Enrolling in Medicare can be a fairly simple process, or a more complicated process depending upon your particular situation. It was pretty straightforward for me, I have a very simple life and am in good health. Like everything with government, the devil is in the details. Below is a basic primer, Medicare 101…
- Medicare is the national health insurance program available to people age 65 or older, younger people with disabilities, and people with end-stage renal disease.
- There are four parts to Medicare: A, B, C, and D.
- Part A is automatic and includes payments for treatment in a medical facility.
- Part B is automatic if you do not have other healthcare coverage, such as through an employer or spouse.
- Part C, called Medicare Advantage, is a private-sector alternative to traditional Medicare.
- Part D covers prescription drug benefits. You’ll need to review every year depending upon your prescription needs.
Maybe you’re getting close to the age of 65 or simply want to understand how Medicare works so you can help a family member or friend. While some people who sign up for Medicare are retired, others are still working. Whatever your situation, you become eligible for Medicare when you reach 65. In fact, if you are already receiving Social Security, you’ll be enrolled in Medicare automatically the month you turn 65. The card will arrive in the mail.
Medicare has evolved over the years and now has four parts: Part A, Part B, Part C, and Part D. While some are mandatory, others are optional. In general, the four Medicare parts cover different services, so it’s essential that you understand the options so you can pick your Medicare coverage carefully:
Medicare Part A: Hospital Insurance
Medicare Part A covers the costs of hospitalization. When you enroll in Medicare, you receive Part A automatically. For most people, there is no monthly cost, but there is a $1,556 deductible in 2022.
Services covered under Part A may include surgeries, inpatient care in hospitals, skilled nursing facilities, hospice care, home healthcare services, and inpatient care in a religious non-medical healthcare institution.
This sounds straightforward, but it’s not. For example, Part A covers in-home hospice care but does not cover a stay in a hospice facility.
Additionally, if you’re hospitalized, a deductible applies, and if you stay for more than 60 days, you have to pay a portion of each day’s expenses. If you’re admitted to the hospital multiple times during the year, you may need to pay a deductible each time.7
Medicare Part B: Doctors and Tests
Medicare Part B covers a long list of medical services including doctor’s visits, medical equipment, outpatient care, outpatient procedures, purchase of blood, mammograms, cardiac rehabilitation, and cancer treatment.5
You’re not required to enroll in Part B if you have “creditable coverage” from another source, such as an employer or spouse’s employer. If you don’t enroll and you don’t have creditable coverage from another source, you may have to pay a penalty if you enroll later.
You pay a monthly premium for Part B. In 2022, the standard cost is $170.10, up from $148.50 in 2021.1 If you’re on Social Security, this may be deducted from your monthly payment.
The annual deductible for Part B is $233 in 2022. Once you meet the deductible, you pay 20% of the Medicare-approved cost of the service, provided your healthcare provider accepts Medicare assignment. But beware: There is no cap on your 20% out-of-pocket expense.
For example, if your medical bills for a certain year were $100,000, you could be responsible for up to $20,000 of those charges, plus the charges incurred under Part A and D umbrellas. There is no lifetime maximum.9
On the other hand, you pay nothing for most preventive services, such as diabetes screenings and flu shots, if you receive those services from a provider who accepts Medicare assignment.
What Parts A and B Don’t Cover
The largest and most important item that traditional Medicare doesn’t cover is long-term care if the only care you need is custodial.11 If you are diagnosed with a chronic condition that requires ongoing long-term personal care assistance, the kind that requires an assisted-living facility, Medicare will cover none of the cost. However, Medicare will cover the costs for acute-care hospital services, for patients who are transferred from an intensive care or critical care unit. Services covered could include head trauma treatment or respiratory therapy.
Medicare Part C: Medicare Advantage
Also known as Medicare Advantage, Part C is an alternative to traditional Medicare coverage. Coverage normally includes all of Parts A and B, a prescription drug plan (Part D), and, depending on your choice of a Medicare Advantage plan, other possible benefits.14
Part C is administered by Medicare-approved private insurance companies that collect your Medicare payment from the federal government.
Depending on the plan, you may or may not need to pay an additional premium for Part C. You still need to pay your Medicare Part B premium. You don’t have to enroll in a Medicare Advantage plan, but for many people, these plans can be a better deal than paying separately for Parts A, B, and D. Beneficiaries will still pay separate premiums if they don’t choose to have the Part “C/D” premium taken out of their Social Security check.
Medicare Part D: Prescription Drugs
Prescription drug coverage, known as Part D, is also administered by private insurance companies. Part D is optional and is normally included in any Medicare Advantage plan.17 Depending on your plan, you may have to meet a yearly deductible before your plan begins covering your eligible drug costs. Some Part D plans have a co-pay.
Medicare prescription drug plans have a coverage gap—a temporary limit on what the drug plan will cover. The coverage gap is often called the “doughnut hole,” and this gap kicks in after you and your plan have spent a certain amount in combined costs. For example, in 2022 the donut hole occurs once you and your insurer combined have spent $4,430 on prescriptions.
Once you have paid $7,050 in out-of-pocket costs for covered drugs, you have reached the level of “catastrophic coverage,” for 2022 in out-of-pocket costs for covered drugs. This means you are out of the prescription drug “donut hole” and your prescription drug coverage begins paying for most of your drug expenses again.
Many states have insurance options that will close the coverage gap, but these may require paying an additional premium.
Medicare Advantage vs. Medigap
People who only have Medicare Parts A, B, and D may incur sizable bills not covered by Medicare. To close these gaps, recipients can enroll in some form of Medigap insurance or in a Medicare Advantage plan (see Part C, above).
One important thing to know about Medigap: It only supplements Medicare and is not a stand-alone policy. If your doctor doesn’t take Medicare, Medigap insurance will not pay for the procedure.
Be sure to work with your fee-only Certified Financial Planner® or a Medicare enrollment specialist to get the right coverage and options for you and yours.