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From A To D: All The Parts Of Medicare
Medicare is a valuable benefit that will help you live a more successful and vibrant retirement. However, the program itself comes with some gaps in coverage that you’ll want to close in order to get the most out of it. In order to make the big choice between Medicare Advantage and Medicare Supplement Insurance, you need to understand the basics of Original Medicare. In this guide, we’ll review all the parts of Medicare and how they work together to give you affordable and comprehensive health care.
Original Medicare Parts A And B – The Foundation For Everything
When the program was first created in 1965 and implemented in 1966, the Medicare program was composed of only two Parts – A and B. This is the backbone of the entire program. All the other parts and private coverages are built on this foundation.
Original Medicare was designed with the idea that you would pay your “fair share” for the costs of your care. It was created with the goal of making health insurance and health care more affordable for retirees. It wasn’t intended to be a completely free program. Understanding this fact will help you appreciate the coverage Medicare does provide, and help you figure out what steps to take to minimize your health care costs in retirement.
Part A
Part A provides hospital benefits. You can think of this as being for “emergency” events, but it really goes beyond that. You will use Part A benefits anytime you need:
Inpatient hospitalization
Skilled nursing care or skilled nursing care in a long term facility
Hospice care
Home health care
Most of these services take place in an institutional setting, although you can receive hospice care in your home along with home health care. Very often with Part A, especially in an institutional setting like a hospital or skilled nursing facility, Part A covers your room and board costs. In other words, Part A gets you in the door, and keeps you housed and fed for the length of your stay. This is only true if you’re in the facility for the short term due to a specific medical condition. It’s important to know that Part A will not cover your room and board in a long term care facility if you simply aren’t able to take care of yourself. Part A won’t provide any type of long term care coverage.
Part B
Part B is the coverage you’re most likely to use. Part B will provide benefits for you for “regular” things like:
Doctor’s appointments
Durable medical equipment
Physical and occupational therapy
Outpatient surgeries
Part B will also help pay for bigger ticket things like dialysis and IV-based chemotherapy. Part B also pays part of your medical costs for services and procedures you receive while you’re in the hospital; Parts A and B work together in this case.
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The Cost Of Part A And B
As we said at the beginning, no part of this coverage is free. You will pay for your Medicare coverage in a couple of ways. These out of pocket costs can be broken down into two categories:
- Cost for coverage (premiums and taxes)
- Cost for services and procedures (co-payments and co-insurance)
Most people pay for Part A during their working careers. If you receive W2 wages, some of your income is withheld from your paycheck in the form of payroll taxes. If you’re self-employed, you pay self-employment taxes. Some of these taxes fund your Part A benefits. Assuming that you’ve worked and paid enough (usually ten years of fulltime work will do the trick), you won’t have to pay anything for Part A coverage when you enter the program. You can also qualify for premium-free Part A by being married to someone who qualifies for it due to their work history.
You don’t pay for Part B until you actually enroll in the program (usually when you’re 65). You’ll pay for Part B in the form of a monthly premium, and you’ll pay for it for the rest of your life.
These are the costs you’ll experience in order to have coverage. You’ll also have out of pocket costs when you use your coverage.
The Cost For Using Part A And B Benefits
You’re expected to pay for part of the cost when you use Part A and B covered procedures and services. You’ll face some or all of these costs:
- Part A deductible
- Part A co-insurance
- Part B deductible
- Part B co-insurance
- Part B excess charges
The two biggest costs you’ll face under Original Medicare are the Part A deductible and Part B co-insurance charges. Your costs are not capped in any way. You simply keep paying every time you use your Medicare coverage. There is no yearly or lifetime cap on your spending. Considering that the co-insurance for some expensive treatments like cancer can add up quickly, people usually look to private insurance plans to help reduce some of these costs.
When Are You Eligible For The Parts Of Medicare?
Medicare was originally designed for retirees, so the basic requirement is that you enter Medicare when you turn 65. In this case, you’ll be eligible to apply for Medicare during a seven month window called your Initial Election Period (IEP). This window spans these months:
- The three months before your birth month
- The month you turn 65
- The three months after you turn 65
Of course, if you’re still working at age 65 you may be able to delay taking your Medicare benefits. If you want to do this, you should talk to your Human Resources department at work and ask them if your employer coverage is adequate for delaying Medicare.
Under current law there are several ways that you can get Medicare coverage before you turn 65. You can enter the program early if any of these apply to you:
- You have received disability payments from Social Security or the Railroad Retirement Board for 24 consecutive months
- You’ve been diagnosed with Lou Gehrig’s disease (ALS)
- You’ve been diagnosed with End Stage Renal Disease (ESRD)
Once you are in the Medicare program, you will be able to enroll in the private plan of your choice.
Medicare Supplement Insurance
Medicare Supplement Insurance was the first product created to help lower out of pocket spending for people on Medicare. This coverage is offered by private insurance companies, and it is designed specifically to work with Parts A and B to fill in many of the gaps in your coverage. There are ten standardized Medicare Supplement (also known as Medigap) plans, plus two high deductible versions. Each one of the available Medigap plans covers a customized mix of the gaps in Medicare. You’re able to select the level of coverage that you desire. Obviously, the more comprehensive the plan you choose, the more expensive it is. You’ll pay a premium directly to the insurance company for this coverage. This premium is in addition to your Part B premium, which you must continue to pay in order to have Medigap coverage.
