Medicare Explained: The ABCs (and D) of Health Care for Seniors
If you’re getting close to retirement, one of the big changes you face is trading your current health insurance for Medicare. The world of Medicare can be complicated, but learning the basics can help.
Medicare is a U.S. government health insurance program for people 65 and older, along with some younger people who have disabilities or kidney failure that requires dialysis or a transplant.
You can enroll for the first time starting three months before the month you turn 65 through the following four months after your birthday month. Open enrollment, in which you can change plans, or join or leave a prescription drug plan, takes place from October 15 to December 7.
Here’s a primer on the parts of Medicare — sometimes referred to as “alphabet soup” because the letters that designate each part can seem like a jumble.
But don’t worry: we’ll walk you through Medicare Parts A, B and D first. We’ll cover Medicare Part C last because, despite its name, it’s not really a part of Medicare, but a way of getting your Parts A, B and D Medicare coverage through a private company.
What is Medicare Part A?
Medicare Part A is hospital insurance, which means that it covers a stay in a hospital, a nursing home or a skilled nursing facility. Part A also covers home health care and hospice services.
However, there’s a catch: Part A will not cover a nursing home stay if you need only “custodial care,” which is personal or health care that can be provided by someone without special training or qualifications. Examples include help with: eating, bathing, getting out of bed, using the bathroom or putting in eye drops.
Here’s an example of Part A coverage: Mary comes down with a cough, which turns into chills, chest pain and trouble breathing. She gets diagnosed with pneumonia and admitted to the hospital, where she stays for 10 days. Medicare Part A covers Mary’s hospitalization, including her semi-private room, food, nursing care, antibiotics, other drugs and medical supplies used during her stay.
However, it doesn’t cover extras like a private room, a TV in the room or a pair of socks, so Mary has to either forego those items or pay for them out of pocket.
The cost: If you’ve worked long enough – about 10 years – and paid Medicare taxes during that time — you can get Part A for free. If not, you’ll have to pay a premium. The standard premium is either $226 or $411 per month, depending on how long you worked and paid Medicare taxes. Here’s a Medicare eligibility and premium calculator that will help you figure out how much you’ll pay.
What is Medicare Part B?
Medicare Part B is medical insurance, which means it covers ambulance services, doctor visits, rehabilitation, surgery, lab tests and imaging. Part B also covers doctor-prescribed medical devices and supplies you need to treat an illness or health problem. For example, it covers blood sugar monitors, crutches and walkers.
Here’s an example of Part B coverage: Fred notices a pain in his shoulder and finds he can’t lift his arm very high when washing his hair. He visits a doctor who takes X-rays, diagnoses Fred with frozen shoulder and prescribes physical therapy. Medicare Part B covers Fred’s doctor visit, X-rays and physical therapy sessions.
The cost: No matter how long you worked, you’ll have to pay a Part B premium.
The standard premium for Part B in 2016 is $104.90 a month for most beneficiaries who have been enrolled in Medicare for the past three years or longer, according to a cost sheet from Medicare.gov and the AARP. The premium has held steady for the past three years because there has been no Social Security cost of living adjustment (COLA). However, the premium for those recipients newly enrolled in Medicare in 2016 is 121.80 a month.
Together, Medicare parts A and B are known as “traditional Medicare.” There are some terms not covered by Parts A and B, and those include dental care, eye exams, hearing aids and routine foot care.
What is Medicare Part D?
Medicare Part D is prescription drug coverage, which means that it covers prescription drugs, vaccines not covered under Part B, and drugs you get as a hospital outpatient, such as during a visit to the ER.
Here’s an example of Part D coverage: Lina’s goes to the pharmacy to fill a prescription from her doctor for blood pressure medication. The generic drug is on her Medicare Part D plan’s drug formulary, which is the list of drugs a plan covers. Her Part D coverage pays for the drug.
The cost: You’ll also have to pay a Part D premium, but cost varies depending on the plan. The average premium in 2016 is about $35 a month, according to data from the Kaiser Family Foundation, a nonprofit that focuses on health policy.
What are Medicare Advantage Plans or Medicare Part C?
You have the option of getting all your Medicare coverage through a plan from a private health insurance company. These plans are known as Medicare Advantage Plans, and are referred to as Medicare Part C. Typically, Medicare Advantage Plans include coverage for parts A, B and D rolled into one plan. If your plan includes Part D coverage, you must take that coverage in order to stay on the plan.
Medicare Advantage plans have to cover all of the same items that traditional Medicare covers, according to Medicare.gov. In addition, some Medicare Advantage plans cover costs not covered under traditional Medicare, such as dental work, hearing related services and vision care.
The cost: Premiums vary by plan, so you’ll have to shop around. Here’s a Medicare plan finder from Medicare.gov. If you enroll in Medicare Advantage plan, you pay an extra premium in addition to your Part B premium, according to the AARP. The average Medicare Advantage premium in 2016 was an additional $37 a month, according to the KFF.
What is the cost-charing for Medicare
In addition to premiums, you’ll have cost sharing, which can include copays, coinsurance and deductibles. Check this costs-at-a-glance chart for more detailed information on Medicare cost sharing.
Also, you may have to pay for certain items that aren’t covered by Medicare. If you don’t know if a service or drug is covered, talk to your doctor or check with Medicare.gov.
If you study up on Medicare before you need to enroll, you can increase your chances of getting coverage that will help keep you and your wallet healthy as you start the next phase of your life.