Understanding Medicare

Medicare is medical insurance provided by the government for individuals aged 65 or older or for certain individuals who are younger than age 65 who are disabled or qualify for Medicare under other special conditions. Medicare was created by Congress in 1965. It is an older form of insurance that was popular back then and is based on hospital plans at the time which were called "Indemnity Plans." Unlike modern health insurance, Medicare hospital coverage - after paying deductibles outlined below - pays for 100% of the covered hospital costs. But, unlike modern health insurance which typically covers hospital expenses either on an unlimited basis or up to a large cut off such as $2 million, Medicare requires the patient to cover all other costs after the free period totally out-of-pocket. Medicare enrollees who do not like this risk of incurring potentially devastating out-of-pocket costs have an option to purchase either Medigap insurance to cover out-of-pocket costs or to purchase Medicare Advantage insurance which is designed like modern health insurance. Medicare consists of 5 parts: Part A, Part B, Part C and Part D.

Part A Deductibles and Co-Pays - Inpatient Hospital (2022)

Medicare pays hospital care with deductibles as outlined here. You pay the deductible or if you purchase Medicare supplemental insurance it will pay the deductible.

• $1,556 deductible - first 60 days
• $389/day coinsurance - 61st through 90th day
• $778/day coinsurance - 91st through 150th day
• Beyond 150 days you or your supplement insurance pay the total cost
• There is a one time, "lifetime reserve" of 60 days that medicare will also pay.

Under Part A, you are also allowed 3 pints of blood.

Medicare Part B

Medicare Part B covers outpatient services and doctors. This is an optional plan from Medicare to help pay for outpatient and doctors care. This plan must be signed up for during a prescribed enrollment period. There is a monthly premium which is deducted from your Social Security payment. There is also an annual deductible. Part B premiums and deductibles go up every year. Medicare Supplement Insurance usually pays for deductibles and co-pays not covered by Medicare. For 2022 the standard Medicare part B premium is $170.10. For individuals with higher income, the premiums are more. The annual deductible for all Medicare Part B beneficiaries is $233 in 2022, an increase of $30 from the annual deductible of $203 in 2021.

Medicare part B may also cover certain durable medical equipment for home care such as hospital bed, walker, etc.

• $0 deductible - Home health care under physicians prescription for skilled need is paid 100%
• $233 deductible and 20% coinsurance for "Durable Medical Equipment"

Medicare Part C, Private Medicare Plans

A Medicare Advantage Plan (like an HMO or PPO) is another Medicare health plan choice you may have as part of Medicare. Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare.

If you join a Medicare Advantage Plan, the plan will provide all of your Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. Medicare Advantage Plans may offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D).

Medicare pays a fixed amount for your care every month to the companies offering Medicare Advantage Plans. These companies must follow rules set by Medicare. However, each Medicare Advantage Plan can charge different out-of-pocket costs and have different rules for how you get services (like whether you need a referral to see a specialist or if you have to go to only doctors, facilities, or suppliers that belong to the plan for non-emergency or non-urgent care). These rules can change each year.

Medicare Medigap Insurance

Medigap, also known as Medicare Supplement Insurance, is offered by private insurance companies. They help fill the coverage "gaps" left open by Medicare Part A and Part B. There are 10 types of Medigap plans. They are Plans A, B, C, D, F, G, K, L, M and N. Not every insurer offers all 10 plans, and prices can vary, but the amount of coverage is the same across companies.

Many can find Medicare Part A and Part B to have too many "gaps" in coverage. Supplementing your coverage with a Medigap plan may help to reduce the amount you pay out-of-pocket when using medical services. Multiple or extended hospitalizations (60 days or more) could potentially costa lot of money out of pocket. So could just one or two outpatient procedures. That is why it may be more cost effective to purchase a Medigap plan, even when factoring in the monthly premium.

Some Medigap plans may also provide you with additional coverage, such as emergency health care when you are travelling internationally, and care at a nursing facility. Be sure to talk with the insurance company offering the plan to fully understand what the plan covers before you sign up.

To be eligible, you must be enrolled in Medicare Part A and Part B.

You must enroll during the Medigap Enrollment Period, which begins 6 months after you turn 65. Those under 65 can enroll if they have a disability. Remember, you must have Medicare Part A and Part B to qualify for enrollment.

If you miss the Medigap Enrollment Period, you may still be able to enroll in a plan. However, insurers are not required by law to accept your enrollment, and can deny you coverage based on pre-existing conditions.

Medicare Part D, Prescription Drug Plans

Medicare drug coverage helps pay for prescription drugs you need. Even if you don't take prescription drugs now, you should consider getting Medicare drug coverage. Medicare drug coverage is optional and is offered to everyone with Medicare. If you decide not to get it when you're first eligible, and you don't have other creditable prescription drug coverage (like drug coverage from an employer or union) or get Extra Help, you'll likely pay a late enrollment penalty if you join a plan later. Generally, you'll pay this penalty for as long as you have Medicare drug coverage. To get Medicare drug coverage, you must join a Medicare-approved plan that offers drug coverage. Each plan can vary in cost and specific drugs covered. There are 2 ways to get Medicare drug coverage:

1. Medicare drug plans. These plans add drug coverage to Original Medicare, some Medicare Cost Plans, some Private Fee-for-Service plans, and Medical Savings Account plans. You must have Medicare Part A (Hospital Insurance) and/or Medicare Part B (Medical Insurance) to join a separate Medicare drug plan.

2. Medicare Advantage Plan (Part C) or other Medicare Health Plan with drug coverage. You get all of your Part A, Part B, and drug coverage, through these plans. Remember, you must have Part A and Part B to join a Medicare Advantage Plan, and not all of these plans offer drug coverage.

Medicare Advantage Plans (also known as Medicare Part C) provide your Medicare Part A and Part B benefits (Parts A & B), along with additional medical coverage, all in one convenient private insurance plan. The additional coverage helps limit, and helps pay for, your out-of-pocket medical expenses.

Unlike Medicare Part A and Part B, many Medicare Advantage plans may also include coverage for prescription drugs (also known as Part D). Medicare Advantage plans may also include dental, vision, and other benefits. Since every plan varies, it is important to understand what your plan covers before signing up.

Most Medicare Advantage Plans tend to be either HMOs or PPOs. HMOs involve using a set of in-network doctors, specialists and hospitals. They typically require you to coordinate your care through a primary care physician, who can refer you to specialists when needed. PPOs tend to have larger networks and do not typically require referrals for specialists. Since Medicare Advantage HMOs and PPOs provide most of your health coverage in a single plan, they can seem similar to the insurance you may have had through an employer.

Medicare Advantage plans can help to reduce the amount you pay out-of-pocket for health care. Medicare Part A and Part B requires you pay for 20% of medical costs when needing outpatient care. It also requires you to pay a set fee per day when hospitalized for 60 days or more, which can vary depending your plan. Further, there is no cap on your out-of-pocket costs. There also is no coverage for prescription drugs, meaning you pay for 100% of costs at the pharmacy.

Medicare Advantage plans can help pay for all of these out-of-pocket costs, with many plans including prescription drug coverage. They also place a "worst-case" maximum limit on your out-of-pocket costs. These limits vary from plan to plan, but can be very affordable. Medicare Advantage maximum out-of-pocket limits can keep your costs both affordable and predictable.

Some people may prefer Medicare Advantage over Medigap because they enjoy the convenience of having one plan. Medigap plans work on top of, or in addition to, Medicare Part A and Part B. Medicare Advantage plans replace Medicare Part A and Part B, and often include additional benefits.