Medicare has four parts (A, B, C, D), each has its own distinct coverage to people who qualify. Qualifying beneficiaries include those aged 65 years or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD). Note that PARTS differs from PLANS. Part A covers hospitalization, and Part B covers 80% of covered Medical Expenses, and you’re responsible for 20% after your Part B deductible.
Medicare Parts A and B are the most basic coverage you can get and are regulated by the Center for Medicare and Medicaid Services (CMS). Private insurance companies offer Parts C and D.
Remember that Medicare is not exactly like the health care insurance coverage given by your employer or individually.
However, similar to your employer plan, Medicare (Parts A and B) covers inpatient and outpatient hospital care, doctor visits, lab tests, and many more.
Part D covers prescriptions.
Part C, also known as Medicare Advantage, replaces original Medicare with a privatized Medicare plan. Part C programs are managed by individual insurance companies and cover everything Parts A and B covers plus perhaps even dental and vision. However, you’ll have to follow the insurance company’s rules.
Let’s explain what the four parts of Medicare are and what they cover:
Part A is known as hospital insurance. It covers medical services such as inpatient hospital stays,skilled nursing facility (SNF) care, blood, home health, and hospice care. To qualify, you’ll be age 65 or older (or disabled for at least two years) and a citizen or permanent resident of the United States. Also, you or your spouse must have contributed to Medicare for at least 10 years (40 quarters). You will be automatically enrolled in Medicare Part A once you enroll in Social Security Income Benefits.
Most people usually get Medicare Part A for free, but if you buy Part A, you’ll pay up to $458 each month. In 2020, the deductible is $1,408 for each benefit period and there can be more than one benefit period per year. For detailed cost information, click HERE to go to an article we’ve posted about Medicare Part A.
Part B provides coverage for doctor and other medical provider expenses. For example, Part B covers doctor’s services, preventive services, outpatient hospital care, and ambulance services, among other medical services such as DME (Durable Medical Equipment), chemotherapy, radiation therapy, part-time or intermittent home health and also rehabilitative services (e.g., physical and occupational therapy). It may even cover extensive dialysis care for people with renal failure. Think of Part B covering people-related services and Part A covering a building where you stay.
Beneficiaries of Medicare pay a monthly premium. The monthly premium for 2020 will be $144.60 for most people. However, if you are a high-income earner, you could be subject to IRMAA, which makes your premium higher. Also, if you did not choose Part B when you first became eligible, you will pay a penalty unless you had creditable coverage.
You could pay less than $144.60 due to the Medicare “hold harmless” provision.
Additionally, if you did not enroll when you were first eligible and did not have creditable coverage, you’ll be subject to a 10% penalty for each 12-month period that you were eligible but did not enroll, except in special cases. Not only that, you will pay this extra amount for the rest of your life. For a more detailed explanation of Part B, click on this article we made about Medicare Part B Services.
These are only two parts that you will sign up for at the Social Security Office or Railroad Retirement Board.
Part C is also called Medicare Advantage. To balance the federal budget, Part C was created through the Balanced Budget Act of 1997. Medicare Part C are plans offered by private insurance companies contracted by Medicare. They are an alternative option to Original Medicare (because this plan covers Parts A and B, and sometimes D depending on your plan). It may also include extra benefits that original Medicare doesn’t cover. There are Medicare Advantage Plans that cover prescription drugs, hearing, vision, dental and fitness programs, meals after surgery, and more.
The costs for each plan vary. I’ve seen plans for zero premium, and I’ve seen plans that are over $100 per month. Either work with a broker who can help you decide between multiple plans or go to Medicare.gov’s plan finder. Keep in mind that Plan Finder won’t give you information on whether your doctor accepts the Medicare Advantage Plan you are considering. That’s where we can assist you.
Part D or Prescription Drug Plan (PDP), provides coverage for prescription drugs. The Federal Government created them to help lower the cost of your retail prescription drugs.
Private insurance companies are approved by Medicare to offer these plans. Each Part D plan has a list of drugs covered called drug formulary. The formulary indicates what tier level your drug is on. The higher the tier level, generally the higher your cost. Also, you’ll pay a monthly premium in addition to Medicare for the drug plan.
The estimated average premium is $41 per month, but the costs vary differently between plans. The deductible can be as much as $435.1
Medicare Part D Monthly Premium differs by plan. If you have a higher income, you may pay more due to IRMAA. For an in-depth look at Part D, click HERE.
Part D is an optional plan. No one is required to enroll but if you are eligible and delay enrolling, you risk paying a penalty in terms of increased insurance premiums when and if you enroll at a later date.
In most cases, Medicare is available to people aged 65 and older, younger people with disabilities, and those with End-Stage Renal Disease (ESRD). To avoid penalties and an increase in your premium, be sure to enroll in Medicare Parts A and B during your Initial Enrollment Period (IEP). There’s also a Special Enrollment Period (SEP), where you can enroll in case of special life events, such as moving to a new state or retiring. Visit Medicare.gov for more information.
You need to pick your coverage carefully. That is why it is important to understand your Medicare coverage. Who you get them from and how you choose to get your benefits may affect where you get your care and your out-of-pocket costs. Our friendly, licensed insurance agents are here to help you find a plan that matches your needs. Help is just a phone call away. Call us today at (866) 445-6683or drop us a message HERE, for a free consultation.
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