Once you become eligible for Medicare, the first thing you should do is learn the basic information about the program, what it can do for you, and how it works.
Overview of Medicare
Medicare is health insurance for:
- individuals who are at least 65 years old
- individuals who are under 65 years old with certain disabilities
- those individuals (who are any age) who have end-stage renal disease, which is permanent kidney failure requiring dialysis or a kidney transplant.
There are four parts to Medicare: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (prescription drug coverage).
Check Your Eligibility
The two basic choices for getting Medicare coverage are by selecting Original Medicare (Part A and Part B) or by selecting a Medicare Advantage Plan (Part C).
A Part D prescription drug plan can be added to Original Medicare (Part A and Part B) so that medicines are covered. And sometimes a Part D plan can be added to a Medicare Advantage Plan, if the plan doesn’t already have prescription drug coverage.
What Medicare Part A Covers
Part A provides coverage should you get injured or come down with a serious illness that requires a hospital stay. Specifically, Medicare Part A (hospital insurance) covers hospital stays, skilled nursing facility care, nursing home case (but not custodial care), surgery, hospice, and home health care, among other things.
Some people have to pay a monthly fee (a premium) to get Part A, but not those who have at least 40 credits of Medicare-covered employment (ten years) in the United States. (Approximately 99% of people who are on Medicare do not have to pay a Part A premium because they have met the employment requirement.)
The Medicare Part A deductible is $1,288.00 in 2016, which is a minor increase from $1,260.00 in 2015. (A “deductible” is money you must spend before Medicare begins to pay.) There is no coinsurance during the first 60 days in a hospital. The daily coinsurance amount is then $322 for the 61st through 90th day in the hospital in a benefit period, as well as $644 for lifetime reserve days. (“Lifetime reserve days” are additional days during which Medicare pays the covered costs, except for a daily coinsurance, if you are hospitalized for more than 90 days. You are allotted 60 reserve days in your lifetime.)
Check Your Eligibility
What Medicare Part B Covers
Medicare Part B (medical insurance) helps to cover the cost of doctor services and outpatient care, as well as some other medical services that Part A doesn’t cover. Part B coverage includes things such as doctor visits, health care providers’ services, an annual wellness exam, outpatient care, durable medical equipment, home health care, and some diagnostic screenings, like prostate cancer screenings and mammograms.
Basically, Medicare Part B covers two basic types of services:
- services that are considered medically necessary (which means those that are necessary to diagnose or treat a medical condition or illness), and
- preventive medical services.
As far as a monthly premium, the majority of people must pay $104.90 per month in 2016 for Part B, which is the same amount as in 2015. In fact, Medicare Part B premiums have stayed the same in the 2013, 2014, and 2015 calendar years. However, if you don’t sign up when you first become eligible for Part B, then you’ll have to pay a late enrollment penalty for as long as you have Medicare. Also, you’ll have to pay more if your modified adjusted gross income exceeds a particular amount.
This premium is deducted from your benefit payment if you get Social Security, Railroad Retirement Board benefits, or Civil Service benefits. However, if you don’t receive any of these types of benefit payments and you sign up for Part B, then you’ll receive a bill called a “Notice of Medicare Premium Payment Due.” (If you have Medicare Part A, you’ll get a “Notice of Medicare Premium Payment Due” each month regarding the premium.)
Even when Medicare Part B covers a service or item, you ordinarily must pay a deductible every year, coinsurance, and copayments (which are a portion of the medical costs that you must pay after you have met the deductible). The deductible for Part B is $166 per year in 2016, and after this is met, you usually have to pay 20% of the amount (that is approved by Medicare of course) for most doctor services, outpatient therapy, and durable medical equipment. It’s good to keep in mind that there isn’t an out-of-pocket limit for Medicare Part B and not all procedures will be covered.
What’s Not Covered by Medicare Part A and Part B
While Original Medicare will help cover many medical costs, it doesn’t cover every type of medical service you might require. In those cases where Medicare doesn’t pay, you’ll have to cover the price of the procedure yourself or have other insurance to take care of the costs.
For example, Medicare will not cover:
- long-term care (also called custodial care)
- dental care (in most cases), including dentures
- eye examinations needed for prescribing glasses
- hearing aids, and
- cosmetic surgery.
In some cases, a Medicare health plan (such as a Medicare Advantage Plan) will cover some of these types of services. It all depends on the type of Medicare Advantage Plan you select.
What Medicare Part C Covers
Medicare Part C (Medicare Advantage Plans) provide Part A and Part B benefits, but the plans are through private companies. These plans must cover all of the services that Original Medicare covers, except hospice care.
To enroll in a Medicare Advantage Plan (or make changes to coverage you already have), you have to take action during specific enrollment periods that happen each year. If you want to leave your plan, you can do this during a special disenrollment period that occurs each year. (Those who chose to disenroll from a Medicare Advantage Plan during this period have to switch to Original Medicare, not a new Medicare Advantage Plan.)
The particular plan you choose may cover the costs of services that are not considered to be medically necessary under Original Medicare. For example, the Medicare Advantage Plan may cover vision, hearing, and/or dental care. In addition, most Medicare Advantage Plans have prescription drug coverage as part of the plan.
Typically, you’ll have to pay a monthly premium for a Medicare Advantage Plan in addition to the premium you pay for Part B, which is currently $104.90 each month—if you sign up for Part B when you’re first eligible. (You must enroll in Part A and Part B to be able to sign up for a Medicare Advantage Plan. Those with end-stage renal disease usually can’t join a Medicare Advantage Plan, but there are some exceptions.) You might also have to pay a copayment or coinsurance for services.
In cases where the plan denies a request for an item or service (that is, it issues an adverse organization determination), you may appeal the decision to the plan by requesting a “reconsideration” within 60 calendar days from the date of the notice of the organization determination.
What Medicare Part D Covers
A Part D prescription drug plan provides drug coverage under Medicare. Insurance companies and other private companies that have been approved by Medicare offer Part D drug plans. While participating in a Part D plan is optional (you don’t have to enroll in this program), these plans are designed to help make prescription drug costs more predictable so it is usually a good idea to strongly consider enrolling in such a plan.
The cost of a Part D monthly premium varies from plan to plan, and those people with higher incomes may pay more. Likewise, the cost for Part D deductibles, copayments, and/or coinsurance also varies from plan to plan.
Those who fail to join a Medicare drug plan when becoming eligible for Medicare (and who do not have another form of drug coverage that, on average, should pay at least as much as standard Medicare prescription drug coverage—called “creditable prescription drug coverage”), may have to pay a late enrollment penalty if they later join. This penalty is in addition to the premium each month and, ordinarily, the penalty must be paid for as long as you have a Medicare drug plan.
For this reason, it usually makes sense for most people to sign up for a Part D plan when they first become eligible for Medicare. However, if you have other prescription drug coverage, it may not be necessary to enroll at this time because you’ll probably get a special enrollment period—though this depends on your particular circumstances.
Also, if you have a Medicare Advantage Plan that doesn’t offer prescription drug coverage (though many do), you may be able to enroll in a plan under Part D. However, it is important to note that if your Medicare Advantage Plan (Part C) does in fact include prescription drug coverage and you join a Medicare Prescription Drug Plan (Part D), you will be disenrolled from your Medicare Advantage Plan and enrolled in Original Medicare.
Next, read about what Medigap policies cover.