The A, B, C’s of Medicare
Clients frequently call us with questions about Medicare. They rarely understand the difference in coverage for the costs of hospitalization, doctors or prescriptions. As with many government programs, the complexity of hundreds of pages in the legislation is too confusing for the average person to comprehend. Unfortunately, no simple summary can answer all the questions but the following article published by the Financial Planning Association® is a succinct primer for understanding the core principles. We hope that you find it helpful.
Marv Kaye, J.D., CFP®
Kaye Capital Management
Understanding Medicare: Parts A, B, C, and D
One of the best way to grasp how Medicare works is to review the major components of the program: Parts A, B, C, and D.
Medicare contains four components: Parts A, B, C, and D. Part A is hospital insurance designed to cover inpatient care in hospitals and rehabilitation facilities. Part B helps to cover physician services, outpatient care, preventive services, durable medical equipment, and certain home health care. Part C, also known as Medicare Advantage, consists of insurance plans provided by private carriers. Medicare Part D, which is prescription drug coverage, generally can be obtained as an addition to Original Medicare (Parts A and B) or by signing up for a Medicare Advantage Plan that includes prescription coverage.
Medicare contains many rules that beneficiaries and their caregivers are required to learn. Perhaps the best way to grasp the program's details is to review the major components of the Medicare program: Parts A, B, C, and D.
Medicare Part A: Hospital Insurance
This insurance is designed to help cover the following:
· Inpatient care in hospitals, including rehabilitation facilities
· Care provided in a skilled nursing facility or hospice for a limited period
· Home health care
For inpatient hospital care, Medicare typically covers a semi-private room, meals, general nursing, drugs, and other hospital services and supplies. Medicare typically does not cover long-term care or custodial care in a skilled nursing facility, although under limited circumstances, it may cover a maximum of 100 days during a benefit period if a doctor certifies that a patient needs daily skilled care.
Medicare Part B: Medical Insurance
Part B helps to cover physician services, outpatient care, preventive services, durable medical equipment, and certain home health care. Although the scope of Part B is extensive, there are many services -- such as dental care, routine eye exams, hearing aids, and others -- that are not covered as part of this program.
Medicare Part C: Offered by Private Insurers
Also known as Medicare Advantage plans, Part C consists of insurance plans provided by private carriers. For beneficiaries with Part C, Medicare pays a fixed amount every month to a private insurer for their care. Many Medicare Advantage plans include Medicare drug coverage, and all cover emergency and urgent care. In addition, certain plans may cover services that are not covered by Medicare, which may result in lower out-of-pocket fees for beneficiaries.
You can sign up for Medicare Part C when you first become eligible for Medicare. You can also sign up between January 1 and March 31 or between October 15 and December 7 each year. If you sign up at the beginning of the year, you can't join or switch to a plan with prescription drug coverage unless you already had Medicare Part D. If you sign up toward the end of the year, your coverage will begin January 1 of the following year.
Medicare Part D: Prescription Drugs
There are generally two ways to obtain Medicare prescription drug coverage. If you have Original Medicare (Part A plus Part B), you can add drug coverage by obtaining it from an insurer approved by Medicare through Part D. Or if you have a Medicare Advantage plan, find out whether your plan includes prescription coverage as part of its program. Even if you don't take many prescriptions, you may want to consider signing up for Part D as soon as you become eligible. If you wait and try to sign up during a subsequent enrollment period, you may be charged a late enrollment penalty and be forced to pay higher premiums.
You can join Medicare Part D when you initially become eligible for Medicare or between October 15 and December 7 of each calendar year.
Infographic: Out of Pocket
Medical coverage from Medicare is far from a freebie. The following are costs that you may encounter.
Part A: No premium if you or your spouse paid Medicare taxes while you were working. For 2015, there is a deductible of $1,260 before coverage begins. You may expect to pay a portion of the cost for a hospital stay of more than 60 days during a benefit period.
Part B: A deductible of $147 for 2015 plus 20% of Medicare-approved amounts for medical services. The amount of additional monthly premiums depends on whether you are enrolled in Original Medicare or in Part C. With Original Medicare, the standard 2015 premium is $104.90 per month. Single beneficiaries with incomes above $85,000 and couples earning more than $170,000 pay higher premiums.
Part C: Costs and levels of coverage vary according to the plan. Contact plans that interest you to learn the details and to compare the costs and levels of coverage with Medicare Part A and Part B.
Part D: Pricing for prescription drug coverage is complex. For those who add Part D to Original Medicare, there is a monthly premium, an annual deductible, and copayments. There is a "coverage gap" that works as follows: After a beneficiary and the insurer pay $2,860 for prescription drugs during a benefit period, the beneficiary will pay 47.5% of the plan's covered brand-name perscription drugs until out-of-pocket expenses total $4,700, at which point catastrophic coverage takes effect. Effective the following calendar year, a new benefit period begins with applicable premiums, copayments, and other costs.
Medicare's rules can be confusing for many people. The Medicare website can be a valuable resource. Every year, Medicare also mails Medicare & You to beneficiaries and makes this fact-filled publication available online. You may want to review it to make sure you have an cost structure accurate understanding of the Medicare program.
Points to Remember
1. Medicare consists of four components: Parts A, B, C, and D.
2. Part A is hospital insurance designed to help cover care in a hospital or rehabilitation center. In addition, Part A may cover a limited amount of care in a skilled nursing facility or hospice.
3. Part B is medical insurance that helps to cover physician services, outpatient care, preventive services, durable medical equipment, and certain home health care.
4. Part C, also known as Medicare Advantage, consists of insurance plans provided by private carriers. For beneficiaries with Part C, Medicare pays a fixed amount every month to a private insurer for their care.
5. Part D, which is prescription drug coverage, may be available as part of a Medicare Advantage plan or may be purchased in addition to Part A and Part B (also known as "Original Medicare").
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(Financial Planning Association)