What is Medicare?
Medicare is the United States federal health insurance program for people who are 65 or older. It’s also available for people who are younger than 65 and have been diagnosed with certain disabilities or health conditions such as End-Stage Renal Disease (ESRD) or Lou Gehrig’s disease (ALS).
That’s a pretty straightforward definition, but there is a lot to the Medicare program, and many beneficiaries are still confused about it long after their enrollment. We’re going to change that for you today!
Medicare was originally created in 1965. President Lyndon Johnson signed the Medicare and Medicaid Act into law. The act established Medicare as a way for retired individuals to get health insurance. It also created Medicaid, which is often confused with Medicare. Medicaid is also a health insurance program, but it is designed for people with limited incomes rather than based solely on age.
The Medicare program consists of four parts, plus some other options for additional coverage. While everyone starts with Parts A and B, the rest of your coverage options will be a personal decision based on your healthcare needs and budget.
How Does Medicare Work?
Let’s start talking in more detail about each part of Medicare and the supplement coverage offered to Medicare beneficiaries.
Original Medicare includes Part A and Part B. It’s sometimes called Traditional Medicare. Original Medicare is where everyone starts. You must enroll in both Parts A and B before you can choose any additional coverage.
Medicare Part A is also called inpatient or hospital insurance. It covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.
Most beneficiaries don’t pay a premium for Part A. As long as you or your spouse have worked and paid taxes for ten years (40 quarters), you won’t pay a premium for Part A. If you haven’t met that requirement, your premium is based on the number of quarters you’ve fulfilled. Premiums typically change (increase) every year.
Even though Part A doesn’t have a premium, it does have other out-of-pocket costs. First, it has a deductible. The Part A deductible works differently than other health insurance deductibles you might be used to. Instead of an annual charge, it goes by benefit periods. A benefit period begins on the first day you become an inpatient and ends when you’ve been out of the hospital (or other facility) for 60 consecutive days.
Part A also has copays, which are based on the number of days you’ve been hospitalized. The first 60 days of a hospitalization are covered by Medicare. Copays begin on day 61.
Medicare Part B is also called outpatient or medical insurance. It covers visits to your doctor, imaging, lab tests, surgeries, durable medical equipment, and many preventive care services.
Part B does have a monthly premium. The Centers for Medicare and Medicaid Services (CMS) sets a standard premium each year. Most people pay the standard amount, but people with higher incomes will pay more. On the other hand, beneficiaries with limited incomes are eligible for Medicare Savings Programs, which can help cover the Part B premium.
Part B also has a deductible, but it is a smaller annual fee. Once you meet that deductible, Part B pays for 80% of covered services, leaving you with a 20% coinsurance amount.
Unlike traditional group health insurance, there is no out-of-pocket maximum under Original Medicare. While it does offer great coverage, it can leave beneficiaries with a large financial burden.
Medicare Supplement Plans
One way to combat Medicare’s out-of-pocket costs is with a Medicare Supplement plan, also known as a Medigap plan. Private insurance companies offer these plans; beneficiaries can enroll and use them as a secondary insurance policy.
There are ten Medigap plans available today, each labeled by a letter of the alphabet. They include Plans A, B, C, D, F, G, K, L, M, and N. Note that we use the word “plans” for Medigap policies versus “parts” for the parts of Medicare. It’s easy to see why so many people find Medicare confusing!
Medigap plans pick up the costs we talked about earlier, including the deductibles, copayments, and coinsurance that Parts A and B would otherwise leave you to pay. The costs picked up by your Medigap plan will depend on which of the letter plans you choose to enroll in. The most popular Medigap plans are Plans F, G, and N.
Medicare Supplement premiums vary based on the plan you chose, the insurance carrier, and some personal factors like your age, gender, and zip code. New Medicare beneficiaries should expect to pay between $80 and $160 for a Medigap plan.
Medicare Part D
Medicare Part D is for prescription drug coverage. Prescription drugs aren’t covered by Original Medicare, so you’ll need a separate policy to get coverage for your medications. This even applies to people who aren’t currently taking prescriptions. Failure to enroll in Part D will result in financial penalties that last a lifetime.
Private insurance carriers sell Part D plans, and the plans will vary across the country. To choose a Part D plan, you’ll need to compare their drug formularies to find out which plan covers all your prescriptions at the lowest cost to you.
Lastly, we need to talk about Medicare Advantage, also known as Medicare Part C. We saved these for last because they offer a kind of alternative to everything we’ve mentioned so far.
You must still enroll in Original Medicare to get a Medicare Advantage plan. However, once you enroll, all your benefits are provided by a private insurance company, not the federal government.
Medicare Advantage plans offer at least as much coverage as Original Medicare, but almost all of them offer even more coverage. For example, you can bundle your prescription drug coverage into your Medicare Advantage plan – for no additional premium! Many plans also include benefits for hearing, vision, and dental care. They often include wellness programs, gym memberships, transportation, meal delivery, and monthly over-the-counter stipends.
If you’re considering Medicare Advantage, it’s important to understand how these plans work and what the different options are. Medicare Advantage plans come in a variety of types, so you’ll need to work with an advisor to find out which one suits your unique needs.
Probably one of the most attractive things about Medicare Advantage plans is their premium. Most Part C plans offer extremely low monthly premiums, often as low as $0 per month. Of course, you should consult the plan’s out-of-pocket costs, including the deductible and all copays.
Get Help with Medicare
You don’t have to struggle through the Medicare maze alone. The insurance agents at Bobby Brock Insurance specialize in Medicare, and we are happy to help you learn more about Medicare. We take the time to give you personalized, comprehensive advice so you can rest assured that you’ve got the best health insurance in place.
Our services are completely free, so call Bobby Brock Insurance today to enroll in Medicare!