Medicare is a government-sponsored health insurance program administered by the Centers for Medicare and Medicaid Services in the United States. Medicare began in 1966 and was originally administered by the Social Security Administration. Over the past half-century, the program has adapted to meet the ever-changing needs of the modern world by adding new program options and allowing for the introduction of supplemental plans.
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When you’re retired, unable to work due to disability, or have end-stage renal disease, your options for health coverage become much more limited. Medicare is available to most people aged 65 or older who have paid Medicare taxes while working, as well as some younger people with disabilities or end-stage renal disease. The program is currently administered by the Centers for Medicare and Medicaid Services.
Perhaps one of the more surprising and often confusing things about Medicare is that it’s divided into four parts, and each part covers something different. The different parts of Medicare are Part A, Part B, Part C (Medicare Advantage), and Part D. Medicare Parts A and B are sometimes referred to as Original Medicare. Your health needs will help determine which parts you need or qualify for.
Medicare Part A covers many hospital-related expenses. These could include hospital stays, hospice, stays in a psychiatric facility, and even home health care in some instances. However, it’s important to note that there are limitations on some of the coverages, such as psychiatric care and long-term care.
You become eligible to enroll in Medicare at 65 and must enroll during specific enrollment windows. Part A is available at no cost to individuals and their spouses who have paid Medicare taxes for at least ten years. Those who cannot receive it free may be eligible for Part A coverage and pay a premium for it. Medicare Part A will pay a portion of the costs associated with a hospital stay, but there are limits and caps to that coverage based on factors like your length of stay and the treatments you receive.
Medicare Part B is perhaps easiest to understand as the opposite of Part A. It covers many medical expenses that are not associated with hospital stays, including doctor visits, some outpatient care, and more. For instance, Medicare Part B can cover ambulance rides, vaccines, and certain health screenings. Similar to Part A, there are limitations on certain coverages to take note of.
Unlike Part A, Part B requires you to pay a premium, and enrollment in the program is voluntary. Enrollment for Part B typically coincides with Part A, but you must still enroll during specific windows. Part B can cover some of the costs associated with diagnosis, treatment, and preventative care. Similar to private insurance, most preventative services are provided at no cost. However, many other services are typically subject to a deductible and coinsurance.
Also known as Medicare Advantage, Medicare Part C plans are often considered the alternative to Original Medicare. You need both Medicare Parts A and B to join a Medicare Advantage plan. Medicare Part C usually has the same rules as Medicare Parts A and B, but their out-of-pocket costs may differ, and you may have to seek different avenues for care than you would under Original Medicare. Unlike Medicare Parts A and B, Part C can sometimes offer prescription drug coverage.
If you have both Medicare Part A and Part B, you could enroll in Medicare Part D as an optional coverage through a private insurance company. Part D helps to cover some of the costs associated with prescription medication. Similar to private health insurance, the price of your prescriptions depends on a number of factors, including the formulary, the “tier” your drug falls under, the pharmacy you use, and more. You’ll pay a premium for this coverage, and charges will be subject to a deductible and coinsurance. After a certain amount is spent, you may enter the coverage gap, or “donut hole,” where the plan won’t pay any benefits. If you incur significant expenses, you may get past this gap and move into “catastrophic coverage,” where you’ll pay very little for your prescriptions.
While it may seem like Medicare covers many of your medical needs, there are some things that it doesn’t. For instance, dental, vision, and hearing visits and treatments are typically not covered. Long-term custodial care is also not covered. These health expenses would need to be paid out-of-pocket or via a supplemental insurance policy. In addition, if you’re interested in any cosmetic medical procedures or procedures outside of the US, those typically aren’t covered either.
Medicare supplement plans, also known as Medigap, are optional coverage plans available to individuals who have both Medicare Parts A and B who want to supplement their Medicare coverage. These supplement plans can help cover more of the out-of-pocket costs of your health expenses, including copayments, coinsurance, and deductibles. However, as of 2006, Medigap plans do not provide prescription drug coverage and often don’t cover long-term care, hearing, dental, or vision-related expenses
Funerals and other end-of-life expenses can be significant, costing your loved ones a lot of money. Unfortunately, Medicare only covers medically-necessary expenses, meaning those needed to diagnose or treat a condition or illness, and funerals don’t fall into that category. That’s where final expense insurance comes in. You can typically get a plan for a relatively low cost without a medical exam. Final expense insurance isn’t part of Medicare, but it can help cover expenses such as embalming, cremation, hearse fees, and more that Medicare does not cover.
Even though Medicare Part A and Medicare Advantage provide coverage for many of your hospital stay expenses, you are still responsible for some out-of-pocket costs, which can add up quickly. A hospital indemnity plan can help supplement your Medicare Part A or Medicare Advantage coverage. Although these plans will differ from one company to another, they often provide a cash benefit for every day you are in the hospital within your chosen benefit period, which can help cover the out-of-pocket costs you incur.
