Whether your 65th birthday is on the horizon or decades away, understanding the different parts of Medicare is critical, as this government-sponsored program may play a role in your future health care decisions
Medicare is the federal government program that provides health care coverage (health insurance) if you are 65+, under 65 and receiving Social Security Disability Insurance (SSDI) for a certain amount of time, or under 65 and with End-Stage Renal Disease (ESRD). The Centers for Medicare & Medicaid Services (CMS) is the federal agency that runs Medicare. The program is funded in part by Social Security and Medicare taxes you pay on your income, in part through premiums that people with Medicare pay, and in part by the federal budget.
Once you have become Medicare-eligible and enroll, you can choose to get your Medicare benefits from Original Medicare, the traditional fee-for-service program offered directly through the federal government, or from a Medicare Advantage Plan, a type of private insurance offered by companies that contract with Medicare (the federal government). Original Medicare includes:
- Part A (Inpatient/hospital coverage)
- Part B (Outpatient/medical coverage)
Parts A & B: Original Medicare. There are two components. In general, Part A covers inpatient hospital care, skilled nursing facility costs, hospice, lab tests, surgery, and some home health care services. One thing to keep in mind is that, while very few beneficiaries must pay Part A premiums out of pocket, annually adjusted standard deductibles still apply.1,2
Many pre-retirees are frequently warned that Medicare will only cover a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the one with these provisions. Under the current Part A rules, you would pay $0 for days 1-20 of care in a skilled nursing facility (SNF). During days 21-100, a $194.50 daily coinsurance payment may be required of you.1,2
Knowing the limitations of Part A, some people look for other choices when it comes to managing the costs of extended care.
Part B covers physicians’ fees, outpatient hospital care, certain home health services, durable medical equipment, and other offerings not covered by Medicare Part A.2
Part B does come with some costs, however, which are adjusted annually. The premiums vary, according to the Medicare recipient’s income level, but the standard monthly premium amount is $170.10 for 2022, and the current yearly deductible is $233.2
Part C: Medicare Advantage plans. Sometimes called “Medicare Part C,” Medicare Advantage (MA) plans are often viewed as an all-in-one alternative to Original Medicare. MA plans are offered by private companies approved by the federal government. Although these plans come with standardized minimum coverage, the amount of additional protection offered can differ drastically from one person to the next. This is due to unique provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits. In other words, comparing prices and services offered from different vendors may be the best way to find a Medicare Advantage plan that works for you.3
Part D: Prescription drug plans. While Medicare Advantage plans often offer prescription drug coverage, insurers also sell federally standardized Medicare Part D plans as a standalone product to those with Medicare Part A and/or Part B. Every Part D plan has its own list (i.e., a “formulary”) of covered medications. Visit Medicare.gov to explore the formulary of approved drugs for your Part D plan as well as their prices, organized by tier.3,4
It is important to understand your Medicare coverage choices and to pick your coverage carefully. How you choose to get your benefits and who you get them from can affect your out-of-pocket costs and where you can get your care. For instance, in Original Medicare, you are covered to go to nearly all doctors and hospitals in the country. Medicare Advantage Plans, on the other hand, usually have network restrictions, meaning that you will be more limited in your access to doctors and hospitals. However, Medicare Advantage Plans can also provide additional benefits that Original Medicare does not cover, such as routine vision or dental care.
Medicare is different from Medicaid, which is another government program that provides health insurance. Medicaid is funded and run by the federal government in partnership with states to cover people with limited incomes. Depending on the state, Medicaid can be available to people below a certain income level who meet other criteria (e.g., age, disability status, pregnancy) or be available to all people below a certain income level. Remember, unlike Medicaid, Medicare eligibility does not depend on income. Also, eligible individuals can have both Medicare and Medicaid and are known as dual-eligibles.
Everyone who has Medicare receives a red, white, and blue Original Medicare card. If you choose to receive your coverage through Original Medicare, you will show this card when you get services. If you choose to receive your Medicare benefits through a Medicare Advantage Plan, you will still get an Original Medicare card but you will show your Medicare Advantage Plan card when you get services. No matter how you get your Medicare health benefits, only give your Medicare number to your doctors and health care providers.
Sound confusing? Yes, it does. But that’s why I’m here. So, give me call or schedule a meeting with me to discuss this further, answer your questions, and help you get set up with the best program available that meets your needs.
- CMS.gov, 2022
2. Medicare.gov, 2022
3. Medicare.gov, 2022
4. Medicare.gov, 2022
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