Parts of Medicare – Is your 65th birthday sneaking up on you? If so, it’s time to start learning about the Medicare program and what kind of insurance benefits you’ll have once you’ve retired. Medicare can be a complicated topic, but if you know the basics of each part, that information will get you a long way.
When you’re finished with this article, you’ll understand what’s covered by each of the four parts of Medicare.
The Medicare ABCDs
Medicare is a little bit like alphabet soup – letters are mixed in everywhere! It’s best to start learning about Medicare by looking at each part individually.
Part A: Hospital Insurance
Part A is going to come in handy if you’re ever admitted as an inpatient to a hospital or skilled nursing facility. It serves as your room and board insurance during your stay.
The first thing to understand is the Part A deductible, which is $1,556 in 2022. (Premiums and deductibles usually change each year.) An important thing to note about the Part A deductible is that you might have to pay it more than once a year. It applies to each “benefit period,” which begins on the first day of your hospitalization and ends 60 days after you’ve been discharged.
Aside from the deductible, your out-of-pocket costs under Part A will be calculated based on how many days you’ve been hospitalized. Medicare Part A will cover your first 60 days at 100%, and you won’t pay a dime (other than that pesky deductible). After that, you’ll owe $389 up to day 90, at which point you’ll run out of benefits and be responsible for the entire bill. The exception is if you have any of your lifetime reserve days to use. You’re given 60 of these when you first enroll in Part A. If you use a lifetime reserve day, your portion will be $778 per day.
The upside to this is that most people get premium-free Part A. As long as you or your spouse paid FICA taxes for 40 quarters, you won’t have to pay a premium for Part A. All those taxes you paid go towards your future Part A premium. If you haven’t paid taxes for the full 40 quarters, you can still enroll in Part A, but you’ll have to pay a premium.
Part B: Outpatient Insurance
You’ll use your benefits under Medicare Part B for preventive care, surgeries, doctor visits, lab tests, x-rays, durable medical equipment, and more.
This year, the Part B deductible is $233, and you only have to pay that once annually. (Whew!) Once you’ve met your deductible, Part B provides 80/20 cost-sharing. Medicare pays for 80% of the covered service, and you pay the remaining 20%. You may have to pay an additional 15% in Part B excess charges if you see a doctor or other provider who does not accept Medicare assignments. The good news is this is pretty rare since about 96% of all healthcare professionals accept Medicare.
The standard Part B premium is currently $170.10. The majority of the population pays this amount, but if you have earned a high income in the past, you might be subject to IRMAA, the Income Related Monthly Adjustment Amount.
Part C: Medicare Advantage
Medicare Advantage plans are a big topic to cover, but we’ll go through some introductory information here. The federal government pays private insurance companies to offer Part C plans to Medicare beneficiaries. They do so because if you enroll in a Part C plan, that insurance company takes on all your claims that would normally have fallen under Parts A and B. A Part C plan bundles your A and B coverage, tosses in some extra benefits, and wraps them all into just one insurance plan.
Medicare Advantage plans are often low in cost. In fact, some plans are as low as $0 per month. You can see why these plans are so attractive. However, there are some limitations. You’ll need to receive care from a specific network of doctors, and you may have to follow some rules regarding your care. Even so, these are a great option for many people.
Part D: Prescription Drug Plans
Last part! Part D is reserved solely for prescription drug plans or PDPs for short. Unless you enroll in a Part C plan that includes prescription drug coverage, you’ll need to enroll in a separate Part D plan.
Private insurance companies offer these plans, and they are specific to where you live. You’ll choose one based on its drug formulary – the list of medications it covers. A licensed insurance agent will compare the medications you’re currently taking to the ones listed on the formulary and then find the plan that offers the most coverage and least out-of-pocket expenses for you.
You need to enroll in Part D even if you aren’t currently taking medications. Failure to enroll will cause you to pay penalties down the road. If you aren’t taking medications, there are some very inexpensive plans you can purchase that will prevent you from paying much larger penalties in the future.
That wraps up our introduction to the parts of Medicare! You probably still have lots of questions, which is perfectly normal. Our licensed insurance agents are here to help educate you on all things Medicare, so give us a call today to speak with one of our experts!