, like Medicare Supplement plans, can’t or don’t offer drug coverage.

A Prescription Drug Plan, or PDP:

Helps pay for prescription medications not covered under Original Medicare.

Available as a standalone plan to complement your existing coverage, or can get wrapped into a Medicare Advantage plan, often with no additional premium.

To avoid a late enrollment penalty, enroll in Part D during your IEP. If you enroll after your IEP, a penalty is permanently added to your Part D premium that remains for as long as you have Part D coverage.

See how a real medical bill would get paid with these plans:

* Graphic intended for educational purposes only. Individual experiences may vary.

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