Medicare is Crazy Complicated, Right?!
What is Medicare?To put it simply, Medicare is a national health insurance program for those 65 years and older in the United States. Some people receiving Social Security disability can even enroll into Medicare before turning 65. Enrolling into Medicare isn’t just one piece, though! The whole Medicare program is actually segmented into different sections, known as Parts. It is vital to know how all these fit together so you can get the most of your Medicare plan. While Medicare is complicated at times, you deserve to be treated with respect when it comes to your care and any questions you may have. It is essential to understand how your coverage works, so you can live your life to the fullest without having to worry too much over healthcare costs.
Medicare’s History in the United States
In the 60s, most notably in 1965, President Johnson signed into law the Medicare bill. This program was created so citizens 65 years or older would receive a form of healthcare coverage that was desperately needed nationwide. At the time, however, the coverage was relatively limited, this being Medicare Part A and Part B.
As the times and needs of individuals change, not to mention advancements in healthcare, Medicare’s coverage evolved as well, and now even more people are covered than when it first began! Medicare now covers over 56 million people within the United States!
The Federal agency that oversees Medicare is the Centers for Medicare and Medicaid Services. Also known as CMS.
Both Medicare Part A and Part B provide the necessary coverage for most of your healthcare expenses. This coverage, though, is limited and doesn’t cover everything related to your healthcare needs. That can leave you with some steep medical bills, which is not something we want to be burdened with in our retirement years. Luckily, with the additional parts of Medicare, Part C, Part D and Medicare supplement plans, there is further coverage we can obtain to help curb these costs. When all is said and done, Medicare can now be broken down into 4 parts:
- Medicare Part A
- Medicare Part B
- Medicare Part C
- Medicare Part D
What are the Parts of Medicare?
Medicare is comprised of multiple parts that all cover different aspects of your health insurance needs. The parts of Medicare are broken into lettered parts to differentiate the coverages.
Medicare Part A
Medicare Part A is considered your inpatient coverage, also known as your hospital “room and board.” Coverage under Medicare Part A includes:
- Inpatient Hospital Care
- Skilled Nursing Facility Care
- Nursing Home Care
- Hospice Care
- Home Health Care
Medicare Part B
Medicare Part B is considered your outpatient services. Outpatient care can include physician and healthcare services both inside and outside of the hospital. Coverage under Medicare Part B includes:
- Doctor Visits
- Outpatient Care
- Home Health Care
- Durable Medical Equipment
- Preventative Care
Medicare Part C
Medicare Part C is also known as a Medicare Advantage Plan. Medicare Advantage Plans are when you leave Original Medicare, and entered a “all in one” plan that encompasses your Medicare Parts A, B, and D under a private health insurer (although you must continue to pay your Medicare Part B premium). These plans are typically HMO or PPO plans.
Medicare Supplement Plan
Although not a lettered piece of Medicare coverage, Medicare Supplement plans, also known as Medigap plans, are another form of additional coverage that Medicare beneficiaries can enroll into. These Medigap plans have beneficiaries remaining in Original Medicare, while enrolling in additional coverage to significantly limit the out-of-pocket expenses not covered by Medicare Parts A and B.
Medicare Part D
Medicare Part D is your prescription drug plan. Original Medicare Parts A and B do not cover prescription drugs, so these plans were designed in order to help Medicare beneficiaries cover a significant portion of their prescription costs.
Medicare Part A
Medicare Part A is hospital insurance that will assist you with the cost of inpatient and skilled nursing care. Hospice and most home healthcare services are also covered by Medicare Part A.
For the most part, consider the inpatient hospital benefit of Medicare Part A as coverage for the room and board in a hospital. This Part A room and board covers your costs for a semi-private room and your meals. It doesn’t, however, cover a lot of the treatments you may need hospitalized. Confusing right? Just to make things a bit complicated, a lot of services that occur in the hospital are actually considered “out-patient” procedures, which fall under Medicare Part B. So, even though you have been admitted to the hospital as an inpatient, not everything that happens to you in the hospital falls under Medicare Part A.
