A guest blog from Boomer Benefits
Most people know that Medicare is a national health insurance program for people age 65 and older and for certain individuals with disabilities or serious health conditions. Outside of that though, we don’t really have to think about Medicare much until we are turning 65 ourselves. Then we learn that Medicare has 4 parts and 10 standardized supplement plans and literally dozens of drug plan choices in every state.
Figuring out all these moving parts can be overwhelming because most of us have never had to make such complex health insurance decisions before.
Fortunately, while it seems confusing at first, Medicare actually works a lot like the coverage that we’ve each had before from a former employer. It includes hospital, outpatient, and drug coverage. There are premiums that we pay for certain parts, and there are some deductibles and copays as well.
Let’s break it down into pieces to make it simpler.
Original Medicare Benefits and Premiums
Back in 1965 when Medicare was created, they broke into two parts. We still call this Original Medicare today. Parts A and B are the basic building blocks of Medicare coverage. Part A covers inpatient hospital expenses including skilled nursing facilities. Part B covers outpatient medical benefits, such as preventive care, doctor’s visits, lab work and even surgeries. If Medicare is the primary insurance, people need both parts.
As long as an individual has worked and paid FICA taxes for at least 10 years in the U.S, Part A will cost nothing. Those taxes have pre-paid the Part A coverage. People who don’t have the 10 years work history can qualify under their spouse’s work history if it is sufficient. They can also buy into Part A.
Part B has a monthly premium that is based on the modified, adjusted household gross income. For most new enrollees, this premium is $134/month, but it can be higher if earnings fall into a higher income bracket. Check out this chart to see the four tiers of income and their associated premiums: Medicare Costs page.
Whenever beneficiaries access their Medicare benefits, there will be some cost-sharing that they are responsible for. Medicare Part A has a $1340 deductible in 2018. If someone has more than one hospital stay in a year that is separated by at least 60 days outside of the hospital, they could pay this deductible more than once. Also, if a hospital stay lasts longer than 60 consecutive days, Medicare begins to charge a daily hospital copay that is quite expensive. Benefits run out at 150 days.
Part B also has a deductible, but it is a much smaller annual deductible. After that deductible has been met, Medicare will pay 80% of approved outpatient expenses. The Medicare beneficiary is responsible for the other 20%
For this reason, many people enroll in some form of additional coverage. There are Medicare supplement plans that pay after Medicare to help fill in the gaps. These plans have no networks. Policyholders can see any Medicare provider in the nation, which is nearly 900,000 providers.
When a person first enrolls in Medicare, they have an opportunity to get a Medigap plan with no health questions asked. This is called the Medicare Supplement Open Enrollment.
There are also Medicare Advantage options, which are called Part C of Medicare. These plans offer al the same Part A and B benefits, but that care is provided by a private insurance company instead of through Original Medicare. These plans usually have smaller networks in local areas but may have lower premiums than Medicare plans. Read more about those options here: Medicare Advantage vs Medigap.
Part D Drug Plans
For over 40 years, people on Medicare did not have outpatient drug coverage. Luckily Congress created Medicare Part D and rolled it out in 2006, so we now have very good Part D options.
Part D functions kind of like a pharmacy card. It gives beneficiaries access to a formulary of medications. Instead of paying the entire cost of the medication, enrollees pay just a copay. Beneficiaries enroll in Part D directly with an insurance company.
Every state has multiple Part D plans to choose from, but Medicare’s website has a Plan Finder Tool to help individuals find one that is cost-effective and carries all the needed medications.
Part D is voluntary, but we strongly encourage enrollment for anyone that doesn’t have another means of drug coverage, such as VA benefits. There are many expensive medications these days for conditions like cancer and chemotherapy that cost thousands and would be likely out of reach without Part D coverage.
No One Has to Go It Alone
It would be great if Medicare offered classes to teach us about how all this works. Since it doesn’t, you learn as much as you can through reading and researching. Start by visiting your local insurance agent or checking out Medicare’s website at www.medicare.gov.
Danielle Kunkle is a co-founder at Boomer Benefits, where her team helps Baby Boomers navigate their entry into Medicare.