What’s The Difference Between Medicare And Major Medical


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Image by Iowa Democratic Party - iowademocrats.org via Flickr

Yesterday I was asked what the difference is between Medicare and Major Medical insurance.  The difference is purely a matter of semantics (how a word is used.)

“Medicare” is always a type of “Major Medical” insurance.  However, “Major Medical” insurance is not always a part of Medicare.  In this post I will try to explain.

MAJOR MEDICAL

InvestorWords.com defines Major Medical insurance like this, “Insurance that covers most serious medical expenses up to a maximum limit, usually after a deductible and coinsurance have been met.”

Major Medical insurance is the most comprehensive and expensive type of health insurance that is available.  However, it is not the only thing that can be called health insurance.

Health insurance also includes the following types of insurance.

  • Long Term Care
  • Disability
  • Accident
  • Dental
  • Critical Illness
  • Medicare
  • Medigap

I am certain that there are other types of health insurance that I just did not think about.

During the recent Health Care Reform debates every politician and member of the press talked about “Health Insurance” as if Major Medical were the only type available.  There actions contributed to the confusion in America.

Today, when most people refer to “Health Insurance” they are talking about Major Medical insurance for someone under the age of 65.  That, however, is not always the case.  Terms must be defined before there can be any conversation.  If you do not define your terms, you run the risk of people using the one word to refer to different things.

MEDICARE

Medicare is a government sponsored form of Major Medical for those people over the age of 65, with End Stage Renal Disease or have drawn Social Security Disability Income for at least 24 months.

Medicare operates differently than the Major Medical insurance people had during their career years.  Before you enrolled in Medicare, you had all your insurance bundled into one package.  With original Medicare, you will need to be enrolled in Medicare Parts A, B and D separately.

This is probably an over-simplification but you will get the idea about Medicare.  Part A is automatic and “free” to all qualifying Americans.  It covers your hospital costs.  Part B covers your doctor’s fees.  Since it costs a premium, it is optional.  Part D covers your prescription drugs.  It also costs a premium and is optional.

The biggest difference between what you had during your career and Medicare is something called the “Out-of-pocket-maximum.”  Your previous Major Medical policy probably limited the amount you had to pay for catastrophic medical bills.  That provision is called an OOP.

Although there are OOPs in many Medicare Advantage plans, there are no OOPs in Original Medicare.  It is true that Medicare is unlimited.  It will pay 80% of your doctor’s bills regardless of how much they are.

It is also true that you will have to pay 20% of your doctor’s bills, with no cap.  If you want to limit your exposure to doctor bills, you should look at getting a type of policy that will pay what Medicare does not.  That type of policy is called a Medigap.

Understanding Medigap InsuranceIf you are about to enroll in Medicare and are not certain if you need to spend money on Medigap, I encourage you to read my book, “Understanding Medigap Insurance.”

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