In part 3 of our blog series on Health Insurance, we provide an overview to Medicare. Prior to signing-up for any medical coverage, it is important that each person thoroughly read and obtain guidance directly from medicare.gov or a licensed Medicare agent.
Medicare is health insurance for people 65 or older. You're first eligible to sign-up for Medicare three months before you turn 65. You may be eligible to get Medicare earlier if you have a disability, End-State Renal Disease (ESRD,) or ALS (also called Lou Gehrig's disease). There are four basic Medicare Plans;
Part A (Hospital Insurance): Helps cover inpatient care hospitals, skilled nursing facility care, hospice care and home health care.
Part B (Medical Insurance): Helps cover:
Services from doctors and other health care providers
Outpatient care
Home health care
Durable medical equipment (like wheelchairs, walkers, hospital beds and other equipment)
Many preventive services (like screening shots, or vaccines and yearly "wellness" visits)
Part D (Drug Coverage): Helps cover the cost of prescription drugs (including many recommended shots and vaccines). You join a Medicare drug plan in addition to Original Medicare, or you get it by joining a Medicare Advantage Plan with drug coverage. Plans that offer Medicare drug coverage are run by private insurance companies that follow rules set by Medicare.
Medicare Supplemental Insurance (Medigap): Extra insurance you can buy from a private company that helps you pay your share of costs in Original Medicare. Policies are standardized, and in most cases named letters like Plan G or Plan K. The benefits in each lettered plan are the same, no matter which insurance company sells it.
Medicare Options
When you first sign up for Medicare and during certain times of the year, you can choose which way to get your Medicare coverage. There are two main ways: Original Medicare and Medicare Advantage (also known as Part C).
Original Medicare
Original Medicare includes Part A and Part B
You can join a separate Medicare drug plan to get Medicare drug coverage (Part D)
You can use any doctor or hospital that takes Medicare, anywhere in the U.S.
To help pay your out-of-pocket costs in Original Medicare (like your 20% coinsurance,) you can also buy supplemental coverage like Medicare Supplemental Insurance (Medigap), or have coverage from a former employer or union, or Medicaid.
Original Medicare covers most, but not all the costs for approved health care services and supplies. After you meet your deductible, you pay your share of costs for services and supplies as you get them. There's no limit on what you'll pay out-of-pocket in a year unless you have other coverage (like Medigap, Medicaid, or employee or union coverage).
Services covered by Medicare must be medically necessary. Medicare also covers many preventative services, like shots and screenings. If you go to a doctor or health care provider that accepts the Medicare-approved amount, your share of costs may be less. If you get a service that Medicare doesn't cover, you pay the full cost.
If you are interested in a Medicare Advantage or Medigap Plan - you should carefully research and consider your options prior to signing up for Original Medicare.
With Original Medicare, you can:
Go to any doctor or hospital that takes Medicare, anywhere in the U.S.
Join a separate Medicare drug plan (Part D) to get drug coverage
Buy a Medicare Supplemental Insurance (Medigap) policy to help lower your share of costs for services you get.
To Set Up Medicare Coverage:
Go to www.medicare.gov to sign-up. You will be asked to answer a few questions to find out when you can sign-up for Part A and Part B based on your situations, as well as to find out if you need to sign up or if you'll automatically get Part A and Part B.
Most people get Medicare Part A (Hospital Insurance) and Part B( Medical Insurance) when first eligible (usually when turning 65).
The date your Part A and Part B coverage will start depends on when you sign up. You will then be provided with all the forms and details needed for signing up for Part A and Part B.
Sign up for Part A (Hospital Insurance) and Part B (Medical Insurance)
Choose which way you want to get your Medicare health coverage: You can choose either Original Medicare or Medicare Advantage (Part C) for your health coverage. If you choose Original Medicare, you'll also decide if you want drug coverage (Part D) and supplemental coverage, like Medigap.
You'll have Original Medicare unless you join a Medicare Advantage Plan. If you're not lawfully present in the U.S., Medicare won't pay for your Part A and Part B claims, and you can't enroll in a Medicare Advantage Plan or Medicare Drug Plan. Generally, you pay a monthly premium for Medicare coverage and part of the costs each time you get a covered service. There's no yearly limit on what you pay-out-of-pocket, unless you have supplemental coverage, like a Medicare Supplemental Insurance (Medigap) policy, or you join a Medicare Advantage Plan.
