Learning the parts of Medicare can be like learning a whole new language. There are many working parts, and it can be hard to tell which part is doing what and how they’re working together to provide your healthcare coverage. So today, we’re going to review the ABCDs of Medicare so that you can begin to understand your Medicare options.
Medicare Part A
Part A is also referred to as hospital insurance and will help pay your room and board expenses during an inpatient stay. It will also help cover the costs of an inpatient stay at a skilled nursing facility or nursing home and includes coverage for home health care and hospice. It does not offer long-term care or custodial care benefits.
You’ll be able to use Part A almost anywhere in the United States. Most healthcare providers and facilities accept Medicare assignment, which means they agree to provide treatment for the Medicare-approved amount.
The Cost of Medicare Part A
You will not pay a premium for Part A if you have met certain requirements. To receive premium-free Part A, you or your spouse must have paid Medicare taxes for at least ten years. If you haven’t met that requirement, you can still enroll in Part A, but you will pay a premium.
Part A has a deductible of $1556 that applies to each benefit period. Once you’ve met your deductible, Part A will pay for the first 60 days of your hospital stay. After that, you will have a coinsurance expense of $389 per day from days 61 to 90. If your stay extends past 90 days, you will need to use some or all of the 60 lifetime reserve days. Your coinsurance during that time will be $778 per day. Once those are exhausted, you are responsible for the full cost each day.
An inpatient stay at a Skilled Nursing Facility (SNF) is slightly different. To be eligible for coverage in an SNF, you must first have a qualifying 3-day inpatient hospital stay. After that, you’ll need to meet the deductible, and then Part A will pay for your first 20 days. Your coinsurance for days 21-100 will be $194.50 per day.
Medicare Part B
Part B is outpatient medical insurance. It provides coverage for visits to your doctor, surgeries, diagnostics, durable medical equipment (DME), surgeries, and preventive services like vaccines and wellness exams.
As with Part A, you can use Part B all over the U.S.
The Cost of Medicare Part B
Everyone pays a premium for Part B. In 2022, the standard premium is $170.10 per month. If you have a high income, you will pay an adjusted amount called IRMAA, the Income Related Monthly Adjustment Amount. The Social Security Administration will use your Adjusted Gross Income from a prior tax return to determine if you must pay more than the standard premium. The first threshold begins at $182,001 for married couples filing jointly and adds $68 to your premium. Adjusted amounts increase from that point.
The Part B deductible applies annually and is currently set at $233. After meeting that deductible, your Part B coverage is an 80/20 split where Medicare picks up 80% of the cost, and you are left with the remaining 20%.
Parts A and B do not have maximum out-of-pocket expenses like you may be accustomed to with group health plans. This is one reason it’s important to consider a form of supplemental coverage.
Medicare Part C
Medicare Part C consists of Medicare Advantage (MA) plans. MA plans are offered by private insurance companies who have been authorized by the federal Medicare program to offer such plans. An Advantage plan will bundle your coverage in Parts A and B, add in extra benefits, and wrap them all into one convenient package.
Since Private insurers offer part C plans, they vary from one state (and even one county) to the next. They will all have at least as much coverage as Parts A and B provide, and you’ll often find additional benefits like routine dental care, vision and hearing services, meal delivery, transportation services, and prescription drug coverage. You will need to read the summary of benefits to find out the exact coverage offered in each plan.
The Costs of Medicare Part C
Premiums, deductibles, coinsurance, and other costs will also depend on your chosen plan. There are several types of Medicare Advantage plans, the most popular being Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). These plans can have relatively low premiums because they utilize a network of providers. You’ll need to receive care from a provider in your network to get the most benefits.
If you enroll in Part C, you’ll still need to pay the Part B premium.
Medicare Part D
Medicare Part D consists of prescription drug plans or PDPs. Part D plans are sold by private insurance carriers, and like Part C plans, they will vary by location. You will pick a Part D plan based on the medications you take.
The Cost of Medicare Part D
Each Part D plan will have a premium based on how much coverage the plan provides. The more prescriptions you take, the more coverage you’ll need, which means your premium will likely be higher. The standard Part D deductible in 2022 is $480. Most plans use the standard deductible and can never have a deductible more than that amount.
Your prescription coinsurance will depend on which category your medications are placed into. Each drug plan has a drug formulary, the list of medications the plan covers and which tier each medication falls into. Generic, common prescriptions in lower tiers cost less than specialty, name-brand prescriptions in higher tiers.
You may find yourself in the coverage gap or donut hole if you take expensive medications. This is a phase of coverage where you will have to pay more for your medications.
The Part D Penalty
Many Medicare beneficiaries assume that they don’t need to enroll in a Part D plan if they aren’t taking any medications. Unfortunately, this is a common mistake and one that leads many people to incur the Part D penalty.
If you do not enroll in a Part D plan when you become eligible, you’ll pay a penalty when you do decide to enroll. It’s a 1% penalty, which doesn’t sound like much, but can add up if you don’t enroll for a couple of years. If you aren’t taking any medications, there are Part D plans with very low premiums.
That wraps up the ABCDs of Medicare! Of course, there is much more information to learn, but this is a great place to start. If you have additional questions, don’t hesitate to reach out. Our licensed insurance agents are Medicare experts and can answer any questions you have.