The Parts
of Medicare
The federal health insurance program known as Medicare is wildly popular among those who benefit from it and those who desire to make it available to more Americans. This program helps millions of Americans afford health insurance. This coverage makes health care extremely affordable, which has helped improve life expectancies for seniors. The program is often complicated and hard to understand for those approaching Medicare enrollment. People want to avoid making mistakes when they first enter the program. This in-depth guide will help answer two of the most common questions, What are the parts of Medicare, and how do they work?
A Brief Introduction To The Parts Of Medicare
Medicare was enacted in legislation signed by President Johnson in 1965. The program became effective in 1966. Medicare was enacted as two distinct but complementary “Parts” – Part A, which provided hospitalization benefits, and Part B, which provided medical benefits. When looking at the parts of Medicare, it is essential to understand that Medicare was not designed to be a free program. It was always intended to have a cost for both coverage (premiums) and services (co-payments or co-insurance).
Medicare Part A
The hospital insurance portion of Medicare, Part A, is designed to help reduce hospitalized costs. Part A covers more than just hospitalizations, but almost everything covered by Part A takes place in an institution of some kind. Part A will provide coverage for:
- Hospitalization
- Skilled nursing
- Home health care
- Hospice care
It’s important to understand that Part A covers your stay in the hospital or skilled nursing facility, but you will probably also be covered under Part B while you’re staying there. Hospice is covered by Part A whether you’re in a facility or receiving this care at home.
As we said before, nothing about Medicare is meant to be free, so you will experience some costs with Part A. These costs can be broken down as follows:
- Payroll taxes while you’re working
- Monthly premiums
- Deductibles
- Co-insurance
You’re probably heard that Part A is “free.” This means that most people don’t have to pay a monthly premium for coverage. Instead, most Americans pay for their Part A range through payroll or FICA taxes during their working careers. These amounts are taken out of your paychecks that fund the Medicare program. This is also how you support Social Security. If you pay these taxes at a certain minimum level for at least ten years, you qualify to receive Part A without an additional premium. If you don’t work enough or aren’t married to someone who did (you can be eligible through your spouse), you have the option but not the requirement to pay for Part A when you are eligible for Medicare.
Besides your payroll taxes or monthly premiums, you’ll also have costs when you use your benefits. The highest cost is the Part A deductible. You will have to pay the Part A deductible each time you use Part A services in a new “benefit period.” The concept of a benefit period is complicated, but you can think about it as a period when you get Part A services separated from any last time you used Part A services by more than 60 days. In other words, if you use Part A services twice in 60 days, you would only pay the deductible once. But, if you go more than 60 days without treatment, then you’ll pay the Part A deductible again if you need covered services.
Besides the deductible, you will also be subject to daily co-insurance if you experience facility stays longer than:
- 60 days for an inpatient hospitalization, or
- 20 days for skilled nursing care
There are limits on the total number of days you can receive institutional care, but it is sporadic to encounter this.
Medicare Part C
Medicare Advantage Plans
The Medicare Advantage program, technically known as Part C, is a privately administered alternative to Original Medicare. With Medicare Advantage, you receive your Part A and B benefits from a private insurance company. Instead of Medicare paying your medical claims (submitted by doctors and facilities), your Medicare Advantage insurance company pays these bills. This can be a concern to some people, but Medicare Advantage plans must cover everything Parts A and B cover, so you do not lose any benefits if you choose Part C.
One of the primary reasons Part C has become popular is that these plans provide an Out of Pocket Maximum (OOPM) amount. This is a hard limit; if your out-of-pocket costs reach this amount, your plan will pay 100% of the cost of your covered procedures for the rest of the year. This alone makes Part C an attractive program.
There’s more than this, however. Besides OOPM protection, Medicare Advantage plans also come with many benefits beyond Original Medicare. Some of these extras can include:
- Built-in prescription drug coverage
- Vision coverage
- Hearing coverage
- Dental coverage
- Fitness benefits
- Transportation
- Safety and healthy living products and services
- Emergency coverage outside the United States
These extra benefits also fill voids in your Original Medicare coverage since none of these items are available under Parts A or B. Taken as a whole, Medicare Advantage does an excellent job of closing many of the gaps in Medicare and providing coverage at an affordable price.
Medicare Part B
Part B is the medical insurance aspect of the Original Medicare program. This is what you’ll use for more routine things like doctor’s visits and other care outside of a hospital or skilled nursing facility. You are likely to use Part B services much more frequently than Part A. Part B covered services include:
- Doctor’s visits
- Specialist visits
- Physical and occupational therapy visits
- Durable medical equipment like bottled oxygen, canes, and wheelchairs
- Outpatient surgeries
- Cancer treatments that are IV based like chemotherapy, or radiation
You pay for Part B coverage differently than you do Part A. You don’t pay payroll taxes for Part B. Instead, you pay a monthly premium when you sign up for coverage. This is helpful because you don’t have to pay for Part B until you need the coverage and enroll in it.
