Anyone who is approaching age 65 will likely be aware that they will be eligible for Medicare, provided that they (or their spouse) has enough work credits and has paid taxes into the system via their employee payroll deduction.
Medicare is defined as being a federally funded program that’s purpose is to provide basic health care insurance to those who are age 65 and over, as well as to certain other qualified individuals due to disability. Throughout the years, Medicare has become the leading health care insurance program in the United States.
When it was initially created, Medicare had two primary parts. These consisted of Medicare Part A and Part B. Today, however, the program has expanded, and it now includes Medicare Parts C and D as well.
What Does Medicare Cover?
Medicare covers a wide variety of different services. These include:
- Part A – Hospital Coverage. Medicare Part A pays for inpatient care in a hospital. It also pays limited benefits for skilled nursing home care (after a hospital stay), as well as some home health care and hospice benefits.
- Part B – Medical / Doctors Coverage. This part of Medicare pays for doctors’ services, as well as for services and supplies that are needed for treating disease.
- Part C – Medicare Advantage. Medicare Part C is also referred to as Medicare Advantage. This is an alternate method of receiving your Medicare Parts A and B coverage.
- Part D – Prescription Drug Coverage. This part of Medicare helps in paying for prescription drugs that doctors prescribe to Medicare enrollees.
Medicare Part A and Part B are considered Original Medicare. An individual can choose to receive their benefits through Original Medicare (along with a Medicare Part D prescription drug plan), or alternatively, they may opt to receive their Medicare benefits through a Medicare Advantage plan through Medicare Part C.
Medicare Part A
Medicare Part A is primarily considered the hospital portion of Medicare – although it does cover other things such as some skilled nursing home and home health care related services, provided that the individual qualifies.
The inpatient hospital services that are covered via Medicare Part A include semi-private rooms, meals, general nursing, drugs (as part of the enrollee’s inpatient treatment), and other related hospital services and supplies.
There are certain types of services and supplies that are not covered by Medicare Part A, too. These include items such as private duty nursing, a private room (unless it is medically necessary), a television and phone in the hospital room (if there is a separate charge for these items), and personal care items such as razors and / or slipper socks.
There are various deductible and copayment costs that are associated with Medicare Part A. In 2016, these costs include a deductible of $1,288 for each benefit period, as well as the following:
- Days 1 through 60 – $0 coinsurance for each benefit period;
- Days 61 through 90 – $322 coinsurance per day in each benefit period;
- Days 91 and beyond – $644 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over the enrollee’s lifetime).
An individual will be responsible for all of his or her inpatient hospitalization cots beyond their lifetime reserve days after that.
In order to be eligible for Part A hospitalization when his or her doctor makes an official order that states that the person requires two or more midnights of medically necessary inpatient hospital care to treat an illness or an injury, and the hospital formally admits them.
The individual will also have to require the kind of care that can only be given in a hospital, and the hospital that they are in must accept Medicare as a form of payment. Also, the hospital’s Utilization Review Committee must approve the individual’s stay while they are in the hospital.
Medicare Part B
Medicare Part B covers medical services such as doctor visits, outpatient care, and other types of medical services that are not covered by Medicare Part A. Part B also covers various preventive services, when treatment is likely to work the best. Enrollees will often pay nothing for a preventive service, provided that it is received from a doctor or health care provider who accepts assignment. Part B of Medicare also covers things like clinical research studies that test different types of medical care, such as how well a cancer drug may work with a patient.
Just like with Medicare Part A, there are deductibles and copayments associated with Medicare Part B. In 2016, enrollees pay a $166 annual Medicare Part B deductible amount. Once this deductible has been met, they must typically pay 20 percent of the Medicare-approved amount for most doctor services, including most doctor services while they are an inpatient in a hospital, as well as while having outpatient therapy, and for the use of durable medical equipment.
Medicare Part C
Medicare Part C is also known as Medicare Advantage. This is an alternative method of receiving one’s Medicare Part A and Part B coverage. It is required by law that Medicare Advantage plans offer all of the coverage that is offered in Medicare Part A and Part B. However, these plans typically offer even more benefits, as well, such as dental and / or vision coverage as well.
Many of the Medicare Advantage plans that are available on the market today come in the form of an HMO (Health Maintenance Organization) or PPO (Preferred Provider Organization). This means that an enrollee will typically need to see the health care providers who are listed within a network and / or obtain a referral before seeing a specialist.
There are a number of different Medicare Advantage plans available. These can include the following:
- Medicare HMO (Health Maintenance Organization)
- Medicare PPO (Preferred Provider Organization)
- Medicare PFFS (Private Fee For Service)
- Medicare Special Needs Plans
- Medicare MSA (Medical Savings Account)
Medicare Part D
Medicare Part D provides coverage for prescription drugs. Those who are in Original Medicare (Medicare Part A and Part B) may choose to also obtain a Medicare Part D plan in order to obtain prescription drug benefits.
