What should You know about Medicare?
If you have been confused about the ins and outs of Medicare, that will shortly change! Read Below!
Medicare is a federal health insurance program in the United States designed for individuals who are 65 years of age or older. It also covers younger individuals who have specific disabilities or medical conditions, including End-Stage Renal Disease (ESRD) or Lou Gehrig’s disease (ALS).
While this definition is quite simple, the Medicare program itself is complex, leading to ongoing confusion for many beneficiaries even after they sign up. Today, we aim to clear up that confusion for you!
Medicare was established in 1965 when President Lyndon Johnson signed the Medicare and Medicaid Act into law. This act created Medicare to provide health insurance for retired individuals. It also introduced Medicaid, which is frequently confused with Medicare. However, Medicaid is a separate health insurance program intended for people with limited incomes, regardless of age.
The Medicare program is divided into four parts, with additional options for extra coverage. Everyone begins with Parts A and B, while the other parts depend on personal healthcare needs and budget considerations.
What is Medicare?
What are the different parts of Medicare?
Medicare Part A, also known as inpatient or hospital insurance, covers inpatient hospital stays, care in skilled nursing facilities, hospice care, and some home health services.
Most beneficiaries do not have to pay a premium for Part A. If you or your spouse have worked and paid taxes for at least ten years (40 quarters), you qualify for premium-free Part A. If you haven't met this requirement, your premium is determined by the number of quarters you've worked, and these premiums typically increase each year.
Although Part A doesn't have a premium for most, there are other out-of-pocket expenses. It includes a deductible, which is not annual but instead applies to benefit periods. A benefit period starts the day you are admitted as an inpatient and ends after you have been out of the hospital or other facility for 60 consecutive days.
There are also copays for Part A, which depend on the length of your hospital stay. Medicare covers the first 60 days of hospitalization completely, but copays start accruing from day 61 onwards.
Original Medicare, sometimes referred to as Traditional Medicare, comprises Part A and Part B. This is the foundational coverage that everyone begins with. You need to enroll in both Parts A and B before you can opt for any additional coverage.
Original Medicare
Part A
Medicare Part B, also known as outpatient or medical insurance, covers doctor visits, imaging, lab tests, surgeries, durable medical equipment, and many preventive care services.
Part B requires a monthly premium, which is set annually by the Centers for Medicare and Medicaid Services (CMS). Most people pay the standard premium, but those with higher incomes will pay more. Beneficiaries with limited incomes may qualify for Medicare Savings Programs to help cover the Part B premium.
There is also an annual deductible for Part B, which is relatively small. After meeting this deductible, Part B covers 80% of approved services, leaving beneficiaries responsible for a 20% coinsurance.
Unlike traditional group health insurance, Original Medicare does not have an out-of-pocket maximum. While it provides extensive coverage, this lack of a cap can result in significant financial burdens for beneficiaries.
Part B
Part C is mostly referred to as Medicare Advantage. To enroll in a Medicare Advantage plan, you must first sign up for Original Medicare. However, once enrolled, a private insurance company, rather than the federal government, provides all your benefits.
Medicare Advantage plans offer at least the same coverage as Original Medicare and often provide additional benefits. For instance, you can include prescription drug coverage in your Medicare Advantage plan without an extra premium. Many plans also offer coverage for hearing, vision, and dental care, as well as wellness programs, gym memberships, transportation, meal delivery, and monthly over-the-counter stipends.
If you're considering Medicare Advantage, it's crucial to understand how these plans operate and explore the different options available. Medicare Advantage plans come in various types, so working with an advisor can help you find the one that best meets your needs.
One of the most appealing aspects of Medicare Advantage plans is their premium. Most Part C plans have very low monthly premiums, often as low as $0 per month. However, it's important to review the plan's out-of-pocket costs, including deductibles and copays.
Part C
Medicare Part D provides prescription drug coverage, which is not included in Original Medicare. To get coverage for your medications, you need a separate Part D policy, even if you aren't currently taking any prescriptions. Not enrolling in Part D can result in lifetime financial penalties.
