Making the most of your Medicare benefits is a great way to improve the quality of your health and lead a vibrant lifestyle in retirement. Understanding your benefits, rights, and options for Medicare Insurance can help you make informed and effective coverage choices.
Part A is the hospitalization portion of Medicare. It covers you mostly in institutional settings. Although a hospital is the most common setting for using your Part A benefits, there are other institutional settings where Part A will help pay your costs, including:
Your Medicare benefits for Part A will provide you room and board as necessary, along with other items and services that are needed for your stay, or for your care.
When it comes to home healthcare, Medicare Part A will cover the costs related to your care as long as you meet certain criteria. To receive these Medicare benefits, you must:
In a skilled nursing setting, Part A will cover your stay for medical treatment. Part A will not pay for you to be in a facility solely for help with Activities of Daily Living (ADL).
Part B provides medical insurance. It’s designed to help you pay for outpatient services and procedures. You’ll use Part B for things like:
You’ll use Part B more frequently than Part A since it is primarily designed to help with more non-emergency procedures and services.
While Original Medicare provides very comprehensive medical coverage, there are a number of common services that are not covered at all, or only in rare circumstances. Among the more glaring omissions in Parts A and B are:
While there are exceptions in each of these cases, for the most part, Original Medicare won’t cover these services. You’ll have to look to private coverage to get help in these areas.
Most Americans are eligible to receive Medicare coverage one day. To be eligible you must be either a United States citizen or a permanent legal resident who’s resided in the country legally for five or more years. This is the most basic requirement for eligibility. There are other requirements that will determine when you will actually enter the program and start receiving benefits.
There are four main triggers for entry into Medicare:
While most people get Medicare by turning 65 years old, you can start receiving Medicare benefits at earlier ages if you meet the disability or illness guidelines.
It is also possible to delay taking your Part B benefits if you’re still working or covered by your spouse’s employer plan. When you do this, you can enroll in Part B at a later time when you lose your employer benefits.
There are two main kinds of costs for Part A - costs to have the coverage, and costs for services and procedures.
Most people pay for their Part A coverage by paying payroll taxes during their working careers. If you’re an employee, you have certain taxes withheld from your paychecks each payday. If you’re self-employed, you’re also required to pay these taxes. These payroll taxes are used to help pay for your Part A coverage. Since most people work at least from their 20s to retirement age, you’ll probably pay Part A taxes for about 40 years.
If you work full time for at least ten years, you’ll qualify for premium-free Part A, which means that you get your coverage without paying any additional premium. You can also qualify for premium-free Part A, even if you didn’t work enough, through your spouse, assuming that they worked and paid enough payroll tax.
There are two groups of costs you’ll pay when using Part A covered services:
The Part A deductible for 2023 is $1,556. You pay this amount first, and then Part A begins to cover your costs. If you stay in the hospital more than 60 days, or in a skilled nursing facility for longer than 20 days, you’ll have to pay a daily co-payment.
It is possible to pay the Part A deductible more than once in a year, which is unusual in the field of insurance.
Just like with Part A, there are two separate categories of costs.
With Part B, you don’t begin paying for it until you actually enroll. Once you enroll, you’ll have to pay the monthly Part B premium. For 2023, the base premium is $171.10 per month. If your income is over certain thresholds, you might have to pay more than the base.
When you actually use your Part B benefits, you can expect to pay these costs:
The Part B deductible is $233 for 2023. Once you've paid this amount, Part B starts paying 80% of the cost of your Part B medical care. You pay the remaining 20%. You are also responsible for any Part B excess charges, which can be up to 15% of the Medicare-approved cost of services. However, these are pretty rare and they’re avoidable if you stick to providers who accept Medicare’s standard payment terms (most do).
Original Medicare doesn’t provide a cap on your out of pocket spending during the year, unlike almost all other health insurance you’ve had in the past. You keep paying your deductibles and co-payments the entire year. Because of this, your costs are potentially unlimited in a situation where you need massive amounts of care, like with cancer or extended hospitalizations.
Because of the gaps in coverage from Medicare, and because of the unlimited liability, most people choose to use a private insurance plan to help limit their out of pocket spending. There are three types of private coverage available:
Part D of Medicare gives you two different ways to get help with the cost of medications:
Both of these options are offered by private insurance companies. The coverage for medications works exactly the same for both standalone plans and MAPDs. When you enroll in a Part D drug plan, you will have certains costs, including:
Every Part D drug plan has an official list of medications and vaccinations it covers, known as a Formulary. The Formulary is organized into four or more Drug Tiers. The higher the Drug Tier, the more expensive a medication is. Medications that aren’t on the Formulary aren’t covered by the plan at all; you would pay the full cash price in those cases.