Oftentimes, if a person is receiving their Medicare benefits through a Medicare Advantage plan, Medicare Part D prescription drug benefits are already included as a part of their plan. Therefore, the enrollee will get all of their Medicare coverage through the Medicare Advantage plan.
Medicare Part D plans are not offered via Medicare itself, but rather through private insurance companies that are approved by Medicare. There are many different plans to choose from, and the premiums can differ a great deal from one plan to another, depending on the benefits that are offered, as well as the location in which the enrollee lives.
Medicare Supplement Insurance (Medigap)
Even though Medicare covers many different services, there are still many “gaps” in its coverage. These primarily include copayments, coinsurance, and deductibles that can be required by enrollees to pay out-of-pocket. These can often be quite costly – and over time, they can add up.
For those who are enrolled in Medicare Parts A and B (Original Medicare), there is a way to help in reducing such costs by obtaining a Medicare Supplement insurance plan, such as Medgap Plan F or Medigap Plan G. Medicare Supplement insurance – also referred to as Medigap – helps to fill in Medicare’s coverage gaps by paying for various deductibles, copayments, and coinsurance.
Currently (in 2016), there are ten different plans to choose from, each named after a letter of the alphabet. Medicare Supplement Plan A is the most basic of the plans. This Medicare Supplement plan covers the following benefits:
- Medicare Part A coinsurance and hospital costs, up to an additional 365 days after Medicare’s benefits have been used up;
- Medicare Part B coinsurance or copayment;
- Blood – first three pints;
- Medicare Part A hospice care coinsurance or copayment.
All of the other Medicare Supplement plans must also offer the core benefits that are offered in Medicare Supplement Plan A.
More comprehensive plans, such as Medicare Supplement Plan F, provide all of the core benefits that are offered in Plan A, as well as the following:
- Skilled nursing facility care coinsurance
- Medicare Part A deductible
- Medicare Part B deductible
- Medicare Part B excess charge
- Foreign Travel Exchange
Medigap Plan F also offers what is referred to as a “high deductible” plan. If an enrollee opts for this particular plan option, it means that he or she will pay for the Medicare-covered expenses – up to the deductible amount ($2,180 in 2016) before their Medicare Supplement plan will pay any of the benefits.
It is important to note that for individuals who live in the states of Minnesota, Massachusetts, and Wisconsin, the Medicare Supplements are standardized in a different manner. Therefore, it is important to visit the Medicare website at www.Medicare.gov in order to determine the Medicare Supplement benefits that you are eligible for in your particular state.
It is also important to note that Medicare Supplement insurance coverage is only available to those who are enrolled in Medicare Parts A and B (Original Medicare), and not those who are enrolled in a Medicare Advantage Plan (Medicare Part C).
How Much Does Medicare Cost?
While many people believe that Medicare coverage is free, this is not necessarily the case. For most Medicare Part A enrollees, there is no premium charged for this part of Medicare – provided that you and / or your spouse has enough work credits and paid taxes into the Medicare system during your working years.
If, however, you do not meet this requirement, you can still obtain Medicare Part A coverage, but you will have to pay a premium. In 2016, the premium for Medicare Part A coverage can be up to $411 per month.
There is a monthly premium for Medicare Part B. For most enrollees, the standard Part B premium for 2016 is $104.90 per month – provided that you pave the Part B premium withheld from your Social Security check. For others who are not yet enrolled in Social Security, or who will enroll in Medicare in 2016, the monthly premium for Medicare Part B is $121.80 per month.
However, depending on your income, this amount could be higher. If, for example, your modified adjusted gross income from two years prior is above a certain amount, then the amount that you pay for Medicare Part B (in 2016) could be based on the following chart:
Medicare Part B Costs
|Individual Tax Return||Joint Tax Return||Married and File a Separate Tax Return||Your Part B Premium|
|$85,000 or less||$170,000 or less||$85,000 or less||$121.80|
|Above $85,000 up to $107,000||Above $170,000 up to $214,000||N/A||$170.50|
|Above $107,000 up to $160,000||Above $214,000 up to $320,000||N/A||$243.60|
|Above $160,000 up to $214,000||Above $320,000 up to $428,000||N/A||$316.70|
|Above $214,000||Above $428,000||N/A||$389.80|
There are also costs involved for Medicare Part C and Medicare Part D. The costs that are related to Medicare Advantage will be largely dependent upon whether or not the plan that you choose charges a monthly premium, as well as whether or not the plan pays any of your monthly Medicare Part B premium. Because these plans differ, you may or may not have deductible or copayment and coinsurance charges.
Likewise, Medicare Part D prescription drug plans will also be varied, depending on the actual plan that you choose, as well as the medications that you use. Costs can also differ depending on the pharmacy that you use, as well as whether or not the pharmacy is in your plan’s network.