Part D plans are sold by private insurance companies and can vary by region. When choosing a Part D plan, you should compare their drug formularies to determine which plan covers your medications at the lowest cost.
Part D
What is a Medicare Supplement?
A Medicare Supplement, also known as Medigap, is a type of health insurance policy sold by private companies designed to fill the gaps in Original Medicare coverage. While Original Medicare (Parts A and B) covers many healthcare costs, it doesn't cover everything. There are out-of-pocket expenses such as copayments, coinsurance, and deductibles that can add up.
Medigap policies help pay for these extra costs. For example, if you have a hospital stay, Medicare Part A will cover a large portion of the cost, but you might still be responsible for a deductible and daily coinsurance charges if your stay extends beyond a certain period. A Medigap policy can cover these additional costs, reducing your financial burden.
Medigap plans are standardized and labeled by letters A through N, each offering a different level of coverage. These plans are regulated to ensure they provide consistent benefits across different insurers, so a Plan G from one company will offer the same basic benefits as a Plan G from another company. However, premiums may vary between companies and locations.
To enroll in a Medigap policy, you must first have Medicare Part A and Part B. Medigap policies only cover one person, so if you and your spouse both want Medigap coverage, you each need to buy separate policies.
Medigap policies do not cover prescription drugs, so if you need drug coverage, you will need to enroll in a Medicare Part D plan separately. Additionally, Medigap does not work with Medicare Advantage Plans (Part C); if you have a Medicare Advantage Plan, you cannot use a Medigap policy.
Now that we have covered all of the basics, you may be wondering, “so now what?” Fortunately there are only 3 main options when it comes to how you choose to receive your Medicare benefits, and the best choice for you depends on your unique needs, wants, and budget. Let’s take a look at the 3 options to help give you clarity for what is best for you!
So now what?
1. Original Medicare with a Prescription Drug Plan (Part D)
What It Covers:
Part A (Hospital Insurance): Covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. Most beneficiaries don’t pay a premium for Part A if they have paid Medicare taxes for a sufficient period.
Part B (Medical Insurance): Covers doctor visits, outpatient care, medical supplies, preventive services, and some home health care. Part B has a monthly premium, an annual deductible, and typically covers 80% of approved services, leaving you with a 20% coinsurance.
Part D (Prescription Drug Plan): Covers prescription medications. These plans are offered by private insurance companies and vary in terms of covered medications and costs.
2. Original Medicare with a Medicare Supplement (Medigap) and Prescription Drug Plan (Part D)
What It Covers:
Part A and Part B: As described above, Original Medicare forms the foundation.
Medicare Supplement (Medigap): Helps cover the gaps in Original Medicare, such as copayments, coinsurance, and deductibles. Different Medigap plans (labeled A through N) offer various levels of coverage, but all provide standardized benefits regulated by the government.
Part D: Covers prescription medications, as explained above.
3. Original Medicare with a Medicare Advantage Plan (Part C)
What It Covers:
Medicare Advantage (Part C): These plans are an alternative to Original Medicare, offered by private insurance companies. You still need to enroll in Part A and Part B, but the Advantage plan provides all Part A and Part B benefits.
Additional Coverage: Many Medicare Advantage plans include additional benefits not covered by Original Medicare, such as vision, dental, hearing, and wellness programs. Most also include Part D prescription drug coverage.
Out-of-Pocket Maximum: Medicare Advantage plans have a yearly out-of-pocket maximum, providing financial protection by capping your total expenses for covered services.
Choosing the right Medicare plan is a personal decision that depends on your individual healthcare needs, budget, and lifestyle. Whether you prefer the flexibility of Original Medicare with a Prescription Drug Plan, the comprehensive coverage of a Medicare Supplement, or the additional benefits of a Medicare Advantage plan, the best choice varies from person to person.
We understand that navigating Medicare options can be confusing. That's why we're here to help you make an informed decision tailored to your unique situation.
Call today to get help! Our experts are ready to assist you in finding the perfect Medicare plan for your needs.