Are you trying to figure out how medicare works? Read this article to learn about the basics of medicare with our medicare 101 article.
Are you getting close to age 65? Whether you’re still working, or not, you may start to consider Medicare as a health insurance option. In 2018, over 50 million Americans received Medicare and Medicare Advantage benefits.
At age 65, you’re eligible to receive Medicare benefits. In most cases, you must enroll. If you retired before 65 and are already receiving social security, you’re automatically signed up.
However, it gets much more complicated than that. With some Medicare 101, you’ll be able to make the right decision on a plan and understand the options available. The main goal of Medicare is to give individuals at retirement age affordable health insurance.
There are 4 different original Medicare plans available, along with Medicare Advantage. Depending on your health and needs, some plans will fit you better than others. Understanding the lingo and how it all works will help you make the right choice when it’s time to sign up.
Here’s a breakdown of what Medicare is, how it works, and how to select the right plan for you.
Medicare is a federal health insurance program offered to US citizens and legal residents. People at age 65 who are working or retired are eligible for Medicare. Individuals who have a disability or other health conditions may be eligible for Medicare as well.
There are 4 main parts to Medicare: Part A, Part B, Part C (Medicare Advantage) and Part D. Each one covers different health-related costs ranging from preventative check-ups to prescription drug costs.
Before we dive in, there’s some lingo you should know.
A premium is a payment you make each month to keep your health insurance.
Deductibles are what you pay out-of-pocket before your coverage will cover any costs. After you pay the deductible, then Medicare starts to cover some of the costs.
Coinsurance is a percentage of your health bills that you pay.
Copays are rates you pay each time you receive care. It’s $25 to see your primary physician and $250 for emergency visits with Medicare.
Here’s the Medicare 101 on the different Parts you can enroll in.
Medicare Part A
Medicare Part A covers hospital care. Everyone who enrolls in Medicare automatically receives Part A.
In most cases, many people can enjoy Part A for no monthly costs. However, there is a $1,408 deductible.
Part A covers many services including:
In-patient care (in the hospital)
Skilled nursing facilities
In-home hospice care
Home healthcare services
In-patient care in a religious (non-medical) healthcare establishment
But Part A gets a little muddier beyond these services. For example, it covers in-home hospice care but does not cover your stay in a hospice center.
If you’re hospitalized, you’ll have to pay the $1,408 deductible. When you stay in the hospital beyond 60 days, you’ll need to pay part of the expenses each day. In some cases, people need to pay the deductible each time the hospital admits them.
Medicare Part B
Part B covers many medical services. People who don’t have creditable health coverage from an employer or a spouse’s employer must enroll in Medicare Part B.
Unlike Medicare Part A, you have to pay a monthly premium for Medicare Part B. In 2019, the monthly cost was $135.50, but rose to $144.60 for 2020. For those receiving social security, the premium is automatically deducted from your monthly payment.
While the cost may be undesirable for some, there is a penalty fee for those who don’t enroll and don’t have a credible source of health insurance. It’s better to spend your hard-earned money on Part B than a fee that offers you zero benefits.
Speaking of benefits, Part B covers the following:
Mental health care
Outpatient surgery and care
Medical equipment such as walkers and wheelchairs
The deductible for Part B is $198. After you meet the deductible, you pay 20% of the service cost as long as it’s Medicare-approved and the healthcare provider accepts Medicare.
Do take note that there isn’t any limit on the 20% you pay out-of-pocket. If you have a $50,000 bill, you’re responsible for $10,000 of the bill.
Fortunately, there is a silver lining. There are almost no costs for most preventative check-ups, screenings, and shots at healthcare facilities that accept Medicare.
Medicare Part C
Medicare Part C, also known as Medicare Advantage, is an alternative option to original Medicare. Some private companies will offer Medicare Part C and collect your payments from the federal government.
