The Basics of Medicare

What is Medicare? Medicare is a federal health insurance program that pays for a variety of health care expenses. Medicare is administered by the Center for Medicare and Medicaid Services (CMS), a division of the Department of Health and Human Services (HHS). Medicare is for people who are 65 or older, certain younger people with disabilities and people with End-Stage Renal Disease. Medicare is vital to the financial security of millions of retired and disabled Americans.


Medicare is an entitlement program just like Social Security. Most U.S. citizens earn the right to enroll in Medicare by working and paying Medicare taxes for at least ten years or by being the spouse of someone who has worked and paid Medicare taxes for ten years.


The Fundamentals of Medicare


The Medicare program has four “”Parts”; Part A, Part B, Part C and Part D. Parts A and B are commonly referred to together as Original Medicare. Part C is the Medicare Advantage Program and Part D is Prescription Drug Coverage. First we will go over Original Medicare.


Medicare Part A


Medicare Part A is hospital insurance. Part A covers inpatient hospital care, time spent in a skilled nursing facility, limited home health care services and hospice. Most Part A beneficiaries do not have to pay a monthly premium. If you or your spouse has worked for at least 40 quarters or 10 years and paid Medicare taxes during that time, then you and your spouse are eligible for Part A with no monthly premium. Otherwise, you may still be eligible for Part A, but may have to pay a monthly premium.


Medicare Part A generally does not cover the full amount of your hospital stay. Part A beneficiaries will pay a hospital deductible, currently $1,340 in 2018, before Medicare benefits begin. Medicare then pays 100% of your bill for up to 60 days in a hospital or 20 days in a skilled nursing facility. After 60 days in the hospital or 20 days in a skilled nursing facility, the Medicare beneficiary will pay a flat per day amount for up to 90 days in the hospital and 100 days in a skilled nursing facility.


It is important to note that the hospital deductible is a recurring deductible. This means that you could pay the deductible more than once in a calendar year. For example, when you pay the hospital deductible, you get to stay in the hospital for 60 days from the date you are admitted. If you are discharged after seven days and then readmitted a week later, you would not have to pay the hospital deductible because you are still within your 60 day benefit window. However, if you are discharged from the hospital after a seven day stay and admitted again three months later, you would be required to pay the hospital deductible again because your first 60 day benefit window has closed.


Medicare Part B


Medicare Part B is also known as Doctor’s insurance. Part B benefits cover a varity of non-hospital healthcare expenses, such as doctors’ office visits, blood tests, diagnostic testing such X-rays and MRIs, diabetic screenings and supplies and outpatient care. Part B does have a monthly premium. The premium is currently $134 for 2018. The premium can be higher for beneficiaries with annual adjusted gross incomes above $85,000 for individuals and $170,000 for married couples.


Medicare will begin to pay benefits after the annual deductible has been met, currently $183 for 2018. After the Part B deductible is met, Medicare pays 80% of covered benefits.


It is important to note that there is no annual cap or out-of-pocket limit on how much a Medicare beneficiary with just original Medicare (Part A and Part B) can pay for their health care benefits in a calendar year.


Medicare Part C


Medicare Part C is the Medicare Advantage program. Medicare Advantage plans are health plans that are approved by Medicare and provided by private insurance companies, such as Aetna, Cigna, Humana, United Healthcare and many others. Medicare sets the rules for Medicare Advantage plans and regulates the companies that operate the plans. Enrolling into a Medicare Advantage plan is optional, but in order to enroll you must have Part A and Part B and continue to pay your Part B premiums.


A Medicare Advantage plan provides all of the benefits of Medicare Part A and Part B except hospice care using a managed health care plan model such as a Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) or other managed care arrangement. Medicare Advantage plans also provide many benefits that are not covered by original Medicare such as vision, dental, health coverage while traveling outside of the United States and in many cases prescription drug benefits. One of the biggest advantages of a Medicare advantage plan is that all Medicare Advantage plans have a designated annual out-of-pocket maximum, which caps the amount of out-of-pocket expenses a Medicare beneficiary can pay for their Part A and Part B expenses in a calendar year. Find Medicare Advantage plans in your area.


Part D


Part D is optional prescription drug coverage. However, a late enrollment penalty will be assessed by CMS if you do not enroll in a plan with prescription drug benefits when you are first eligible and decide to enroll in a plan later. Part D benefits are available as a stand-alone prescription drug plan offered by private insurance companies or as part of a Medicare Advantage plan.   You will share the costs of your prescription drugs according to the plan in which you enroll. These costs may include a deductible, copays, or a percentage of the drug cost known as coinsurance. Find Medicare Part D plans in your area.


What you just read is a basic summary about the four “Parts” of Medicare. In other posts we will explore each of the parts in more detail. Please contact us if you have questions and follow us on Facebook and Twitter to get all the most up to date news and info about Medicare and the health insurance market.


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