The Basics Of Medicare Coverage
Enrolling in Medicare is a major milestone for Americans, but many find it confusing. Understanding the facts can help make enrollment a snap.
Medicare is a health insurance program designed for seniors and retirees. Medicare began in 1965 and has grown to cover more than 59 million Americans. People who have Medicare coverage are known as Beneficiaries. Medicare provides hospital and physician benefits. To receive Medicare coverage, you must meet several conditions. Conditions relating to citizenship include:
- You must be a United States citizen, or
- You are a permanent legal resident
In addition to the citizenship or resident conditions, you must satisfy one of these other requirements:
- Age 65 or older (known as aging into Medicare)
- Received Social Security Disability payments for 25 consecutive months
- Diagnosed with ALS (Lou Gehrig’s Disease) or End Stage Renal Disease (ESRD)
How Does Medicare Coverage Work?
In its most basic form, Medicare–also known as Original Medicare–consists of two parts:
- Part A–Inpatient hospital, nursing home, and hospice coverage.
- Part B–Outpatient medical services (doctors, physical therapists, labs, and other tests) coverage.
Original Medicare doesn’t cover 100% of your medical bills. You must pay deductibles and coinsurance under Part A and B. The largest cost for most people is the Part A deductible and Part B coinsurance.
How Much Does Original Medicare Cost?
In 2020, the Part A Deductible is $1,408. You pay this amount before Medicare will begin paying benefits. The Deductible applies for every “benefit period.” This means that if you’re hospitalized more than once, you’ll pay the Deductible each time.
The Part B coinsurance is 20% of the Medicare-approved expense. Part B expenses include:
- Seeing a doctor or therapist.
- Having x-rays or blood work.
- Outpatient surgeries.
- Certain cancer treatments, such as chemotherapy.
In each of these cases, you’ll be responsible for 20% of the bill. There is no out-of-pocket maximum for a year like you often see with private health insurance.
Beyond Original Medicare
Original Medicare can leave you exposed to large medical bills. Enrollees want protection from these high costs. Many people choose to supplement their Medicare coverage or enroll in alternatives to Original Medicare.
Medicare Supplement Insurance
Medicare Supplement plans limit your out-of-pocket costs under Original Medicare. A few provide total coverage. These plans are often called Medigap plans because they close many or all of the gaps in Original Medicare. For example, Part B will cover 80% of an x-ray of your hip, and Medigap will cover the remaining 20%. This means less out-of-pocket costs for you.
Supplement plans are issued by private insurance companies. They work with Original Medicare to lower your out-of-pocket expenses. They are available with a wide range of benefits. The more the plan covers, the higher the premium is.
Part C Medicare Coverage
Part C of Medicare refers to the Medicare Advantage program. Part C plans are an alternative to Original Medicare. Medicare Advantage Plans are managed by private insurance companies.
Part C plans must cover everything that Original Medicare covers. Most of them provide more generous benefits than Original Medicare. For instance, Part C plans often provide vision, hearing, and dental coverage.
Medicare Advantage Plans don’t cover every dollar of every expense like some Medigap plans do. They require copays and coinsurance. They have some important differences from Original Medicare:
- Medicare Advantage plans must have an annual out of pocket maximum (OOPM) amount
- Deductibles and copays are generally less than under Original Medicare
- Most Medicare Advantage plans provide emergency coverage worldwide
Medicare Advantage plans work like the employer-provided health insurance you’re familiar with. They’re usually HMO- or PPO-based. They have networks of physicians and hospitals through which you receive care.
Some Medicare Advantage plans are tailored to people with chronic illnesses like diabetes and heart disease. These Special Needs Plans (SNPs) provide benefits and programs to meet the unique needs of people with these conditions.
Medicare Coverage And Prescription Drugs
Original Medicare doesn’t cover prescription drugs. To meet the need for affordable drug coverage, Congress and President Bush created Part D in 2006.
Part D refers to Medicare Prescription Drug Plans. Beneficiaries can get Medicare coverage for prescription drugs in one of two ways:
- By adding a Prescription Drug Plan to Original Medicare, or
- By enrolling in a Medicare Advantage plan that offers drug coverage (MAPD)
These plans are run by private insurers. Part D plans charge a monthly premium and sometimes have an annual deductible. Medicare Advantage plans may have a monthly premium, but many do not.
Beyond premiums and deductibles, Medicare Drug Plans also have copayments or coinsurance costs. These costs vary for each medication. Copays and coinsurance can change during the course of a calendar year as the plan pays more benefits.
If your drug costs are high enough, you may end up in the “donut hole.” The donut hole is a phase of coverage where you pay more for your medications. Once you’ve passed the donut hole, you’ll enter the catastrophic coverage stage, and your costs will be capped.
How Do Get Medicare Coverage?
Enrolling in Medicare is easy. Your enrollment options depend on several factors:
- Whether you take Social Security at age 65
- Whether you delay taking Part B
- Whether you enroll before or after your 65th birthday
If you take Social Security at age 65, your Medicare enrollment is automatic. You may consider delaying Part B if you’re still working and have employer coverage.
If you don’t take Social Security at 65, you can enroll in Medicare only. You may enroll three months before your birth month. If you turn 65 in June of 2020, you can sign up beginning on March 1st. You also have three months after your birth month to enroll without penalty.
If you sign up for Medicare coverage during the three months before your birth month, you can enroll online. Sign up using the Social Security Administration’s secure website. If you wait until after your 65th birthday, you may need to enroll in person at a Social Security office.
You also may have to enroll face to face if you’re a naturalized citizen or permanent legal resident.
What If I Want Something Besides Original Medicare?
Enrolling in Parts A and B isn’t the end of the story for most people on Medicare. This is also the time to decide if a Medigap plan is a good fit for you, or to check out the Medicare Advantage plans in your area.
Enrollment in these private plans is a separate process from Original Medicare. However, it’s very important to remember that you must be enrolled in both Parts A and B in order to join a Medicare Advantage or Medigap plan.
For Part D Prescription Drug Plans, you must be either entitled to Part A or actively enrolled in Part B in order to enroll.
When choosing your Medicare coverage, it’s always a good idea to shop around. Seek help with education and planning so you can make an informed decision. Speaking with an independent Medicare insurance specialist is an effective way to find a plan in your area.
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