Part B
Part B is the coverage you’re most likely to use. Part B will provide benefits for you for “regular” things like:
- Doctor’s appointments
- Durable medical equipment
- Physical and occupational therapy
- Outpatient surgeries
Part B will also help pay for bigger ticket things like dialysis and IV-based chemotherapy. Part B also pays part of your medical costs for services and procedures you receive while you’re in the hospital; Parts A and B work together in this case.
Part C Medicare Advantage
The Medicare Advantage program is technically called Part C of Medicare. This was not a part of the original design for Medicare. Instead, it was created in the 1990s as a way to allow people to receive their benefits through a private insurance company. Health care through a Medicare Advantage plan works similarly to employer provided health insurance, which most people are familiar with.
Medicare Advantage is a genuine alternative to Original Medicare, so when you choose this coverage you actually leave Original Medicare. This can sound scary, but in reality you have all kinds of protections under Part C. For one thing, you can disenroll from Medicare Advantage and return to Original Medicare during one of the Medicare Election Periods. Also, Medicare Advantage plans are required to cover everything that Parts A and B cover. In other words, your coverage is basically identical to Original Medicare. You will give your provider your Medicare Advantage plan card instead of your Medicare card. Your provider will bill your Plan rather than Medicare.
One thing that is different about Medicare Advantage plans when compared to Original Medicare is that most Medicare Advantage plans have some kind of network restrictions. In HMO plans, for instance, you must only use plan network providers. PPO plans allow you more flexibility, but there is no guarantee that your PPO plan will be accepted by providers outside of your plan’s service area.
There are improvements on Original Medicare also. For instance, most Medicare Advantage plans provide extra benefits that are not available under Part A or B. These benefits can vary by plan and location, but frequently include:
- Hearing, dental, and vision coverage (none of which are typically covered by Medicare)
- Fitness benefits
- Transportation benefits
- Over the counter credits
Another benefit of Medicare Advantage plans is that they come with Out of Pocket Maximum (OOPM) protections. Every plan has a yearly limit on your medical costs. You won’t pay more than your OOPM in any year, which is a tremendous improvement upon Traditional Medicare.
Perhaps the biggest benefit available under Part C that’s not available from Traditional Medicare is prescription drug coverage. Many Medicare Advantage plans come with Part D drug coverage built-in, which closes a major gap in Original Medicare.
TALK TO YOUR ORLANDO MEDICARE ADVISOR NOW!
Part D Prescription Drug Coverage
Part D is the newest enhancement to the Medicare program. Part D became effective in 2006 and is designed to help you pay for medications. Prior to the creation of Part D, you were on your own when it came to paying for prescription medications. Medicare did not help with the cost of routine and maintenance medications. Part D was designed to alleviate the growing burden of the cost of medication.
Part D created two ways to get help with prescription drugs:
- Standalone Prescription Drug Plans
- Medicare Advantage Prescription Drug Plans (MAPD)
The actual drug coverage works exactly the same with all Part D plans, whether you choose a standalone drug plan or an MAPD.
As with the other parts of Medicare, you’re still going to have to pay out of pocket for most of your medications. How much you pay will change throughout the year.
Your costs change as you move through four Coverage Stages.
The first Coverage Stage is the deductible stage. If your Part D plan has a deductible, you’ll have to meet this amount before your plan will begin sharing the cost of your medications.
The second Coverage Stage is the Initial Coverage Stage. During this stage, you’ll pay your plan’s standard co-payments or co-insurance for every prescription you fill. You’ll continue like this until the total spending on medications (what you’ve paid out of pocket plus what your plan has paid) hits $4,430 (2022 amount), and then you move to the next coverage stage.
The third Coverage Stage is the Coverage Gap Stage. In this stage, you’ll pay no more than 25% of the cost for your medications, both generic and brand name. You’ll continue paying this amount until the amount you’ve personally spent, plus the value of name-brand manufacturer discounts hits $7,050 (2022 amount). Then you’ll move into the last phase.
The fourth Coverage Stage is the Catastrophic Coverage stage. In this stage, you’ll pay no more than a tiny co-insurance or co-payment amount for the rest of the year. In January, you’ll start over at Coverage Stage one again.
There is no annual cap on your drug costs; you’ll keep paying for each prescription you fill throughout the year.
Get The Most Out Of The Parts Of Medicare
To maximize the value of your Medicare benefits it’s important to choose the right Medicare Insurance plan for you. This usually boils down to choosing between Medicare Supplement Insurance paired with a standalone drug plan or a Medicare Advantage plan with built-in drug coverage. This can be a stressful decision for people.
Orlando Medicare Advisors can help you make a stress-free decision. When you schedule a free consultation, we’ll help you understand what your true needs for coverage are, and find several plans for your review. We can help you compare costs and benefits and even look up your doctors and medications for you to make sure that the plan you choose will fit your needs. You can get the ball rolling today by scheduling your free, no-obligation consultation.