Medicare is federal health insurance for people 65 or older, people of any age suffering permanent kidney failure, and people with certain disabilities that have entitled them to disability income coverage under Social Security for at least the past 24 months.
There are four basic parts to Medicare and several supplement plans. Let’s look at these parts individually to see how the whole puzzle fits together.
Part A is typically a pre-paid benefit through payroll deductions from your paycheck. To quality for Part A without having to pay a premium, you and your employer must have have paid into Medicare Part A for a total of 40 quarters. For people who have less than 40 quarters of contributions, there is a premium, which varies by the number of quarters of contributions.
Part A covers:
- Hospital Stay
- Home Health Care
- Hospice Care
- Skilled Nursing Facility Stay
Part A does not cover a private room or non-medical things like a television. If you are already receiving Social Security, enrollment in Part A is automatic at age 65. If you are not receiving Social Security benefits at 65, you should consider signing up for Medicare even if you do not plan to retire at age 65.
Part B is also called Supplementary Medical Insurance. Part B is in place to pay for medically necessary physician’s charges, outpatient hospital care, some other medical services not covered by Part A, and preventive care. Part B is usually deducted from a person’s Social Security check and the cost will depend upon a person’s income. If a person is not receiving Social Security, then Medicare will send a quarterly invoice.
Part C plans are also known as Medicare Advantage Plans. If you join one of these plans, you generally get all Medicare-covered health care through a private health plan. These plans are HMO and PPO managed care plans. In many Advantage Plans, there are extra value added benefits and lower copays than in original Medicare. Furthermore, an Advantage Plan limits your maximum out of pocket maximum cost per year versus Parts A & B, which do not have a maximum out of pocket limit.
To enroll in an Advantage plan, you must have Medicare Parts A & B. You will pay the normal premiums for Part A and B. In addition, there may be a premium that you will pay for the Advantage Plan depending on the plan’s level of coverage. If you join an Advantage Plan you will pay for care under the plan’s fee schedule, which is at least as comprehensive as Parts A & B.
Part D is a drug plan for people who are eligible for Medicare. There is a monthly premium for the drug plan and it is optional to enroll. However, if you chose not to enroll in Part D when you first are eligible, the premiums are higher later. The plans are managed by private Medicare approved carriers and vary slightly. Most plans have a coverage gap, which is commonly referred to as a donut hole. The donut hole is a gap in coverage that will start once the retail cost of your drugs totals a certain amount that varies each year. In the donut hole, you will get about a 50% discount on covered name brand drugs and must pay a maximum of 86% of the plan’s cost for generic drugs. During the gap, if the discount plus the total amount you pay reaches a threshold that varies every year, the client is no longer in the payment gap. Once out of the gap the insured will pay 5% or less of the drug cost, and the plan will pay the remaining 95%. ***Note these numbers change each year and it is best to review drug plan options with an agent***.
Medigap/Supplement Plans are standardized plans run by approved private carriers that help to reduce the coverage gaps in Part A & B. People either have an Advantage Plan (Part C) or an Medigap/Supplement Plan. Medigap plans all are standardized and cover the same things from carrier to carrier. The only thing that varies are the premium paid for the plan.
Some plans are issue age plans, which does not raise your premiums based on age, but can raise your rates for inflation and other factors. Attained age plans raise your premiums due to age and other factors such as inflation. You have a 6 month window from when you turn 65 to enroll in a Medi-Gap plan in which the insurance carrier cannot reject you for medical conditions.
Below is a summary of the standardized coverage for Medigap Plans: