If you have questions about Medicare you're not alone. The reality is that most Medicare beneficiaries don't fully understand their Medicare benefits, and which plan options are available to choose from. Below we will explain the different types of coverage in further detail. Plan availability will vary on a state to state and county to county basis. Here is a quick diagram that outlines the different parts of Medicare:
Part A: Hospital
The original Medicare Plan (Part A) provides hospital insurance to people 65 or over and those who meet special criteria and runs on a fee-for-service basis. Doctors are also limited as to what they can charge you for their services. As long as you or your spouse paid your Medicare taxes while you were working, you normally will not have to pay a monthly premium for Part A coverage. You also have the option of adding Part B and Part D, and will be enrolled in Part A automatically once you turn 65 unless you opt for Medicare Advantage.
Even if you did not pay Medicare taxes before retirement, you can still buy Part A if you are over 65 years old and meet US citizenship and residency requirements, or if you are under 65, disabled, and lost your premium-free Part A coverage because you went back to work. More often than not, if you opt to buy original Medicare Plan coverage, you are required to buy Part B as well as pay both services’ premiums. If you have limited income, your state may provide financial assistance for your Part A and B coverage.
Medicare hospital insurance includes a variety of medically-necessary services, like hospital stays (a minimum of 3 days), so long as you do not need long term or custodial care. Part A consists of semi-private rooms, hospital services and supplies, the doctor, emergency room services, and drugs that you are prescribed for your treatment. Hospital services like anesthesia, chemotherapy, and inpatient dialysis are covered by Part A as long as they are deemed medically necessary. Personal care items and private rooms are not covered by Medicare Part A.
Blood is another service that the original Medicare program covers. As long as the hospital receives blood from a blood bank without any charge, you do not need to worry about payment. However, if the hospital needs to purchase blood for you, you must repay the hospital for the blood or you or someone else can done blood. This service includes blood transfusions as well as other blood work you are given in a hospital.
Hospice, skilled nursing facility, and home health services are also covered by Part A. If you have a terminal illness, and your doctor has confirmed that you have 6 months or less to live, your hospice care (including pain relief, grief counseling, and other service) will be covered by Medicare. In order to receive skilled nursing facility care, a doctor must declare that you are in need of daily skilled care like physical therapy. Home health services are also covered, provided they are ordered by a doctor and are also supplied by a Medicare certified home health agency: you must be determined home-bound in order to receive these services, and the home health services are again limited to medically necessary care.
Traditional Medicare provides you with a semi-private room and meals in hospitals, hospitals, and nursing facilities. These services do not include private nursing or private rooms, and unless deemed medically necessary, also do not cover long term or custodial care. Televisions and telephones are also not covered if they incur an additional charge.
Part B: Medical
Part B of Medicare provides qualifying US citizens with outpatient medical insurance, which covers doctors’ services, preventative services, and other forms of outpatient care. You can enroll in Part B medical insurance three months before and four months after your 65th birthday. There is also a special enrollment period for those who are covered by a group health plan offered by a union or employer.
If you are already receiving benefits from Social Security or the Railroad Retirement Board, you will automatically enroll in Part B the month you turn 65: if your birthday is on the first of the month, you will enroll in Part B on the first day of the previous month. If you are disabled and under the age of 65, you automatically get Part B once you receive Social Security disability benefits. Most people must pay a monthly premium depending on their income to ensure Part B coverage. The premium is usually deducted from your monthly Social Security payments depending on income.
You can chose to opt out of Part B by sending the Medicare Part B card back when you receive it in the mail: by keeping the card, you keep Part B and keep paying Part B premiums. If you chose not to enroll during your initial enrollment period, you have the opportunity to register in the general enrollment period that stretches from January 1 to May 1. For every 1 year period that you were qualified to enroll in but opted not to your Part B monthly premium will increase by 10 percent.
Medicare Part B provides patients with medically necessary outpatient health care. Part B fills in some of Part A’s gaps by providing coverage for doctors in an outpatient setting as well as for approved medical equipment and supplies when necessary. Physician services, nursing services, vaccinations, cardiovascular and diabetes screenings, lab services, and other preventative services can all be covered by Part B. Routine physical exams are not covered by Part B.Medicare Part B will not pay for cosmetic surgery, custodial care, prescription drugs, dental care, or vision care, as well as other services.
Medicare does not cover every health-related service or item. You will likely have to pay copayments and deductibles on services even if they are covered by Medicare. Most copayments will cost around 20 percent of the total cost of the service. If a service you need is not covered by Medicare, you must cover the costs yourself unless you have separate insurance.
Part C: Medicare Advantage
Many Americans opt to enroll in Medicare Advantage (Part C), a program which allows you to enroll in private health insurance that offers both Medicare Part A and B benefits. Medicare Advantage plans are not supplemental insurance, but rather health insurance plans of their own. Medicare Advantage can also include prescription drug coverage in addition to vision, hearing, and dental. In most cases, you can join even if you have been diagnosed with a pre-existing condition, except for final stage renal disease. Advantage plans must follow guidelines established by Medicare but also vary in terms of costs and rules.