Medicare Advantage coverage includes Parts A, B, and D (prescription drugs) along with other benefits, depending on your provider. Some plans will cover dental and vision. There are several plans to choose from in Part C, and depending on the plan, you might have to pay another premium.
Medicare Advantage offers several different plans such as:
Preferred Provider Organization (PPO)
Special Needs Plans (SNP)
Medical Savings Account (MSA)
Health Maintenance Organization (HMO)
Like all plans, each one of these has a set of rules, restrictions, and benefits. There is no requirement for people to enroll in Part C and everyone who receives approval for Medicare is eligible. Many find it a better deal than paying for Parts A, B, and D separately.
Despite the advantages, there are many disadvantages of Medicare Advantage plans. Medicare Advantage plans don’t always cover people with serious illnesses and may stop unexpectedly. Make sure to carefully read exactly what your Medicare Advantage plan covers before signing up.
Medicare Part D
Medicare Part D helps cover the costs of prescription drugs. Private insurance companies also offer Part D. Like Parts A and B, Part D is a requirement for those who do not have coverage from another credible insurance provider.
Part D offers several different plans and depending on the one you choose, you may need to meet a yearly deductible before the plan covers approved costs. Other costs you may encounter include copays and coinsurance.
What Medicare Does Not Cover
Medicare Parts A and B offer many benefits and policies to cover major medical but smaller health-related services are not.
Why is this important? Because everyone has different healthcare needs and Medicare doesn’t cover all of them. This can leave you with a large bill you can’t afford or forgo a necessary treatment altogether.
Here’s a list of the most popular services not covered by Original Medicare Parts A and B:
Dental exams, dentures, and dental care
Hearing exams and hearing aids
Eye exams, services, and glasses
Comfort items (hospital phone, TV, private room)
Medical care for those traveling outside the United States
Custodial care (bathing, dressing, etc)
Regular foot care
Providers not in your region of care
Some Medicare Advantage plans may help some of these services. But in most cases, you will have to pay out-of-pocket for these services if you’re receiving Medicare.
While Medicare does its best to offer as much coverage as possible, it doesn’t cover everything. People with Medicare can still receive large bills for the costs that Medicare doesn’t cover. As mentioned above, there are limits on certain services and no cap on copays.
In most cases, people have holes in their insurance that leaves them with healthcare bills on top of their monthly premiums. To reduce these gaps, Medicare recipients have the option to enroll in Medigap insurance. However, Medicare Advantage recipients are not eligible.
Medigap is supplemental insurance sold by private insurance companies that helps cover healthcare costs not covered by Original Medicare. Costs include copayments, deductibles, and coinsurance.
A great advantage to some Medigap plans is they’ll cover services that Medicare does not. The biggest one is to help with medical care costs when you travel abroad.
It works like this: Medicare will cover its portion of Medicare-approved health costs. After that, your Medigap insurance plan will cover its portion of the remaining costs. Then, whatever the 2 plans don’t cover is for you to pay.
Like with most insurance policies, you will have to pay a monthly premium. Medigap policies only cover 1 person and don’t cover spouses any dependents. If another person needs it, they will have to buy their own policy.
Medigap is not a stand-alone insurance plan. You will need a creditable health insurance plan, such as Parts A and B.
Also, Medigap only works with providers who accept Medicare. If your provider does not accept it, then Medigap will not pay for any services.
What Medigap Doesn’t Cover
Like with Medicare, Medigap has its rules and coverage limits. Services not covered by Medigap include:
Vision care and glasses
When enrolling in Medigap or changing your plan, check to see when open enrollment is open. People who enroll after open enrolling may face a “late-enrollment” penalty. This includes people who are changing plans or don’t have a credible drug plan with their policy.
The biggest takeaway of Medicare 101 is you need to plan ahead. Even with Medicare, health care costs can get expensive. Make sure you always read the fine print and reach out for help when it’s time to select the best plan for yourself.
Check out our latest insurance articles to learn how to financially prepare for other insurance such as home, auto, and life.