There are four basic parts of Medicare
Parts A, B, C, and D (though they don’t go together in that order.)
Each part helps pay for certain medical services.
Parts A and B together comprise what is known as “Original Medicare”.
The sequence of each of the “Different Parts of Medicare” can be frustratingly counter-intuitive. These various “Parts” just don’t go in logical order.
If you learn about Medicare A, B, and D first, Medicare Part C will be easier to understand and make a lot more sense.
Know Your Medicare Options
Medicare Part A
- Medicare Part A is one of two parts of what is considered “Original Medicare”. (Part B is the other).
- Medicare Part A helps cover the costs of inpatient care in the hospital, short-term skilled nursing facilities, home health care, and hospice care.
- Most people don’t have to pay a premium for Part A. They’ve already paid into the system in the form of the Medicare tax deductions in their paycheck if they (or their spouse) worked at least 40 calendar quarters (10 years) in the U.S.
- Benefit periods apply. These benefit periods measure the use of inpatient hospital and skilled nursing facility services. Medicare will stop paying for your inpatient-related hospital or skilled nursing facility costs (such as room and board) if you run out of days during your benefit period.
- Most people who enroll in Parts A and B (Original Medicare) either add a Prescription Drug Plan (aka Part D, see below) and a Medicare Supplement (Medigap) Plan or they opt to enroll in a Medicare Advantage Plan. Both of these options in different ways can serve to limit liability, extend benefit periods, and cover some out of pocket costs (like deductible and coinsurance) associated with Medicare Part A.
Medicare Part B
- Medicare Part B, the second of two parts of “Original Medicare”,helps pay for doctor visits and outpatient care. This includes, for example, wellness visits, preventive care, lab services, diagnostic tests, physical therapy, diabetic screenings, mental healthcare, durable medical equipment, ambulatory surgery center services, ambulance and emergency room services.
- Part B benefits include both a deductible and coinsurance. The annual Part B deductible is indexed annually; $203 in 2021. For coinsurance, beneficiaries generally pay 20% of the Medicare-approved amount for the covered services utilized. There is no annual out-of-pocket maximum! (See #5 Medicare Supplement). Medicare pays the remaining 80%.
- Most people have to pay a premium for Part B. The standard monthly Part B premium in 2021 is $148.50. Monthly premium payments may be less than the standard amount if you enrolled in Part B in 2020 or earlier and your premium payments are deducted from your Social Security check. Also, your premium may be more than the standard amount based on your income. You will pay an income-related monthly adjustment amount (IRMAA) if your reported income from 2018 was above $87,000 for individuals or $174,000 for couples.
- Part B charges a penalty if you don’t sign up when you are first eligible and you don’t have a valid waiver like employment-based coverage. The penalty is 10% of the monthly premium amount for each full 12-month period that you could have had Part B but didn’t sign up for it. The penalty is added to your monthly premium payment for as long as you’re enrolled in Part B.
- Most people who enroll in Parts A and B (Original Medicare) either add a Prescription Drug Plan (aka Part D, see below) and a Medicare Supplement (Medigap) Plan or they opt to enroll in a Medicare Advantage Plan. Both of these options in different ways can serve to limit liability, extend benefit periods, and cover some out of pocket costs (like deductible and coinsurance) associated with both Medicare Parts A and B.
Medicare Part D (No, you’re not seeing things. Part C comes later)
- Medicare Part D is health care coverage that helps you pay for the prescription drugs you use.
- Original Medicare (Parts A & B) does not cover most prescription drugs. Beneficiaries must elect and buy this coverage in addition to Part A and/or Part B.
- Everyone who qualifies for Medicare and enrolls in either Part A and/or Part B is eligible for Part D Prescription Drug Coverage.
- Part D is only offered through private companies that contract with Medicare. You have two choices:
- Stand Alone Prescription Drug Plans (PDPs)
- Available through Medicare Advantage Plans (MAPDs)
- Part D covers most outpatient drugs you get from the pharmacy or through mail order. There are exceptions (eg. administered by a doctor, chemotherapy) that are covered under the other parts of Medicare.
- There are four stages of Prescription Drug Coverage:
- Annual Deductible
- Initial Coverage
- Coverage Gap
- Catastrophic Coverage
- With Part D Prescription Drug Plans (PDP), coverage and costs vary by plan and may change each year.
Medicare Part C (Also known as…… Medicare Advantage)
- Medicare Part C, better known as “Medicare Advantage”, is Medicare coverage that comprises an “all in one” alternative to Original Medicare. These “bundled” health plans include Part A, Part B, and usually Part D all under one coverage umbrella.
- If you elect to go with a Medicare Advantage plan instead of Original Medicare, you still must enroll in parts A and B and pay the Part B premium.
- Many Medicare Advantage plans do not charge an additional monthly premium. And a few MA plans even pay for part of your Part B premium.
- CMS, the federal agency which oversees Medicare, requires all Medicare Advantage plans to cover everything that Original Medicare covers. Some plans may have lower out of pocket costs and provide additional benefits that original Medicare does not cover like gym memberships and hearing, dental and vision care. These extra benefits often vary from one Medicare Advantage plan to the next.
- Most Medicare Advantage plans also include prescription drug coverage at no additional cost. You don’t have to pay for a separate Prescription Drug Plan like you do with Original Medicare.
- There are many Medicare Advantage plans from which to choose.
- Generally, there are two types of Medicare Advantage plans offered -- HMOs (health maintenance organizations) and PPOs (preferred provider organizations).
- With most HMO plans you typically must choose a primary care doctor who then directs your care and generates a referral if you require care from a specialist. For any service to be covered you must remain within the HMO’s network of participating providers and within the plan’s geographic service area. Services received from non-network providers typically are not covered by the plan.
- PPO’s typically offer more choice and greater flexibility. They feature a broader network of providers from which to choose, often without need of a referral. You also have the option of seeking care from a non-network provider, though in most cases you will pay higher cost for the out-of-network services.
- If you enroll in a Medicare Advantage Plan, you are still in the Medicare program covered under Medicare.
A Word About Medicare Supplement Plans (also known as Medigap Plans)
- Medicare SupplementPlans (aka Medigap) are separate private insurance plans that work in conjuction with Original Medicare, Parts A and Part B and pay for most of the costs that remain after Original Medicare pays first.
- Supplement Plans are not considered a part of Medicare. They are standarized plans offered by private companies and they are only available for purchase to people who have Original Medicare Parts A and B and have not opted for a Medicare Advanrtage Plan. Those who opt for a Medicare Advantage Plan (aka Part C), cannot also buy a Supplement (Medigap) Plan.