Parts of Medicare – The Medicare program consists of four parts, plus some extra products that can be very beneficial. In order to choose which ones you want to enroll in, you’ll need to understand what each of the parts of Medicare does and how they fit together to provide you with comprehensive benefits.
This article will review the basics of the four parts of Medicare and tell you who is eligible to enroll in the federal Medicare program.
The 4 Parts of Medicare: ABCD
The four parts of Medicare are named by letters of the alphabet. There are Parts A, B, C, and D. After we discuss those, we’ll talk about another Medicare option, Medicare supplements.
Medicare Part A: Hospital Insurance
Part A is your hospital insurance. You’ll use it if you are ever admitted to a hospital or skilled nursing facility. It pays for your room and board expenses during your stay. You’ll be responsible for a deductible and coinsurance costs, based on how long you’ve been hospitalized.
Most beneficiaries are eligible for premium-free Part A. If you paid FICA taxes for 40 quarters (ten years), you won’t pay for Part A. The taxes you paid while working pre-paid your Part A premiums.
Medicare Part B: Outpatient Insurance
Part B is the second half of Original Medicare. It is your outpatient insurance and will help pay for things like doctor visits, durable medical equipment, surgeries, lab tests, and preventive care. Like Part A, you’ll have a deductible as well as other out-of-pocket expenses. For the most part, you’ll be responsible for 20% of the cost of covered services.
Part B is not premium-free. CMS sets a standard premium each year, which is the amount most people pay. If you have a higher income, you might be subject to IRMAA, the Income Related Monthly Adjustment Amount.
Medicare Part C: Medicare Advantage
You do not have to enroll in Part C. There are no penalties if you choose not to enroll in a Medicare Advantage plan. Your other option (if you don’t want to pay all the out-of-pocket costs associated with Original Medicare) would be a Medicare supplement plan, which we’ll discuss soon.
Part C plans are offered by private insurance companies that the government pays to provide coverage. The reason they do this is that the insurance company will then be responsible for paying the claims from Parts A and B. So, if you have Part C, your benefits will come from the insurance company, not the federal government.
Most Medicare Advantage plans include extra benefits you won’t find in Parts A and B. This could include prescription drug coverage, transportation, adult day care, dental treatment, vision and hearing exams, eyeglasses, gym memberships, etc. Consult the plan’s summary of benefits to find out which extras are included in your Part C plan.
Many Advantage plans come with a $0 premium. While that sounds great, be advised that these plans are not “free.” You’ll still have deductibles, copayments, and coinsurance costs. Plus, you’ll still pay the Part B deductible.
Medicare Part D: Prescription Drug Plans
Prescription drug plans, or PDPs, are how you’ll get coverage for your prescription medications. Unless you enroll in a Part C plan that includes prescription drug coverage, you’ll need to enroll in an individual Part D plan. Failure to do so will cause you to incur penalties that you’ll have to pay as long as you have any Part D plan.
There are hundreds of Part D plans available, but they are area-specific. Regardless of where you live, you’ll have quite a few to choose from. You will compare your current medications to each plan available and then choose the one that offers the most coverage.
Medicare Supplements
Medicare supplements are also called Medigap plans. These aren’t included in the parts of Medicare, but they are also named by letters of the alphabet. Instead of “parts,” Medicare supplements are “plans.” (We know…confusing! But we didn’t make the rules!)
Like Medicare Advantage plans, Medigap plans offer additional coverage outside of Original Medicare. But instead of wrapping your Part A and B benefits into the same plan, Medigap plans act as your secondary insurance and pay for claims after Original Medicare pays.
There are about ten plans to choose from, each with slightly different benefits. The most popular supplements are Plans F, G, and N. They are the most popular because they leave Medicare beneficiaries with the least out-of-pocket benefits.
Your premium will be based on which plan you choose, plus your gender, age, and where you live. Generally speaking, these plans increase your premium as you get older.
Medicare Eligibility and Enrollment
So, who is eligible for all these benefits? The majority of Medicare beneficiaries are ones who have aged into the program. If you are a U.S. citizen or legal resident, you’re eligible for Medicare when you turn 65. However, it’s also available to younger individuals who have been on disability for two years or who have been diagnosed with End-Stage Renal Disease (ESRD).
If you start receiving Social Security or Railroad Retirement Board benefits at least four months before your 65th birthday, you’ll be automatically enrolled in Parts A and B. Otherwise, you will need to apply with the Social Security Administration.
You are first eligible to enroll three months before your 65th birthday. This is the start of your Initial Enrollment Period or IEP. Your IEP lasts until three months after your birthday. If you enroll during this time, you will not pay any late enrollment penalties. However, if you are covered under another insurance plan that has been deemed “creditable,” you can delay enrollment without being penalized.
You’re not expected to know all the intricacies of the Medicare program. We’ve given you enough information to have a basic understanding, which will be very helpful as you transition into Medicare. But if you have questions or just want some help in choosing a Medicare plan, our licensed insurance agents are here for you! Contact us today and schedule a complimentary consultation.
