When people are new to Medicare at age 65, we often see them get overwhelmed quickly by all the confusing lingo and insurance terminology. It’s hard to make sense of a national health insurance program like Medicare when throughout your life you’ve been had your health insurance selections made for you by your employers.
Fortunately, the key to understanding Medicare is just to break it down into pieces that are easier to learn in steps than all at once. Here’s our best tips for learning what you need to know about Medicare.
Learn the Parts First
Medicare has four parts, and if you first learn what these are and what they do, it becomes easier to understand the rest.
Part A is your hospital coverage. It provides your inpatient care, skilled nursing facility care, blood transfusions and hospice. You will generally use Part A less than Part B as hospital stays occur more rarely than outpatient care.
Part B is your outpatient medical care. It provides for a whole bunch of things, like preventive care, doctor visits, lab testing, diagnostic imaging, urgent and emergency care, outpatient surgeries, some injectable drugs and chemotherapy among other things. Medicare will approve most medically necessary health care treatments as long as they are performed by a physician that accepts Medicare.
If you don’t have any other form of creditable coverage, then having both Medicare Parts A and B are very important.
Part C is optional Medicare Advantage coverage. Everyone has the option of getting their Medicare Part A and B care through a private insurance company instead of Original Medicare. We’ll discuss this more in the third step.
Part D is our retail outpatient drug coverage. Medicare Part D is voluntary, but it can save you a great deal of money on prescriptions. Sold by private insurance companies, these prescription drug plans give you access to a formulary of medications that you can get at just a copay instead of paying full price for your medications.
Medicare doesn’t cover routine vision, dental or hearing benefits. It also doesn’t cover long-term care.
Learn the Costs
Most people pay nothing for Medicare Part A when they age into Medicare. That’s because most Americans pay FICA taxes during their working years to prepay their hospital benefits. If you didn’t work the necessary 10 years to qualify for free Part A, you can obtain it under a spouse’s work record or you can pay for Part A.
Parts B and D have monthly premiums. The standard base premium for Medicare Part B in 2019 is $134/month. Most people pay this amount, but about 5% of Medicare beneficiaries pay more due to their income. When you enroll in Medicare, Social Security will send you a letter annually to let you know what premium you can expect to pay based on your modified adjusted gross income as reported on your tax return from two years prior.
Part D drug plans vary based on the plan you enroll. In 2019, the national average premium is approximately $35/month. However, people in higher income brackets pay more just like they do for Part B.
Lastly, each part of Medicare has cost-sharing that you are responsible to pay as you use your benefits. These come in the form of deductibles, coinsurance and copays. When you enter the hospital, you will pay a $1340 deductible. When you have outpatient care, you’ll pay a $183 Part B annual deductible. These deductibles are set by Medicare and usually change a bit each year.
You are also responsible for daily hospital copays if you have a stay longer than 60 days. On the outpatient side, Medicare covers 80% and you pay 20%. When you use your pharmacy card, you will pay a copay for your medications based on the plan’s Summary of Benefits.
Learn the Supplemental Options
Most people cannot afford to pay 20% of things like CT scans or surgeries, so they usually enroll in supplemental coverage to help them fill the gaps.
Medigap plans pay after Medicare and help to cover your 20% Part B coinsurance as well as deductible and copays. These plans let you see any doctor that accepts Medicare across the nation.
Medicare Advantage plans pay instead of Medicare. These Part C plans are an option for you to get your benefits from a private local insurance company instead of from Medicare itself. These plans generally have networks of doctors that you must get your care from.
You must be enrolled in both Parts A and B and live in the plan’s service area in order to enroll in either a Medigap plan or Medicare Advantage plan.
A Medicare insurance broker can provide you with information and quotes about options in your area.
Do Your Annual Homework
Since Medicare changes the deductibles, copays, and coinsurance for Medicare each year, you should always review your coverage once per year. This mainly affects Part D plans and Medicare Advantage plans.
Each year in September, your insurance carrier will send you an annual notice that explains any change for the following year. Review it carefully to make sure there is nothing alarming that would directly affect you, such as the carrier no longer offering one of your important medications.
You have an opportunity to change your Part D or Medicare Advantage plan once each year during the Annual Election Period in the fall, which runs from October 15th to December 7th.
About the author
Danielle Roberts is a Medicare insurance expert who helps people understand their Medicare benefits and options. You can learn more here: https://boomerbenefits.com/about-us.