Now that we know what Medicare Part A covers, let’s talk about the cost of Medicare Part A-
For the majority of Medicare enrollees, the cost for Medicare Part A is $0. Who doesn’t love free?! Well, not technically free- you’ve actually paid taxes to help fund the premiums for all your hospital benefits while you were working. You need to have worked 40 quarters (10 years) to qualify for premium-free Part A. However, even if you don’t qualify for the premium-free coverage right away, you are still able to apply for it. You will, however, pay a significant monthly premium for your Part A coverage.
Although Medicare Part A is typically premium-free for most Medicare enrollees, that doesn’t mean that you have zero cost for your hospital coverage. Medicare Part A carriers a deductible per benefit period of $1484 in 2021. Per benefit period means that you can actually end up paying this deductible more than once a year if you go more than 60 days between hospitalizations. Not only does Part A have a deductible, there are also coinsurances associated with both your hospital and skilled nursing facility stays. It is essential to enroll in something like a Medicare Supplement plan to limit these costs, which will be discussed further down below.
Here is a more straightforward way to break down the Part A inpatient coverage:
- Care you receive when you’re admitted to a hospital as an inpatient through a doctor’s official order.
- Any skilled nursing facility care.
- Any hospice and home care.
For more information, see our Medicare Part A page.
Medicare Part B
Medicare Part B is considered your outpatient coverage. Part B is vital to you, as it is your Medicare coverage for both medically necessary and preventative services. When you receive medical services outside of the hospital, and often even inside the hospital, Medicare Part B is in charge of covering these services.
Unlike Medicare Part A, there is a monthly premium to enroll in Medicare Part B. The amount of this premium is set by Social Security and can change on a yearly basis. In 2021, the standard Part B premium is $148.50 per month. However, your Medicare Part B premium can actually increase based on your tax bracket. The increased amount you may pay for your Medicare Part B premium is referred to as your Income Related Monthly Adjusted Amount (IRMAA) and is based on your Modified Adjusted Gross Income (MAGI).
Not only does Medicare Part B have a monthly premium, it also has an annual deductible and coinsurances. The Medicare Part B annual deductible in 2021 is $203. Once you have met your Part B annual deductible, your Medicare Part B coverage is now at an 80/20 split, where Medicare Part B covers 80% of medically necessary services, leaving you responsible for 20%. Unfortunately, that 20% has no stop to it! Just like with Medicare Part A, it is essential to enroll in something like a Medicare Supplement plan to limit these costs.
When you are ready to enroll into Medicare, you will need to submit an application for Medicare Part B, whether you are turning 65 or retiring after age 65. A lot of people get confused by this because you need to contact Social Security to sign up for Medicare. The good news is most people can complete the application online by visiting here.
For a more straightforward look at Medicare Part B coverage:
- Preventative services are used to deter illness or detect illness at an early stage.
- Services medically necessary, or any supplies used to diagnose or treat your medical conditions.
Medicare Part C
Unlike Medicare Parts A and B, you don’t have to go to Social Security to enroll in Medicare Part C. Medicare Part C is defined as a Medicare Advantage plan, or to put it simply, private insurance.
The cost of these plans will vary by the insurance provider, your residential county, and the plan you have selected. If you are interested in registering in a Medicare Part C plan, you must make sure you are already enrolled in Medicare A and B. However, even if you find a plan for Part C that gives you a low premium cost, you will still pay for your Medicare Part B premium.
Living in the plan service area is also a must. Medicare Advantage plans generally have a network of doctors and hospitals that need to be used. This is usually one of the loudest complaints regarding Medicare Advantage plans. After you enroll, your Medicare coverage will no longer come from the government, but from the Advantage plan (insurance company) itself. This means your Part C coverage will pick up the expenses.