Below is how Original Medicare breaks down and its associated costs:
Part A - Hospital Insurance
Premium: $0 for most people (because they paid Medicare taxes long enough while working - generally at least 10 years). This is sometimes called a "premium - free Part A." If you don't qualify for a premium-free Part A, you might be able to buy it. In 2022, the premium is either $274 or $499 each month, depending on how long you or your spouse worked and paid Medicare taxes.
You also must sign up for Part B to buy Part A
If you don't buy Part A when you're first eligible for Medicare (usually when you turn 65), you might pay a penalty
Deductible: $1,556 for each time you're admitted to the hospital per benefit period, before Original Medicare starts to pay. There's no limit to the number of benefit periods you can have.
Inpatient stays (copayments):
Days 1-60: $0 after you pay your Part A Deductible
Days 61-90: $389 each day
Days 81-150: $778 each day while using your 60 lifetime reserve days
After day 150: you pay all costs
Part B - Medical Insurance
Premium: $170.10 each month (or higher depending on your income). The amount can change each year. You'll pay the premium each month, even if you don't get any Part B covered services. You might pay a penalty if you don't sign up for Part B when you're first eligible for Medicare (usually when you turn 65). How much is the Part B late enrollment penalty?
You'll pay an extra 10% for each year you could have signed up for Part B but didn't
This penalty is added to your monthly Part B premium (You may also pay a higher premium depending on your income)
It's not a one-time late fee - you'll pay the penalty for as long as you have Part B.
Generally, you won't have to pay a penalty if you qualify for a special Enrollment Period. To qualify, you (or your spouse) must still be working and you must have health coverage based on that job.
Deductible: You'll pay $233, before Original Medicare starts to pay. You pay this deductible once each year.
Inpatient stays (copayments): You'll usually pay 20% of the cost for each Medicare-covered service or item after you've made your deductible.
If you have limited income and resources, you may be able to get help from your state to pay your premiums and other costs, like deductibles, coinsurance, and copays.
Part C - Medicare Advantage Plan
Monthly premiums vary based on which plan you join. The amount can change each year.
You must keep paying your Part B premium to stay in your plan.
Deductibles, coinsurance, and copayments vary based on which plan you join.
Plans also have a yearly limit on what you pay out-of-pocket. Once you pay the plan's limit, the plan pays 100% for covered health services for the rest of the year.
Part D - Drug Coverage
Premium: Monthly premiums vary based on which plan you join. The amount can change each year. You may also have to pay an extra amount each month based on your income. You might pay a penalty if you:
Don't join a Medicare drug plan when you first get Medicare, and
Go 63 days or more without creditable drug coverage (coverage that's similar in value to Part D).
How much is the Part D Penalty?
You'll pay an extra 1% for each month (that's 12% a year) you could have signed up for Part D, but didn't.
The penalty is added to your monthly premium
It's not a one-time late fee- you'll pay the penalty each month for as long as you have Part D coverage (even if you change plans)
If you have creditable drug coverage or if you qualify for extra help, you won't have to pay a penalty
When you get prescription drugs:
Most plans charge a deductible, an amount you pay before the plan starts to pay, for prescriptions you fill. The deductible amount varies based on which plan you join.
Your actual costs vary depending on the medicines you take, if they are on your plan's list of covered drugs, and which pharmacy you use.
If you have limited income and resources, you may be able to get extra help to pay your plan premiums and other drug costs (like deductibles, coinsurance, and copays). If you qualify, you won't have to pay the Part D late enrollment penalty.
Generally, you only need to sign up for Part A and Part B once. Each year, you can choose which way to get your health coverage (and add or switch drug coverage). Medicare is different from private insurance - it doesn't offer plans for couples or families. You don't have to make the same choice as your spouse.
Part IV of the Health Insurance Blog series will conclude next week with a deeper dive into Medicare Advantage plans.
Sources:
Alabama Medicaid- Applying for Medicaid Benefits: https://medicaid.alabama.gov/