You have many options when it comes to your Medicare coverage. Medicare can be a confusing topic, especially because there are so many components that make up the program. If you are new to Medicare (or need a refresher course), the best way to start learning about the program is by understanding the four parts of Medicare: A, B, C, and D.
Medicare Part A: Hospital Insurance
Part A of Medicare is often referred to as hospital insurance. It will help cover your room and board expenses after you have been admitted to a hospital (or skilled nursing facility) as an inpatient.
There are three costs associated with Part A: the premium, deductible, and coinsurance. Fortunately, most Medicare beneficiaries receive premium-free Part A. As long as you or your spouse was employed and paid Medicare taxes for at least ten years (or 40 quarters), you qualify for premium-free Part A. If you have not met this requirement, your monthly premium will be determined by how many quarters you paid into Medicare. Individuals who paid Medicare taxes for at least 30 quarters will pay $274 per month, and those who paid Medicare taxes for less than 30 quarters will owe the full monthly premium of $499.
Your next expense with Part A is the deductible, which is $1556 in 2022. The Part A deductible works differently than others you may be accustomed to. It is based on a benefit period. A benefit period begins the first day you become an inpatient and ends once you have been out of the hospital for 60 days. You could pay the Part A deductible more than once in a calendar year.
Now let’s discuss your coinsurance expenses with Part A. Your coinsurance amount is based on how many days you have been an inpatient. The first 60 days have no coinsurance costs. Beginning on day 61, your coinsurance is $389 per day. After day 90, your coinsurance increases to $778 per day, as long as you still have your 60 lifetime reserve days available. Coinsurance at a skilled nursing facility (SNF) is different. The first 20 days at an SNF do not have coinsurance expenses. Then, from day 21 to day 100, you will pay $194.50 per day.
Medicare Part B: Outpatient Insurance
Part B of Medicare is reserved for outpatient services. This could include visits to your doctor, surgeries, diagnostic tests and imaging, durable medical equipment (DME), and preventive services.
The standard monthly premium for Medicare Part B is $170.10 in 2022. While this is the premium the majority of beneficiaries pay, you could pay more if you earn a high income. Your premium is calculated based on your Modified Adjusted Gross Income (MAGI) on your tax return from two years prior. If you made over a certain threshold, you would pay an additional amount called the Income-Related Monthly Adjustment Amount (IRMAA). For instance, if you are a married couple who filed jointly and your MAGI was above $182,000, you will pay an additional $68 per month. This would bring your monthly premium to $238.10.
The Part B deductible is much more simple than the Part A deductible. In 2022, the deductible is $233 and is only paid annually. Once you have met that deductible, Part B pays for approximately 80% of your covered services.
Medicare Part C: Medicare Advantage
Part C of Medicare encompasses all of the Medicare Advantage plans. Medicare Advantage (MA) plans have become popular in recent years as more and more providers choose to accept them. Medicare Advantage plans are sold by private insurance companies. To offer a Medicare Advantage plan, the company must first have approval from the Medicare program. One requirement is that the MA plan must offer at least the same amount of coverage as Medicare Parts A and B. The reason for that requirement is that if an individual enrolls in a Part C plan, their coverage from Parts A and B is moved into the Part C plan. They will get their benefits from the private insurance company rather than the federal government.
In addition to the coverage found in Parts A and B, most Part C plans include extra benefits. The plan may offer dental, vision, and hearing coverage, prescription drug coverage, gym memberships, meal delivery, transportation to appointments, and much more.
The exact coverage and cost of a Medicare Advantage plan depend on a host of factors, but they are usually very affordable. Most MA plans have a designated provider network. That means that if you enroll in an MA plan, you’ll need to receive your healthcare from a provider within that network. Because of this, not all plans are available everywhere. In some rural parts of the country, there may only be one plan – or no plans – available for Medicare beneficiaries.
Medicare Part D: Prescription Drug Coverage
Last but not least, Medicare Part D! Part D of Medicare includes all of the prescription drug plans. Like Part C, these are sold by private insurance companies that have met the requirements set by the Medicare program and CMS. There are many different Part D plans available all over the country.
The most important part of a Part D plan is its drug formulary. This is a list of all the prescriptions covered by the particular plan. When choosing a Part D plan, you’ll need to make sure your current prescriptions are included in the drug formulary. Prescriptions in the formulary are categorized into tiers. Prescriptions in the lowest tiers include common, generic medications. Prescriptions in the highest tiers include specialized, brand-name medications. As you probably guessed, prescriptions in the higher tiers have a higher out-of-pocket expense.
The standard deductible for Part D plans is $480 in 2022. Most plans do not apply the deductible to prescriptions that fall into the first (and sometimes second) tiers.
We hope that has given you a high-level overview of the Medicare program. We could dive into more details of each part, but that is plenty of information for you to make informed decisions about your coverage. If you do have more questions, we’re here to help!