One main reason that enrollment at Social Security isn’t required is that the enrollment is strictly voluntary and not part of the Federal government. Although many Medicare Advantage plans can offer low, sometimes zero dollar per month premiums, that doesn’t mean that these plans are free! Medicare Advantage plans frequently involve out-of-pocket maximums that can reach as high as $7,500 in 2021. This means that as you use your plan, you are still going to be paying out-of-pocket for many services and procedures. It is a pay-as-you-go model.
For more information, visit our Medicare Part C page.
Medicare Part D
For the majority of the Medicare’s time, there was no coverage for your prescription medications. This repeatedly proved costly, as new drugs entering the market took a big chunk out of your pocketbook. Surprisingly, the United States’ government took notice and decided to roll out Medicare Part D Prescription Drug Plans.
Medicare Part D covers retail prescription drugs that can be picked up via mail order or in person at your pharmacy. Essentially you choose a carrier based on your prescription list, and enroll into their specific drug plan based on coverage levels. Many states will have up to thirty drug plans for you to choose from. Finding the right one can be a bit challenging. For an easier way to find the right plan for you, have your agent use Medicare’s prescription drug finder tool to run a Part D analysis. This will help you get the right plan for your needs.
For more information, see our Medicare Part D page.
Medicare Supplement Plans (Medigap)
Unfortunately, Original Medicare doesn’t cover all of the costs for your medical treatments. In 2021, Medicare Part A has a per occurrence deductible of $1,484, and Medicare Part B has an annual deductible of $203. Medicare Part B also has a 20% coinsurance for medically necessary procedures that you as the Medicare beneficiary are responsible for.
These out of pocket cost can become significant, as there is no cap on how much beneficiaries can pay under the 20%. This is why most people who stay with Original Medicare also enroll in a Medicare Supplement Plan to help cover those costs.
Most of us coming from a employer insurance plan are tired of the HMO environment and want to remain in control of our own healthcare, not having to request authorization for medical services, or ask for referrals to see the doctors we need to see. Original Medicare with a MediGap plans gives you the freedom to see ANY doctor who accepts Medicare, without having to remain in a network tied to your zip code.
With a Medicare Supplement plan, you can enjoy the freedom of Original Medicare, without having to worry about going bankrupt in your retirement years! MediGap plans typically have affordable monthly premiums, with minimal out-of-pocket.
There is a wide choice of 11 supplement plans, but the choice can usually be boiled down to 4 easy to understand options-
The 4 most popular Medicare supplement options are:
If you click on each option it will take you to a video that explains the benefits.
Having Original Medicare with a Medicare supplement plan allows you to go to ANY doctor or hospital in the United States that accepts Medicare.
* Since January 1, 2020, Medigap plans won’t cover Part B deductibles. Therefore, Plans C and F won’t be available to those individuals new to Medicare starting on this date.
Does Medicare Cover Outside the United States?
Original Medicare does not offer coverage when you travel outside the US. This may come as a surprise to many as they make travel plans. The good news is that Medicare supplement plans do offer some coverage when you are traveling. Make sure to discuss with your agent so you know exactly what your benefits are.
What Medicare Doesn’t Cover
- Any care that is long-term.
- Your hearing aids.
- Any routine vision or dental care. This also includes dentures.
- Medical care outside the United States.
- Any cosmetic surgery.
- No coverage for massage therapy.
The Difference Between Medicare and Medicaid
If you’ve asked about the difference between Medicare and Medicaid, you aren’t alone. It’s a common question. Medicare is a tax-payer funded government health insurance program for those 65 years and up. Medicaid, however, is healthcare and/or financial assistance to those individuals with low income. Many individuals 65 and up can qualify for both. If this the case with you, keep in mind that Medicare is your primary insurance with Medicaid being your secondary.
To help you financially, the government provides many savings programs that you can apply for. This is done through the Medicaid office in your state. This program may help you in paying your Medicare Part B premiums and can also assist in your drug plan. If you are wondering if you qualify for the Medicaid program, check with your local Medicaid office.
So What to Do?
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