If you are just getting started looking into Medicare coverage it can seem confusing at first. It’s important to understand the different types of Medicare plans and what each one covers so that you choose a plan that’s right for you. Read on to learn what Medicare is, who can enroll, and what are the different parts of Medicare.
What is Medicare?
Medicare is a federal health insurance program and it aims to offer basic health coverage for doctor visits, surgeries, and hospital stays. In general, everyone over 65 years of age is eligible for this program. Moreover, younger people with disabilities or End Stage Renal Disease can also apply for Medicare. An example, are people who suffer from kidney failure and require dialysis or transplant.
Different Parts of Medicare
Medicare is divided into four parts and each one covers specific services. You have several options to choose from when selecting a Medicare Plan. There is Original Medicare (Part A and Part B), or there is a Medicare Advantage Plan (Part C). You can add additional coverage such as prescription drug coverage (Part D) or Medicare Supplement Insurance (Medigap). Below, you will find in more detail, what each part includes.
Part A – Hospital Coverage
Part A is the most basic part of Medicare, as you automatically get it once you enroll for Medicare. This part is for inpatient stays, hospice care, stay in a skilled nursed facility, and some specialized home care.
If you are over 65 and you, or your spouse, have paid your Medicare taxes for 10 years or more, you can take advantage of premium-free Part A. However, even if you haven’t completed 10 years of Medicare taxes, you can choose to buy Part A.
Yet, even if Medicare is premium-free, there is still a deductible that you will need to pay once admitted to the hospital. The laws for this deductible change every year, for 2020 the amount is $1,408.
Part A of Medicare will pay for your every need the first 60 days that you stay in the hospital. However, it will not cover for a private room.
Part B – Medical Coverage
Part B of Medicare includes outpatient services, X-rays, visits to doctors, lab tests, diagnostic screenings, ambulance transportation, etc. Along with Part A, it forms an Original Medicare plan.
Contrary to Part A, everyone must pay a premium for Part B. Namely, in 2020 those who have an income up to $87,000 will pay a monthly premium of $144.60. Additionally to this, there is also an extra deductible of $198. Other costs include the 20% of the bills from your visits to the doctors.
To summarize, Original Medicare consists of Part A and Part B. You can add Part D – prescription drug coverage as well as supplemental insurance such as Medigap. With Original Medicare you can visit any doctor or hospital that takes Medicare in the United States. If you need to see specialist, in most cases you will not need to get a referral.
Costs associated with Original Medicare consist of a monthly premium for Part B, and a separate monthly premium if you add on prescription drug coverage – Part D. For Part B services you will typically pay 20% of the Medicare approved amount once you meet your deductible. There is no yearly limit on what you pay out of pocket unless you add supplemental insurance such as Medigap.
Part C – Medicare Advantage
Medicare Advantage Plans, also known as Part C, are administered by private insurance companies contracted with Medicare. It is an all-in-one alternative to Original Medicare. Medicare Advantage is typically a bundled plan that includes Part A, Part B, and usually Part D. Most plans offer extra benefits that Original Medicare doesn’t offer, such as hearing, vision, dental, and more.
As far as costs you may have to pay a premium for a Medicare Advantage plan, in addition to a monthly premium for Part B. Some plans may have a $0 premium, or help pay all or some of your Part B premium. Plans have a yearly limit on what you will pay out of pocket for Part A and Part B services. With a Medicare Advantage plan you can’t buy or use supplemental insurance.
If you select a Medicare Advantage Plan you will need to select a doctor that is in the plan’s network for non-emergency and non-urgent care. If you need to see a specialist you may be required to get a referral.
Part D – Prescription Drug Coverage
Prescription Drug Coverage, also known as Part D, is optional coverage that is available to everyone who has Medicare. Part D is administered by private insurance companies that offer retail prescription drug coverage to Medicare beneficiaries. You will pay a monthly premium and use the insurance carrier’s network of pharmacies to purchase your prescriptions. You will pay the network discounted price for drugs until you reach your annual deductible, as of 2020 the amount is $435. After you reach your deductible you will pay a copay for your medication based on the drug formulary (drug plans separate medication into different tiers which determine the cost). As of 2020 once you and the insurance company have spent a combined total of $4020, you will then only have to pay 25% of the prescription drug cost, which will continue until your total out of pocket drug costs is $6350.
Having an understanding about the different parts of Medicare will help you make a better decision about what type of Medicare plan best fits your needs.