Investopedia: Medicaid 101 – Do you need all 4 parts?
Background: Medicare is the United States’ national health insurance program for citizens and some permanent legal residents. You become eligible for Medicare when you reach 65. The full benefit age is 66 for people born in 1943-1954, and it will gradually rise to 67 for those born in 1960 or later. Currently, more than 49.4 million people are enrolled.
People under 65 with qualifying disabilities are also covered by Medicare; a child with serious health issues who is about to turn 18, could potentially register for Medicare. Under the Affordable Care Act, you can also cover your child under your own policy until age 26. Medicare has evolved over the years and now has four parts. Some are mandatory for all enrollees; others are optional.
Medicare overview
Four Parts of Medicare
- Part A (Hospital) pays for your care in a hospital, skilled nursing facility, nursing home (as long as it’s not just for custodial care), hospice and certain types of home health services.
- Part B (Medical) covers medically necessary services or supplies needed to diagnose and treat a medical condition. It also covers preventive services for illnesses such as the flu, including inpatient and outpatient physician services and some limited outpatient prescription drugs.
- Part C (Medicare Advantage), also known as MA plans, are sold by private companies. MA plans come in two varieties – HMO plans and PPO plans – and take the place of Medicare Part A, Part B and, often, Part D coverage. Many offer extras such as vision, dental, hearing aids and wellness services.
- Part D (Prescription Drugs) provides prescription drugs from a list (called a formulary). Each Medicare prescription drug plan has its own list. Most plans place drugs into different “tiers,” with each tier having a different cost.
Part A covers the costs of being in a medical facility. When you enroll in Medicare, you receive Part A automatically. For most people, there is no cost to receive Part A.
Services covered under part A include inpatient care in hospitals and skilled nursing facilities, hospice care, home healthcare services and inpatient care in a religious nonmedical healthcare institution – a facility that provides medical services that align with certain religious beliefs.
This sounds straightforward, but it’s not. For example, in-home hospice care is covered, but Part A doesn’t cover a patient’s stay in a hospice facility. Additionally, if you’re hospitalized, your Part A deductible is $1,288, as of 2016.
If you stay for more than 60 days, you have to pay a portion of each day’s expenses. If you’re admitted to the hospital multiple times during the year you may have to pay that $1,288 deductible each time.
After spending 60 days in the hospital, you must pay $322 per day in out-of-pocket costs; this increases to $644 per day after 90 days. Once coverage runs out, you will have to pay the full cost of the remainder of your hospital stay.
Part B covers anything done to you: doctor visits, tests, medical equipment and home healthcare are covered. Other examples of covered care include ambulance services, outpatient procedures, the purchase of blood, mammograms, cardiac rehab and cancer treatments.
You’re required to enroll in Part B if you don’t have “credible coverage” from another source – an employer or spouse, for example.
With Part B, you pay a monthly premium. If you don’t enroll and you don’t have credible coverage, you may have to pay a penalty. According to Medicare.gov, the standard premium in 2016 is $121.80 per month for Part B coverage, with a $166 deductible. Once you receive Social Security, the premium is deducted from your Social Security check.
Once you meet your deductible, you pay 20% of the Medicare-approved cost of the service, provided your healthcare provider accepts Medicare assignment.
But beware – there is no cap on your 20% out-of-pocket expense. If your medical bills for a certain year were $100,000, you would be responsible for $20,000 of those charges, plus charges incurred under the Part A and D umbrellas. There is no lifetime maximum.
On the other hand, you pay nothing for most preventive services, such as diabetes screenings and flu shots, if you receive those services from a healthcare provider who accepts Medicare payments.
What Parts A and B DON’T Cover
The largest and most important item that traditional Medicare doesn’t cover is long-term care. If you are diagnosed with a chronic condition that requires ongoing personal-care assistance, the kind that requires an assisted-living facility, Medicare will cover none of the cost. This includes help with everyday activities, such as bathing and dressing. Other uncovered items include routine dental or eye care, dentures, cosmetic surgery, acupuncture and hearing aids.
According to medicare.gov, at least 70% of people over 65 will need long-term care at some point.
