Medicare 101

Medicare gives Americans, age 65+ and younger people with disabilities, an important health safety net. Medicare is the nation’s largest health insurance program, with over 50 million people participating. Yet most people know very little about the “in’s and out’s” of the Medicare system.

Somethings to consider as you navigate through Medicare:

  • Medicare doesn’t cover everything. It was never designed to cover all your medical costs.
  • Medicare isn’t free. While most people don’t pay a premium for Part A, there are other costs involved.
  • Medicare isn’t simple. The benefits are offered in several different ways and you can choose to receive your benefits directly from the government or from a private insurance company or a combination of both.

While Medicare can be a confusing program to understand, man Baby Boomers will acknowledge that it is one of the best things about turning 65.  Medicare has several parts that you must understand. Each part has a letter designated to it to make it easier. Here is a brief overview of each individual part.

Part A, sometimes called hospital insurance. Most Americans receive Part A at no cost if you have enough work credits. The work credits are accumulated during your working years. Part A requires that you have worked 40 quarts, or 10 years. If you do not have the required work history, you may purchase Part A. Additionally, if you do not have the required work 10 years working years, you may qualify for Part A through a spouse. Part A covers inpatient care in hospitals, including the room, and nursing services. Part A also covers a stay in a skilled nursing facility and also home health and hospice care if medically needed. You are responsible for paying some of the costs as well as deductibles. The Part A deductible for a hospital stay is $1,260 for the first 60 days and additional deductibles come into play.

Part B, sometimes called physician insurance. Part B has a monthly premium with a sliding scale that is based on income. In 2015 the monthly premium for someone turning 65 was $104 per month for persons with an annual income of less than $85,000. You have the option of having your monthly premium taken out of your Social Security check and this is the most common way the premium is paid.  Part B provides health coverage for services provided by a physician in their office and in the hospital.  Outpatient care and some home health care are also covered. Durable medical equipment like wheelchairs, walkers, and other medically necessary items are covered under Part B. It also has an annual deductible of $147 and your cost share is 20% of the Medicare approved amounts. For example, let’s say you need a wheelchair that costs $1000; let’s also assume the Medicare approved amount is $1000. Your cost would be the annual Part B deductible of $147, your cost share would be 20% of the Medicare approved amount ($1,000 X .20 = $200). $200 + $147 = $347 would be the amount you would pay. If you had previously paid the $147 annual deductible, your portion would be the cost share of 20%. Some services are not covered at all by Original Medicare. These would include most prescription drugs, hearing aids, routine vision care, routine dental care and extended long term care.

Part C, also called Medicare Advantage. Medicare Advantage plans combine both Medicare Part A and Part B coverage into a single plan offered by federally contracted and Medicare approved private insurance companies. This allows the consumer to get hospital and medical benefits from one source. Most Medicare Advantage plans are either Health Maintenance Organizations (HMO) or Preferred Provider Organizations (PPO). Part C enrollee’s get all the benefits of Original Medicare and many of these plans also include prescription drug cover, Part D Medicare. These plans usually offer extra days in the hospital, dental, vision and hearing benefits, as well as other wellness benefits such as fitness/gym memberships. To enroll in a Part C Medicare Advantage plan, you must be enrolled in Part A and Part B. Part C may or may not have a monthly premium associated with being a member. Co-pays, cost sharing, and many other benefits vary from one insurance company to another. It is critical that you have someone providing the local plan knowledge sot that your health care plan fits your needs. Plans often vary county to county as well as plan changes that can occur every year.

Part D, also called Prescription Drug coverage. Part D drug coverage is an important benefit that helps reduce costs for your prescriptions. You must be enrolled in Part A and Part B to add a “stand alone” Part D plan. You can choose a Medicare Advantage, Part C, plan that includes prescription drug coverage. Part D plans, as well as Medicare Advantage plans that include prescription drug coverage, have lists of covered drugs (formularies) that show cost sharing amounts and what drugs are covered. Some Part D plans have annual deductibles and limits. Many local pharmacies participate with Medicare and are approved providers. Medicare Part D and also Medicare Advantage plans have what many call a “donut hole”. This means that the consumer has initial drug coverage up to $2,960, once that threshold is reached, the majority of the cost share shifts to the consumer until the drug costs reach $4,700, where upon Medicare Part D or Medicare Advantage pays 95% of the costs. Sometimes this “donut hole” is referred to as the Prescription Drug coverage gap. Other options that are available to you are Medicare Supplements, which is sometimes called Medigap. These health care plans are designed to pay the gap between what Original Medicare will pay and what the health care provider bills. For example, the deductible for Part A hospital inpatient stay is $1,260. If you have a Medicare Supplement plan in place, the deductible would be paid for by the supplement. When a consumer turns 65 they have a 6 month window where they may purchase a Medicare Supplement plan without proving insurability. The supplement plan is “guaranteed issue”. Beyond the 6 month window a consumer is subject to “underwriting”, meaning that the insurance company can deny coverage based upon current and historical health issues the consumer has. These Medicare Supplement plans do not include prescription drug coverage. The consumer must purchase a “stand alone” Part D plan in addition to the Medicare Supplement. Medicare can be very confusing. We highly recommend that you speak with a license, certified, independent insurance agent that can help you explore all your options. An agent can review your prescriptions drugs and health care concerns and that can re commend a great fit between you and the options you have.