Being Educated About Medicare Plans Will Make You a Smart Shopper
Nearly 54 million Americans are covered by Medicare health insurance. For many who are just retiring, it can be an overwhelming and complex process.
Medicare is composed of four parts, with each offering a specific type of coverage. Take the time to educate yourself about Medicare so you’ll be able to make more informed decisions that fit both your health needs and your budget.
It’s important that you understand the A, B, D and Cs of Medicare coverage, so let’s begin with some eligibility guidelines.
Most people age 65 or older who are citizens or permanent residents of the United States are eligible for Medicare. If you receive, or are eligible to receive, Social Security benefits or Railroad Retirement Board (RRB) benefits, you are automatically eligible to receive premium-free Part A, which is your hospital insurance.
Anyone who qualifies for premium-free Part A is also eligible for and can enroll in Part B, the medical insurance. Together, Parts A and B are known as Original Medicare. This type of Medicare coverage is provided by the federal government.
If you’re not eligible for premium-free Part A, you may be able to sign up during a General Enrollment Period between January 1 – March 31 each year. You must be a United States citizen or a lawfully admitted non-citizen who has lived in the U.S. for at least 5 years. If you buy Part A you must also have Part B and pay monthly premiums for both. Make sure you understand the penalities for not signing up for Part A when you are eligible for Medicare otherwise you may have to pay more. For more information, click here.
Part A Coverage
Part A is your hospital insurance and helps cover the cost if you are admitted to a hospital either by your doctor or in an emergency. This includes your medical care and any prescriptions you receive while hospitalized. Part A also covers any medically necessary home health services like part-time or intermittent skilled nursing care, physical therapy, pathology services and more. While Part A covers most of your inpatient hospital costs, you will be responsible for paying some of the costs based on the number of days you are hospitalized. You do not pay a deductible for this coverage.
Part B Coverage
Under Part B, you will pay a monthly premium based on your income from the previous 2 years. There is also an annual deductible of $166 to meet. Part B covers medically necessary doctor’s services like most preventative medical screenings, outpatient hospital care, durable medical equipment and other medical services. You can visit any doctor who is signed up as a Medicare provider. After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor’s services (including most doctor’s services while you’re a hospital in-patient); outpatient therapy, and durable medical equipment.
One thing you should keep in mind when choosing Original Medicare is that there’s no yearly limit for what you pay out of pocket. To help with costs that Original Medicare doesn’t cover, you may choose to buy a supplemental insurance policy called Medigap. Medigap policies are only available through private insurers. It’s important to note that you must have Medicare Parts A and B to enroll in a Medigap policy.
Part D Coverage
Medicare Part D is the benefit that provides outpatient prescription drug coverage. These prescription drug plans, also called stand-alone PDPs, add drug coverage to Original Medicare. They are only available through private insurance companies that have contracts with Medicare. To qualify for this coverage,you must be eligible for Part A and/or enrolled in Part B and live in the service area of the plan. You must enroll in Part D coverage separately.
Each Part D plan varies in cost based on a monthly premium, any deductible and the cost of the medications you take. Each plan must cover a certain number of drugs in each therapeutic category. A plan’s formulary (list of covered drugs) changes each year, so make a list of all your prescription medications and check to see if they are covered by the plan you are considering.
If you decide not to join a stand-alone prescription drug plan when you are first eligible, you’ll likely pay a late enrollment penalty if you decide to join one later, unless you have other creditable prescription drug coverage.
Part C coverage
Part C is another way to get your Medicare coverage (Parts A and B). These plans, known as Medicare Advantage Plans, are provided through private companies and approved by Medicare to provide the same or better coverage than Original Medicare. Part C must follow Medicare rules but these plans may also offer additional coverage for other services such as dental, hearing, vision and other health and wellness programs that Original Medicare doesn’t cover.
There are several types of Advantage Plans. For example, the Medicare Savings Account (MSA) plan and some Private Fee-for-Service (PFFS) plans don’t include prescription drug coverage, so you would have to enroll in a stand-alone Part D plan. In other plans like a Health Maintenance Organization (HMO), you may only use the doctors that are in their network. If you don’t, you may have to pay the full cost out of pocket. With a Preferred Provider Organization (PPO) plan, you can use in-network or out-of-network doctors, but you will pay more if you decide to go to a doctor out of network.
What you pay in a Medicare Advantage Plan (MA) will differ by plan, but in general you will likely pay a monthly premium, a yearly deductible and copayments or coinsurance for medical visits or services. And while Advantage Plans have to offer the same services as Original Medicare, the costs for these services can be different. One benefit to choosing a Part C plan is that there is a limit for your yearly out-of-pocket costs, so the plan will cover the full amount after you reach that limit.
On the flip side, most MA plans are managed plans that consist of a network of doctors, hospitals and other healthcare providers. The network can change at any point in the year, so if your doctor leaves the network in the middle of the coverage year, you would need to find new doctor in the network to be covered. You also may need to get pre-approval (pre-certification) for certain services or they may not be covered and your costs will be higher. This is especially true with HMOs and PPOs.
Before enrolling in an Advantage Plan check to see if your preferred doctors and pharmacies are in their network and, if the plan includes prescription medication coverage. Don’t forget to make sure that the drugs you take are on the formulary.
There is no right or wrong choice when it comes to selecting Medicare coverage, but it’s important to have a strong understanding of how each type of plan works if you are thinking about enrolling in an Advantage Plan. It’s a good idea to read the Medicare and You Handbook for more detail on the differences in these plan types.
- Understanding the ABD & Cs of Medicare will help you make the right choice about coverage for your health care needs
- Reminder that there are penalties for late enrollment in Part B and Part D
- For additional information on the various parts of Medicare and their coverage, visit medicare.gov or call 1.800.MEDICARE (1.800.633.4227), 24 hours a day, 7 days a week
To better understand the coverage stages of Medicare Part D, please watch this video