It’s easy to get a bit mixed up by the many moving parts and features of Medicare. This article hopes to help you make sense of the alphabet soup which is known as Medicare.
Quick note: At the bottom of this article, I've included a 2-page PDF tear sheet that can be downloaded, printed off for future use, or worst case, on those nights you are having difficulty falling asleep, it can be used as a sleeping aid.
The information below provides some information on the major coverage options, called parts A, B, C, D, and some of their more significant aspects. Use it to help you think about what level and combination of coverage suits you and your family the best.
Medicare Part A (hospital coverage): Part A is the portion of Medicare that pays hospital costs. Part A also includes some benefits for skilled home care, hospice care, and the first 100 days of skilled nursing care. You probably won’t have to pay any premiums for Part A, because you already paid for it with payroll taxes while you were working. In 2021, you have to pay the first $1,484 of the cost of each hospital stay. Part A covers the rest for the first 60 days, and then you pay the first $371 per day for days 61–90. After that, there are “lifetime reserve” days (you have a total of 60 days to use in your lifetime, and then they are done), for which you pay the first $742 per day. You are responsible for the full cost of any additional days.
Medicare Part B (medical coverage): Part B is the portion of Medicare that covers outpatient health care visits such as doctors, outpatient surgery, diagnostic testing, durable medical equipment, and ambulance services. Part B is not free. You’ll pay premiums ($148.50 per month in 2021)—and if your income is over a certain amount, your premiums are subject to surcharges. These surcharges are based upon your modified adjusted gross income as reported on your IRS tax return from 2 years ago, which can be as much as $504.90 per month for income above $500,000.
Under Part B, you are responsible for the first $203 of covered medical services. Once that deductible is met each year, you will typically owe 20% of the cost of such services, although you may also owe “excess charges” for some providers.
Medicare Part C (Medicare Advantage): Part C plans are private plans that contract with Medicare to provide Medicare A and B benefits. Many of these bundled plans are available for only the cost of the standard Part B premium. More than 60% of Medicare Advantage enrollees are in HMO plans, with the vast majority of the rest in PPO plans.
Medicare Part D (prescription drug coverage): Part D plans are optional prescription drug plans available to everyone who has Medicare. These private plans contract with Medicare to provide at least a standard level of prescription coverage. They are available both as stand-alone plans and as part of Part C (Medicare Advantage) plans. Premiums vary, and there are surcharges for those with higher incomes, but as of 2021, they ranged from $12.30 to $77.10 per month.
*Medicare Supplemental Insurance (Medigap). Medigap policies are private policies designed to cover expenses not covered under Part A or Part B (above). To make things confusing they follow standardized forms, designated with letters A through N. Medigap policies add to the “alphabet soup” confusion. Example: Medicare Part A and Medigap Plan A are not the same thing. Any Medigap policy designated with a particular letter provides a specific set of benefits, regardless of which company issues it.
It's important when approaching 65 years of age that you do your research to determine what is best for you and your family.
Generally when you turn 65, this is called your Initial Enrollment Period. It lasts for 7 months, starting 3 months before you turn 65, and ending 3 months after the month you turn 65.
If you miss your 7-month Initial Enrollment Period, you may have to wait to sign up and pay a monthly late enrollment penalty for as long as you have Part B coverage. The penalty goes up the longer you wait. You may also have to pay a penalty if you have to pay a Part A premium, also called “Premium-Part A.”
Regardless of which Medicare option you choose, you need to do it in a timely manner. Otherwise, you could encounter periods of time when you,
This is something you don't want to miss, put a reminder in your phone. In fact, I would recommend a full 6-months before you turn 65, you start your Medicare research so by the time you are in the 7-month Initial Enrollment Period you can sign up and you'll will know exactly what options you'd like and you'll have a good idea of all the costs.
To do your research and for a more complete description of costs, what is and is not covered visit www.medicare.gov
- Paul R. Rossi, CFA