A Beginner’s Guide to Medicare
This article was updated on: 10/20/2018
As someone new to Medicare, you may be a little confused about your Medicare coverage options. You might have many choices, often with different rules, coverage limits, doctors, and costs. You worked hard to get Medicare. Now it’s time to make sure Medicare works hard for you and you get the coverage you’ll be happy with. This article explains more about Medicare Part A and Part B (together, they are often called “Original Medicare”), Part C (often called “Medicare Advantage”) and Part D (the part of Medicare that covers your prescription medications). You’ll also learn a little about Medicare costs.
What is Original Medicare?
Original Medicare is Part A and Part B. Many people think of Medicare Part A as “hospital insurance.” It helps cover services such as (but not limited to):
- Inpatient hospital care
- Skilled nursing facility care
- Hospice care
- Home health services
Most people don’t pay a monthly premium for Medicare Part A. Generally you don’t have to pay a Part A premium as long as you or your spouse paid Medicare taxes for a minimum of 10 years (40 quarters) when you were working (or your spouse was working). However, your Part A coverage may still include other out-of-pocket costs such as deductibles, copayments and/or coinsurance when you use the coverage.
Many people think of Medicare Part B as “medical insurance”. It helps cover services and supplies needed for the diagnosis or treatment of your health condition, including but not limited to:
- Doctor visits
- Laboratory tests and X-rays
- Emergency ambulance service
- Various preventive tests
- Durable medical equipment
You’ll typically pay a monthly premium for Medicare Part B. The amount you pay will vary depending on your specific situation.
In addition to your monthly premium, people with Part B coverage have a yearly deductible and coinsurance. Before the deductible is met, you’ll pay the full Medicare-approved cost of medical services you receive during the year (the deductible doesn’t apply to every service, and some services may be available at no cost to you, such as an annual flu shot). After it’s met, you’ll typically pay only 20% of the Medicare-approved amount for most Part B covered services for the rest of the year.
What is an alternative way to get my Original Medicare benefits?
Some people choose to get their Medicare benefits through Medicare Part C, also known as Medicare Advantage. These are Medicare-approved private health insurance plans for people enrolled in Medicare Part A and Part B.
Medicare Advantage plans provide all of your hospital and medical insurance coverage that you would receive with Medicare Part A and Part B (except hospice care, which is still covered under Part A). Plus, they often include extra benefits, such as
- Routine vision services
- Routine dental services
- Hearing coverage
- Prescription drug coverage
- Out-of-pocket maximum amounts (so your out-of-pocket Medicare spending is limited to a certain amount per year)
Many Medicare Advantage plans have specific provider networks, which means you may have to see certain doctors or go to certain hospitals to use your plan benefits—or you may pay more to go to a doctor who is outside the network.
Roughly one in every three Medicare enrollees has a Medicare Advantage plan, according to the U.S. Centers for Medicare and Medicaid Services. They are popular, in part, because they may have lower out-of-pocket costs than Original Medicare (Part A and Part B only).
When you enroll in a Medicare Advantage plan, you are still in the Medicare program and must keep paying your Part B premium.
What is Medicare Part D?
Original Medicare (Part A and Part B) doesn’t cover most prescription medicines. For that coverage, you will generally need to either enroll in a stand-alone Medicare Part D Prescription Drug Plan or a Medicare Advantage Prescription Drug plan.
You don’t automatically get Medicare Part D Prescription Drug coverage as a Medicare beneficiary. The coverage is optional, but you may have to pay a late-enrollment penalty if you sign up for Part D coverage after you’re first eligible for it or if you go 63 days or more in a row without a creditable prescription drug coverage. That means coverage that’s at least as good as Medicare Part D Prescription Drug Plans, on average. To avoid paying this penalty, it’s often a good idea to sign up for Medicare Part D as soon as you’re first eligible, unless you have and continue to keep what Medicare considers “credible prescription drug coverage.”