Part C, also known as Medicare Advantage, is an alternative to traditional Medicare coverage. Coverage normally includes all of Parts A and B, a prescription drug plan (Part D) and possibly other benefits. Part C is administered by private insurance companies that collect your Medicare payment from the federal government.
Depending on the plan, you may or may not need to pay an additional premium for Part C. You don’t have to enroll in an advantage plan – and they have limitations, such as possibly not covering healthcare if you’re away from your home region – but for many people these plans can be a better deal than paying separately for Parts A, B and D. If you’ve been pleased by the coverage of an HMO, you might find these similar.
Part D, or Prescription drug coverage, is also administered by private insurance companies. Part D is required unless you have a prescription drug plan from another source, including a Medicare Advantage plan. Depending on your income; you may pay up to $72.90 in addition to your plan premium per month, as of 2016. (That extra figure is for people with incomes above $214,000 [filing taxes individually] or married/filing jointly incomes above $428,000.)
Depending on your plan, you may have to meet a yearly deductible before your plan begins covering your eligible drug costs.
Medicare plans have a coverage gap – a temporary limit on what the drug plan will cover. Often called the doughnut hole, this gap kicks in after you and your plan have spent $3,310 in combined costs in 2016, and it doesn’t close until you’ve spent $4,850 out-of-pocket. Once you have paid more than $4,850, you enter catastrophic coverage, under which you will pay a small co-payment for your prescription drugs. While in the doughnut hole, however, you will be charged 45% of the cost of covered brand-name drugs in 2016 and 42% of generics. (By 2020, you’ll be charged only 25% of the cost of generics.)
Each state has insurance options that will close the coverage gap, but these require paying an additional premium.
Medigap Option
It’s hard to predict Medicare costs. Because of that, many retirees who don’t choose a Part C (MA) plan purchase a Medigap plan instead. Such plans come in 10 standardized policies that offer a great deal of variety and fill in many out-of-pocket costs associated with traditional Medicare. Some even provide additional services not covered by traditional Medicare. Medigap plans, however, do not provide Part D (Prescription Drug) coverage, so if you obtain a Medigap policy you may also need Part D.
A one-time Medigap open-enrollment period starts the month you turn 65 and are enrolled in Part B and lasts six months. During this period you can buy any Medigap policy sold in your state regardless of your health. Afterward, if you want a Medigap policy you could be denied coverage or forced to pay a higher premium. Medigap and Medicare Advantage
People who only have traditional Medicare – Parts A, B, and D – may incur sizable bills not covered by Medicare. To close these gaps, most recipients enroll in some form of Medigap insurance or in a Medicare Advantage plan (see Part C, above). One important thing to know about Medigap: It only supplements Medicare; it’s not a stand-alone policy. If your doctor doesn’t take Medicare, Medigap insurance will not pay for the procedure. Medigap coverage is standardized by Medicare, but offered by private insurance companies.
Costs
Most people pay enough into the Medicare system during their working lives that they do not have to pay for their Medicare Part A coverage. For more on Part A costs, go here.
The 2016 standard monthly premium for Medicare Part B coverage is $121.80. If you make more than $85,000 ($170,000 for couples), you will pay more. For more on Part B costs, go here.
Some Part C (MA) plans do not charge a premium. Other costs can include copayments for doctor visits and other services. For more on Part C costs, go here.
Part D coverage includes a monthly premium that will vary depending on the plan you choose and the drugs you use. Significant coverage gaps with Part D include the dreaded “donut hole,” which could force you to pay a larger portion of drug costs until you reach the “catastrophic coverage” amount of $4,850. More information about Part D cost is available here.
Costs for Medigap coverage depend on the type of policy you have and where you live; they can range from $50 per month to several hundred dollars. More about Medigap costs can be found here. For even more on typical Medicare costs, including out-of-pocket costs, go here.
As noted in the title – this entire post is directly from Investopedia, none of it is original content.
Additional Source: http://kff.org/medicare/fact-sheet/medicare-spending-and-financing-fact-sheet/
Where does Medicare money go? http://www.washingtonpost.com/wp-srv/special/national/medicare-doctors-database/