Unfortunately, Medicare plans only cover expenses that are considered medically necessary. That means most of your dental, vision, and hearing needs—including dental exams and procedures, vision exams and glasses, and hearing aids, for example—are not covered under Medicare, and only a handful of Medicare Advantage plans may provide this kind of coverage. You’ll need to turn to standalone plans offered by private insurance companies to fill the gaps in your Medicare plan. You can often find plans where these policies are bundled together, or you can choose to get separate plans.
The Affordable Care Act (ACA) and short-term medical plans may offer you the health coverage you need. ACA differs from short-term medical insurance, so it’s important to consider your needs when choosing between the two. ACA is subject to federal regulations that mandate minimum coverage, and you can’t be turned away because of a pre-existing condition, which can result in higher premiums. Short-term medical plans typically have lower premiums, but they have more limitations on your coverage, and you can be turned away based on your health.
General Medicare is divided into four sections referred to as Parts A, B, C, and D. Parts A and B are considered Original Medicare.
- Part A. Medicare Part A covers hospital-related expenses, including inpatient stays in a traditional hospital, skilled nursing facility, or hospice. It may also include coverage for home health care.
- Part B. Medicare Part B covers expenses that are not considered hospital-related. This may include some doctor visits and outpatient care, medical supplies, and preventive care services.
- Part C. Medicare Part C is also known as Medicare Advantage. Medicare Advantage plans are an alternative to original Medicare. These plans typically follow Medicare rules, but they may have different out-of-pocket costs and may require an individual to use different channels to obtain care than original Medicare. They may also include coverage for prescription drugs.
- Part D. Medicare Part D is designed to help cover the cost of prescription drugs for those who have both Medicare Part A and Part B. This is an optional coverage that is provided through private insurance companies.
Most people become eligible to enroll in Medicare Part A when they turn 65. Individuals must enroll during specific enrollment windows. Having health insurance through an employer’s plan can impact enrollment timeframes. Part A is provided free for individuals and their spouses who worked and paid Medicare taxes for a minimum of ten years. Those who are not eligible to receive free Part A may be eligible to buy it and pay premiums for coverage. Once eligible for Medicare, individuals will typically be enrolled automatically in Part A if they are receiving Social Security (SS) or Railroad Retirement Board (RRB) benefits. Those who are not receiving SS or RRB benefits, as well as those living in Puerto Rico, are not automatically enrolled.
Part A pays a portion of the costs for services associated with hospitalization. For example, these services include inpatient care, skilled nursing facilities, or hospice. Part A does not cover long-term care that is custodial in nature. There are limits to the amounts Medicare Part A will pay based on covered services and length of hospital stay. Medicare does cover inpatient care in a psychiatric hospital. However, coverage is capped at a maximum of 190 days per lifetime. Also, Medicare Part A will only cover care in a semi-private room, unless a private room is medically necessary.
Medicare Part B always requires the individual to pay a premium. Eligibility for Parts A and B tend to coincide. However, Part B eligibility will be impacted by whether or not a person is eligible for premium-free Part A. Enrollment in Part B is voluntary. Depending on a person’s eligibility, they may be enrolled in Part B automatically with the option to refuse it, or they may need to enroll on their own. Like Part A, enrollment can only happen during certain windows.
Part B covers a portion of the costs associated with medically necessary services to diagnose or treat a condition. It also includes some preventive care costs. For example, Part B typically pays for an ambulance, durable medical equipment, certain health screenings, and some vaccines, including the flu shot and the COVID-19 vaccine. Most preventive services are provided at no cost. However, other services are typically subject to a deductible and 20% coinsurance. There is no limit on out-of-pocket costs.
There are services that won’t be covered by either Part A or Part B. For example, dental care including dentures, vision exams and glasses, hearing aids and hearing aid fittings, and routine foot care typically are not covered. Additionally, long-term care in a nursing home (custodial care) is not covered. Similarly, Medicare does not cover cosmetic procedures or acupuncture. Services not covered by Medicare must be paid for out of pocket. Alternatively, they may be covered by other supplemental insurance plans. Finally, Original Medicare does not cover services provided outside the United States, except in limited circumstances.
Medicare supplement plans are also known as Medigap plans. These optional plans are available to individuals who have Parts A and B and wish to supplement that coverage. These policies can help cover the patient’s out-of-pocket costs. This includes copayments, coinsurance, and deductibles. Medigap plans may also provide coverage for when an individual needs care while outside the United States. Medigap policies written after 2006 do not include prescription drug coverage. Also, Medigap plans typically do not cover services like dental, vision, and long-term care, eyeglasses, hearing aids, and private-duty nursing.
Contact us to go over your options for Medicare and its alternatives.