Most Advantage plans have lower copayments than the traditional Medicare plans, but are also limited to certain service areas and often involve networks. You can only enroll in a plan during certain times of the year, but you will remain enrolled in most plans for a year. The amount that you pay yourself varies from plan to plan, so it is necessary to compare plans in order to find the plan most suitable to your needs. You can enroll in plans in paper, by telephone, or by an online application.
There are several different options for Advantage plans, including Health Maintenance Organizations (HMO), Private Fee for Service (PFFS), Preferred Provider Organizations (PPO), Medicare Special Needs, and Medical Savings Accounts (MSA).Each plan has different guidelines.
HMO plans are required to cover both Part A and B health care, but can also offer additional benefits. You will only be able to visit physicians and hospitals that are within the HMO network unless there is an emergency. However, HMOs can lower costs, making them (in some cases) a less expensive option to the traditional Medicare plan.
PPOs allow you to use doctors, hospitals, and specialists within the PPO network. However, you are permitted to use health providers outside of the network at an additional cost to you without a referral.
If you choose a PFFS plan, you are able to use any doctor or specialist, so long as they accept the terms, fees, and conditions of the PFFS. The plan chooses how much it will pay for the services, and you can spend more or less on PFFS plans than on the traditional Medicare plans.
Medicare Special Needs plans are limited to people with certain diseases, disabilities, or other health needs and customized to fit the needs of that specific group, including people who have diabetes. Medical Special Needs plans continually include the Medicare Part D prescription medication insurance.
If you opt to enroll in an MSA plan, you do not pay a monthly premium because you have a high deductible. You must pay the Medicare Part B premium, and must also pay for Medicare covered services, and after you reach the deductible, the plan will pay for Medicare services. You will also have a savings account in which Medicare will deposit money for your health care costs. MSA plans do not include prescription drugs.
No matter what plan you choose, you will be protected and covered by Medicare Parts A and B. If you are not satisfied with your plan, you can enroll in the traditional Medicare program during the next enrollment period. If the plan opts to end its involvement with Medicare, you will need to choose another plan or enroll in traditional Medicare.
Part D: Prescription Drug Coverage
Neither Part A nor Part B of the traditional Medicare program includes prescription drug coverage. For people over 65 who rely on prescription medication to maintain their health, Medicare Part D provides prescription drug insurance for anybody who qualifies for Part A or Part B regardless of health status or income level.
In order to receive prescription drug coverage, you must enroll in a Medicare drug plan. Part D plans are offered by Medicare-approved private companies. Many Medicare Advantage plans cover both prescription drugs and medical care so long as you have both Part A and Part B. If you have traditional Medicare, you must enroll in a separate Part D plan if you want your medication covered. If you want prescription drug coverage, select the Part D plan you are interested in by enrolling online, over the phone, or by paper application.
Enrolling in prescription drug coverage is completely voluntary for most people—unless you are currently getting your drugs through Medicaid. If you already have sufficient prescription drug coverage through another service, it is not necessary to enroll in a Part D plan. Remember, you will most likely have to pay a premium for your Part D coverage, although there are subsidies available for people with limited incomes.
Part D plans vary in cost and coverage by region and by carrier, so it is important to determine which plan is right for you. Many Part D plans also have a coverage gap, meaning that they will only cover up to a certain dollar amount for your prescription medication. Once you spend more than that amount, you must pay the full cost of your prescription drugs until you reach the out of pocket obligation. After you surpass the out of pocket obligation, you are only responsible for a co-payment. Not all Part D plans cover all the prescription drugs that you may be taking. Your copayment will vary depending on your income and on the types of medication that you need.
Part D plans only cover medically necessary drugs. Part D plans across the board do not offer coverage for cosmetic uses, over the counter drugs, weight loss, or other drugs that are not deemed medically necessary. Drug cost and coverage varies from plan to plan, so it is important to select a plan based on your own personal needs.
The Medicare Donut Hole
Medicare prescription drug coverage (Part D) is currently available through private insurers to anyone with Medicare Parts A & B for an extra monthly premium. Almost all of these prescription drug plans (PDPs) and most Medicare Advantage Plans featuring drug coverage have a coverage gap, also known as "the donut hole." In practice, this means that after an individual and their drug plan have spent a certain amount of money for covered drugs, the enrollee must pay all subsequent drug costs at retail rate out-of-pocket up to a yearly limit. A person's yearly deductible, coinsurance/copayments, and what a person pays while in the coverage gap all count toward this out-of-pocket yearly limit. The limit doesn't include premiums paid monthly or what a person pays for drugs that aren't covered by the drug plan. This means that while enrollees are in the doughnut hole, the coverage gap can amount to thousands of dollars. In other words, while in the doughnut hole enrollees must pay 47.5% of the retail cost of their drugs until they have spent a set amount.
