Medicare has a lot of moving parts, which can be intimidating to new beneficiaries and veterans of the industry alike. To help you wade through the sea of information, we have described the different parts of Medicare, their coverage, and the associated costs.
Part A covers your inpatient care in a hospital or skilled nursing facility, as well as hospice and home health care.
Premium-free Part A is available for many American seniors. You can qualify to pay zero premiums for Part A if:
You can still receive Part A if you don’t qualify for premium-free. As long as you are 65 or older and have lived in the U.S. legally for at least five years, you can purchase coverage. You just have to pay premiums for them, which can be up to $471 each month. The cost depends on how long you or your spouse worked and paid taxes to Medicare. If you paid Medicare taxes for fewer than 30 quarters, you will pay $471 each month in 2021. If you paid Medicare taxes for 30-39 quarters, your Part A premium will be $259.
In 2021, you earn one Social Security or Medicare credit for every $1,470 in covered earnings each year. You must earn $5,880 to get the maximum four credits for the year. During your lifetime, you might earn more credits than the minimum number you need to be eligible for benefits.
The Part A deductible is $1,484 in 2021 for each benefit period. A benefit period begins when you are admitted as an inpatient and ends 60 days after you last receive inpatient care.
Under Part A, you also pay a daily coinsurance after your first 60 days as a hospital inpatient or your first 20 days as an inpatient in a skilled nursing facility. These days are counted for each benefit period. As a hospital or mental health inpatient, you owe $371 each day for days 61-90 and $742 for days past 90 until you have used your 60 lifetime reserve days. After this point, you owe all costs. In a skilled nursing facility, you pay $185.50 each day for days 21-100, then owe all costs.
Part B is your outpatient medical insurance, covering medically necessary and preventive services. Part B covers things like clinical research, ambulance services, durable medical equipment, mental health, and limited outpatient prescription drugs.
Medically necessary services are treatments to diagnose or treat your medical condition that is accepted as standard medical practice. Preventive services are those to prevent an illness (as with vaccinations) and screen to detect illness at its early stages. Many preventive care services are covered at 100%, including flu shots, Pap tests, and mammograms.
Premiums for Part B are calculated based on the income you report in your taxes. The standard Part B premium is $148.50 in 2021, and this applies to individuals with an income of less than $88,000 and married couples reporting less than $176,000. If you make more than $88,000 or $176,000 as a couple, you will pay an Income Related Medicare Adjustment Amount (IRMAA) each month. This added charge raises your premiums based on how much higher your income is.
The Part B deductible is $203 in 2021. Like most health insurance, this deductible is only paid once per year. Once you meet the deductible, you will pay 20% of the Medicare-approved amount for covered services as coinsurance.
Signing up for Part B after your enrollment period can result in a late enrollment penalty. For every 12 months you went without signing up once you became eligible, your premium may go up 10%. This penalty stays with you for the lifetime of your coverage.
Many Part C plans offer prescription drug coverage and have options for added benefits such as dental, vision, and hearing coverage. Original Medicare (Part A and Part B) does not have coverage for routine dental, vision, or hearing care, so this is an important benefit for seniors.
The costs for Medicare Advantage plans vary but include premiums, deductibles, copayments, and coinsurance. These plans operate like the health insurance you are used to. You will pay copayments between $0 and $20 when you visit the doctor and up to $50 to visit a specialist or the emergency room. Once you have paid enough in out-of-pocket expenses to reach the yearly deductible, you will be asked to pay a portion of the total cost for healthcare services as coinsurance.
There are a few different Medicare Advantage plan types. The most common are HMOs and PPOs. Under an HMO, you need a primary care physician and referrals to see a specialist; you must also visit providers within the plan’s network. With a PPO, you have more flexibility to see providers outside of your plan’s network but will pay more for their services. You do not need a primary care physician and, in most cases, do not need a referral under a PPO plan.
In rural areas, Private Fee-for-Service (PFFS) plans may be available, which operate differently. You can receive services from any healthcare provider that agrees to treat you and accepts your plan’s payment terms.
Specialized plans are available for people who are institutionalized, are dual-eligible for Medicare and Medicaid, or have a chronic condition. These are Special Needs Plans (SNPs) with requirements for membership set by the Centers for Medicare and Medicaid Services (CMS). The plans are built to care specifically for their members and often have networks of specialists to treat their members’ conditions.
To sign up for a Medicare Advantage plan, you must be 65 or older, be enrolled in Part A and Part B, and live within the plan’s coverage area. Sign up during the Annual Election Period from October 15 to December 7 or make changes to your plan during Medicare Advantage Open Enrollment from January 1 to March 31.
With a Part D plan, instead of paying the full cost of drugs at the pharmacy, you pay copays. These copayments are based on the plan’s tier system. There are usually five tiers, with higher copayments for higher tiers. Preferred generic drugs have the lowest copayment, followed by generic drugs, preferred brand-name drugs, non-preferred drugs, and specialty drugs (which require special handling or administration).
Part D premiums are based on your income as reported on your tax return, just as Part B premiums are. Most people only have to pay the plan premium, which is around $33 in 2021. If you make more than $88,000 as an individual or $176,000 as a couple, you will owe Medicare an Income Related Medicare Adjustment Amount. This gets paid directly to Medicare, not to your plan. You can have it taken out of your Social Security check for convenience.
The Part D deductible varies between plans. The maximum yearly deductible any plan can have in 2021 is $445. You pay up to $445 for your prescriptions before you begin paying smaller copayments until you and your plan have spent $4,130. Once you and your plan reach that point, you are in the coverage gap.
In the coverage gap, you pay 25% of the cost for your generic or brand-name prescriptions. Once your spending reaches $6,550, you exit the coverage gap and enter catastrophic coverage. At this stage, you pay only 5% of the cost of your prescriptions through the end of the year.
Waiting to sign up for Part D after not having creditable drug coverage can lead to a late enrollment penalty. The penalty adds 1% of the national base premium multiplied by the number of months you did not have Part D or creditable drug coverage. This penalty is added to your monthly Part D premium.
One of the main drawbacks of Original Medicare is that there is no out-of-pocket maximum. This means that if you have many healthcare expenses, you could be repeatedly paying copayments, coinsurance, and deductibles without relief. Part A deductibles are charged for each benefit period, meaning you could pay more than one during the year.
To help manage these expenses, Medicare Supplement plans (also called Medigap plans) help to cover copayments, coinsurance, and deductibles for Part A and Part B. Some of the covered expenses include:
There are 10 Medicare Supplements available: A, B, C, D, F, G, J, K, M, and N. Plans C and F are only open to those who became eligible for Medicare before 2020. They cover the Part B deductible, which will no longer be covered by other plans.
Plans F and G offer the most coverage but have higher premiums. Plans J and K have out-of-pocket maximums of $5,880 and $2,940, respectively. Plan N offers a good amount of coverage but requires you to pay copayments for doctor and emergency room visits.
Enrolling in Medicare Supplements is straightforward. Once you are 65 or older and enrolled in Part B, you have six months to sign up for a Medicare Supplement plan, during which time you cannot be turned away for medical reasons. You can sign up after this Medicare Supplement enrollment period but will have to undergo medical underwriting.
Medicare Supplement guaranteed issue rights protect you from being charged more for preexisting conditions. There are certain situations that grant you these rights:
You cannot be enrolled in both a Medicare Advantage and Medicare Supplement plan.
If you have any additional questions related to Medicare, our team of Colorado Medicare experts is happy to help you. Contact us at 970-233-0063 today.