Besides the monthly premium, you will have several out of pocket costs related to covered services and procedures, including:
- Part B deductible
- Part B co-insurance
- Part B excess charges
The most significant expense you’ll face with Part B is co-insurance. Medicare covers 80% of the cost, but you’ll have to pay the remaining 20%. You’ll pay this amount for every Part B covered procedure, apart from certain preventative services that are covered at no out-of-pocket cost.
You’ll have to pay Part B excess charges of up to 15% if you receive services from providers who don’t accept Medicare’s prices. Since most providers take Medicare’s pricing schedule, this is a somewhat rare cost.
Medicare Part D
Part D of Medicare has to do with prescription drug coverage. Part D provides for two ways to receive help with the cost of your medications:
- Medicare Advantage Prescription Drug Plans (MAPDs) and
- Standalone Prescription Drug Plans
MAPDs are simply Medicare Advantage plans that provide prescription drug coverage. Standalone Prescription Drug Plans only cover medications; they provide no health insurance benefits. You can use a standalone Part D drug plan in the following situations:
- You have Part A, Part B, and Medicare Supplement Insurance
- You only have Part A or Part B
- Very rarely with a specific Medicare Advantage plan (one that is seldom used)
If your Medicare Advantage plan provides drug coverage, you cannot enroll in a standalone drug plan.
Standalone Prescription Drug Plans require you to spend money out of pocket, much like Original Medicare. Some of the costs you will likely pay include:
- Monthly premiums
- Annual deductibles (you’ll pay the total price until you reach the deductible)
- Per-prescription co-payments or co-insurance
The amounts you pay for medications during the year can change depending on the total cost of your prescriptions. As this amount increases throughout the year, you pass through four Coverage Stages:
- Deductible stage – you pay the full price until you reach the deductible
- Initial coverage stage – now your drug plan helps pay for much of the cost, and you pay fixed co-payments or co-insurance
- Coverage gap stage – you pay 25% of the cost of all your prescriptions (generally, this is more than you were paying in the initial coverage stage)
- Catastrophic stage – you pay no more than 5% of the retail cost of your medications, or a small co-payment, whichever is greater. There is no annual cap on your total drug spending.
You begin each calendar year back at coverage stage one.
When you look for a drug plan, you need to search for your medications on the plan’s Formulary; the plan’s official list covers medicines. Plans are not required to cover every medication on the market, so it’s important to check ahead of time to make sure your drugs will be covered by any plan you’re interested in.
Items Not Covered By The Parts of Medicare
Medicare is a solid and affordable health insurance coverage. However, there are some gaps in the coverage beyond the out-of-pocket costs we’ve already reviewed. The enormous hole in the range is that there are no caps on your medical spending with Original Medicare. You keep paying for services and procedures throughout the year, no matter how much you’ve spent. This is very different from most other kinds of health insurance, which provide Out of Pocket Maximum (OOPM) protection.
Other significant gaps in Original Medicare include:
- Lack of prescription drug coverage
- Dental, vision, and hearing coverage
- Emergency foreign travel
There are a few other gaps where Medicare provides only limited coverage, like podiatry, acupuncture, and chiropractic care.
Beyond Original Medicare
Because there are so many out-of-pocket costs associated with Original Medicare, private insurance companies have created insurance products to help protect you from burdensome spending. Like Medicare Advantage and Prescription Drug plans, some of these plans are official Medicare-approved products. Medicare Supplement Insurance is purely a secondary coverage that is not an official part of the Medicare program.
Medicare Supplement Insurance
Medicare Supplement Insurance is coverage offered by private insurance companies to help reduce your out-of-pocket costs under Original Medicare. As the name suggests, this coverage supplements or works with Original Medicare. Medicare Parts A and B are your primary coverage; your supplement plan pays benefits as secondary coverage. This kind of coverage is available in ten different standardized “plans,” Each one covers a diverse mix of the gaps in Original Medicare.
Many Medicare Supplement plans provide coverage for travel outside of the United States. However, none of them help with prescription drugs. If you choose Medicare Supplement insurance, you will need to enroll in a standalone Prescription Drug Plan to help pay for the cost of your medications.å
Making The Parts of Medicare work for you
As you’ve seen, Original Medicare is designed so that you share some of the cost for your care. Since these costs can add up during a year and over your lifetime, you may want to consider adding a Medicare Insurance plan to help lower your expenses. If you’re having a hard time choosing between Medicare Advantage and Medicare Supplement Insurance, reach out to a professional today. A licensed independent insurance agent can help you make an intelligent choice and also help you compare quotes for the plans available in your area. Most importantly, an independent insurance agent can help you make sure your doctors and medications are covered by the plan you choose. To get the ball rolling with a free consultation, contact San Antonio Medicare Advisors today.