Some PDPs offer minimal coverage on things like generic drugs while enrollees are in the doughnut hole, though these types of plans will usually charge a higher monthly premium. Once an enrollee reaches the total out-of-pocket limit during the coverage gap, they are bumped into "catastrophic coverage." Catastrophic coverage guarantees that once an enrollee has spent up to his or her plan's out-of-pocket limit for covered prescriptions the person will only pay a nominal coinsurance fee or copayment for their drugs for the rest of the year. This works out to the enrollee paying about 5% of subsequent drug costs after the doughnut hole, their plan paying about 15%, and Medicare covering about 80%.
As a result of the Protection and Affordability Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010, the doughnut hole will close by 2020. This reform was deemed necessary given the fact that in 2007 an estimated 3.4 million Part D enrollees fell into the doughnut hole and the coverage gap – now at $4,750 – was projected to exceed $6000 by 2020. This year the doughnut hole will shrink through Part D enrollee, Medicare, and drug manufacturer contributions so that by 2020 enrollees will be responsible for only 25% of their drug costs in the coverage gap. Also in 2011 brand-name drug companies were forced to provide a 50% discount on these prescriptions to enrollees in the doughnut hole and beginning in 2013 Medicare will start providing an additional discount on brand-name drugs up to 25% in 2020. As a result, by 2020 the combination of 25% enrollee, 25% Medicare, and 50% drug manufacturer contribution will effectively close the doughnut hole. With regard to generic drugs, in 2011 Medicare will begin providing discounts on generic drugs increasing annually to 75% by 2020.
Medicare Supplement Insurance (also called Medigap Insurance) are health insurance policies sold by private insurance carriers. Medicare supplements are designed to do exactly what the name says. Medicare Supplement come in and Supplement or fill in the gaps in Original Medicare. It is great that the government offers Medicare A (Hospital Insurance) and Medicare Part B (Medical Insurance) but it does leave a lot of out of pocket expense for the Medicare beneficiary such as deductibles, co-pays and coinsurances. This is where Medicare Supplements or Medigap Insurance comes in. Medicare Supplements can come in and pay all or some of the cost sharing Medicare leaves behind depending on which plan you pick. If you have Medicare Part A and Medicare Part B with a Medicare Supplement, Medicare will pay part of the amount approved by Medicare and then your Medicare Supplement Insurance will pay its share.
Medicare beneficiaries can buy a Medicare Supplement policy to cover all or some of the cost sharing listed above. The Medicare Supplement polices available are lettered A-N. An overview can be show below. Plan F is the most comprehensive of the Medicare Supplement policies because is pays all of the cost sharing listed above.
It is important to be aware that all Medicare Supplements have to follow Federal and state regulations and are standardized by the Federal government. “Each standardized Medigap policy must offer the same basic benefits, no matter which insurance company sells it. Cost is usually the only difference between Medigap policies with the same letter sold by different insurance companies.” (2012 Choosing a Medigap Policy, Center for Medicare & Medicaid Services).
This means that every carrier that offers Medicare Supplement Plan F in your area must have the same basic benefits even if insurance carriers charge different premiums. This make it very easy for someone trying to chose a Medicare Supplement for the first time or someone trying to find a more affordable premium to select a plan. Medicare Supplements are similar to a commodity. It’s like trying to buy gasoline. When you run low on gas are you going to stop at the station on the right charging $4 a gallon or the station on the left charging $4.50 a gallon?
What is Medigap Insurance – Important Facts
If you haven’t acquired or have been planning to get a Medigap insurance policy, there are a few things you need to know in order to avoid problems in the future when making a claim. This information will help you understand what to expect and not to expect regarding your Medigap policy.
A Medigap Insurance policy requires you to have Medicare A and B
You and your spouse need separate policies because it only covers one person
You don’t need Medigap Insurance if you have a Medicare Medical Savings Account or MSA Plan
You cannot have a Medigap Insurance policy and a Medicare Advantage Plan together
Your Medigap Insurance premium is different from your Medicare premium
Your Medigap Insurance policy is renewable and can’t be cancelled by the insurance company as long as you’re paying the premiums
Your Medigap Insurance doesn’t cover prescription drugs, long-term care, private-duty nursing, hearing aids, and dental and eye care
You, not your agent, can cancel your Medigap policy by calling your insurance provider
Aside from the difference between Medicare and Medigap, there is still some confusion regarding Medigap and other types of insurance. The plans listed below are NOT Medigap plans.
Medicare Prescription Drug Plans
Medicare Advantage Plans, such as HMO and PPO
Employer and union plans
Federal Employees Health Benefits Program
Indian health Service and similar policies
Long-term Insurance policies