To enroll in a standalone Prescription Drug Plan, you must be either actively enrolled in Part B, or entitled to receive Part A. There is no specific age limit or requirement.
As you fill prescriptions throughout the year, you’ll pay co-insurance or co-payments as you move through four Coverage Stages. The amount of the payment can change based on the total cost of your drugs during the year. In the last Coverage Stage, known as Catastrophic Coverage, your costs are capped at a small co-payment of 5%. There is no cap on your drug spending.
Medicare Supplement Insurance (also popularly known as Medigap) is a private insurance coverage that is designed to work with your Original Medicare benefits. This insurance is designed to cover some of the amounts that you’d normally have to pay out of pocket.
The benefits provided by Medigap plans have been standardized across 47 U.S. states (Minnesota, Massachusetts, and Wisconsin have their own rules and plans). In these 47 states, there are ten Medigap plans available, and they are designated by letter: Plans A, B, C, D, F, G, K, L, M, and N. There are also high deductible versions of Plans G and F.
Every one of the standardized plans covers a slightly different mixture of your out of pocket costs under Medicare (deductibles, co-insurance, and co-payments). Because of this, you’re able to choose the level of coverage you desire. This helps you control your costs since the premium you pay for a Medigap plan is related to how much of your costs it pays for you. Plans that are very comprehensive (covers most or all of your out of pocket costs for you) will be more expensive than less comprehensive ones.
Some of the standardized Medicare Supplement Insurance plans provide emergency coverage while you’re outside the U.S. However, Medigap plans don’t cover prescription medications, so if you choose one you’ll also have to enroll in a standalone Part D drug plan.
When you have a Medigap plan, your provider will bill both Medicare and your Medigap plan. Medicare will pay what it is obligated to first, and then your Medigap plan will pay its share. If your Medigap plan doesn’t cover all of your costs, you’ll pay the difference.
In order to enroll in a Medigap plan, you must be actively enrolled in both Parts A and B. Besides this you might also have to be 65 or older. This means that if you enter Medicare early (because of disability or health condition), you may not be able to choose Medicare Supplement Insurance right away. Depending on the laws of the state you live in, you might have to wait until you’re 65.
The last private option to consider is Part C of Medicare, or Medicare Advantage. Medicare Advantage plans allow you to receive all of your Part A and B benefits through a private health insurance plan that has a contract with CMS.
With Medicare Advantage plans, you will be responsible for paying specific co-payments or co-insurance for each procedure and service you use. Your plan will pay the provider or facility for their services. The Medicare system is not involved in any of these payments, which makes Medicare much different from Medicare Supplement Insurance.
Besides covering everything offered by Parts A and B, many Medicare Advantage plans provide benefits that are not available from the Medicare program. Some of the common extra benefits include:
In addition to these extras, all Medicare Advantage plans feature an annual Out of Pocket Maximum (OOPM) limitation. This caps your spending during the year. Once you reach the OOPM, the plan will pay 100% of the cost for your Medicare-covered expenses. The OOPM does not apply to prescription drugs if your plan comes with a drug benefit.
There are several different types of Medicare Advantage plan, but the two most common are Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO)
HMOs utilize a specific group of providers and facilities. Each of these providers has a contract with the plan. As a member, you must use the providers in the plan’s network. You are responsible for full cost for any health care received outside the network.
You normally must have a primary care physician, and this doctor is responsible for managing your care. They will order lab work and diagnostic testing that they believe is necessary; they’ll also provide referrals to see specialists when needed.
PPOs are a little more flexible than HMOs. While PPOs also have a network of providers, you are allowed to see non-network providers, too. Your costs (co-payments or co-insurance) are usually lower when you use in-network providers. With PPOs, you can usually see specialists without getting one from a primary care physician. PPOs, while often slightly more expensive than HMOs, provide more freedom.
Medicare benefits and costs change each year. Private insurance companies also change their costs and coverages each year. As these benefits change, you can make changes to your coverage. The Annual Election Period (AEP) is your chance to make changes. AEP is open from October 15th to December 7th of each year. You will be notified by Medicare and your Medicare plan of any changes to your coverage before AEP so you can be ready to select the best option for you.
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