Like Medicare Advantage, enrollment in a stand-alone Medicare Part D Prescription Drug Plan is usually limited to certain times of the year, including but not limited to when you are first eligible for Medicare Part B. In some cases, such as when you’re losing coverage because you’re moving out of your plan’s service area, you might qualify for a Special Election Period.
Medicare Part D Prescription Drug Plans are offered by private insurance companies who have contracts with Medicare. Your monthly premium, deductible, copayments, coinsurance, pharmacy network/service area and the list of prescription drugs covered by the plan (formulary) will vary depending on the plan you choose. The formulary may change at any time and your Medicare plan will notify you when necessary.
What is Medicare Supplement insurance?
A Medicare supplement insurance policy (sometimes called Medigap) can help pay some of the out-of-pocket costs that Original Medicare (Part A and Part B) doesn’t cover, such as
Medicare Supplement policies are sold by private companies. Different Medicare Supplement plans cover different amounts of the Part A and Part B out-of-pocket costs. You pay the insurance company a monthly premium in addition to your Part B premium.
A Medicare Supplement policy is different from a Medicare Advantage plan. Medicare Advantage is a way to get your Original Medicare Part A and Part B benefits, while a Medigap policy only supplements your Original Medicare coverage and may help pay out-of-pocket costs. You usually would not have both a Medigap policy and a Medicare Advantage plan –these plan types don’t work together.
In most U.S. states, benefits are standardized and denoted by different letters of the alphabet (for example, Medicare Supplement Plan A). If you have a standardized Medicare Supplement plan, your policy is guaranteed renewable even if you have health problems, but you may not be able to switch supplement policies unless you qualify for a guaranteed-issue right.
New Medicare Supplement policies do not include prescription drug coverage, so many people also enroll in stand-alone Medicare Part D Prescription Drug Plans. If you did this, you would have Original Medicare (Part A and Part B), a Medicare Prescription Drug Plan, and a Medicare Supplement insurance policy.
What do I have to pay for a Medicare health plan?
Medicare provides for excellent health-care coverage, but it doesn’t cover everything. You will generally be responsible for paying a share of your health-care expenses. Here are some of the out-of-pocket costs that come with Medicare coverage.
- Premium: Your premium is a specific monthly amount you must pay to the Medicare program (usually for Medicare Part B) and/or a private insurance company in exchange for your health benefits, Medicare Supplement policy, and/or prescription drug coverage. This is usually paid out-of-pocket, although people who qualify for Medicaid may get help paying for their premium(s).
- Annual deductible: Your annual deductible is the amount you must pay out-of-pocket for your health care or prescription drugs before your Medicare insurance (whether it’s Original Medicare, Medicare Advantage, a Medicare Supplement policy, or a stand-alone Medicare Part D Prescription Drug Plan) starts paying. This amount varies by plan and could change every year. Some plans don’t have deductibles.
- Copayments: A copayment is an out-of-pocket payment you may be required to make for your share of a health-care cost. These are commonly found in Medicare Advantage and Part D Prescription Drug Plans. For example, each trip to the doctor might cost you $15 while Medicare covers the rest of the cost. You might pay $10 every time you fill a prescription, for example, and your plan would pay the balance.
- Coinsurance: Medicare Part B uses a coinsurance structure for many benefits. Coinsurance is an amount you may be required to pay as your share of the cost for health-care services after you meet your plan’s deductibles. Unlike a copayment, coinsurance is usually a percentage (often 20%) of the approved cost of a given service, rather than a flat fee.
- Maximum out-of-pocket limit: This is a yearly limit on your out-of-pocket spending for Medicare-covered services. Original Medicare does not have an overall out-of-pocket limit but such protection is required for all Medicare Advantage plans. Once you reach the maximum limit, your health plan will pay 100% of the cost of covered health-care services for the rest of the year.
If you still have questions about Medicare plans available to you, I am happy to help you find answers. If you prefer, you can schedule a phone call or request an email by clicking on the buttons below. You can also find out about plan options in your area by clicking the Compare Plans button.
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