Retirement Planning

Understanding Medicare – Taking it Part by Part

Often when you are involved in or overhear a conversation about Medicare, terms like “Part A” and “Part D” make you wonder, “what in the world do they mean?” Fear not, this article is your guide to joining those conversations – and maybe even educating your friends and family on the subject.

Part A: Think places. It covers:

  • Inpatient hospital care
  • Home health care
  • Hospice care
  • Skilled nursing care followed by a covered hospital stay
  • Semi-private room, meals, operating and recovery room, lab tests, x-rays

Now let’s talk cost. With Part A, there is no premium as long as you, the insured, have at least 40 quarters (10 years) of Medicare-covered employment. However, there are deductibles and coinsurance if you become admitted to one of the places mentioned above. In that case, benefit periods will  determine the amount you pay.

The benefit period begins on the first day the insured is in the hospital and ends after 60 days. The deductible when admitted to the hospital will be $1,408 in 2020. In other words, the deductible covers 60 days. Beyond that, the following coinsurances amounts will apply:

  • $352/day for days 61-90.
  • $704/day for days 91-150 for each lifetime reserve day. Beneficiaries are limited to a total of 60 reserve days over the course of their life.
  • $176/day for skilled nursing care days 21-100. The first 20 days following a hospital stay are fully covered.

Part B: Think services. It covers:

  • Doctor’s visits
  • Lab tests
  • Ambulance
  • Outpatient therapy
  • Clinical research
  • Mental health (inpatient, outpatient, partial hospitalization)
  • Getting a second opinion before surgery
  • Durable medical equipment (wheelchairs, hospital beds, walkers, oxygen)

Often there is a misunderstanding aboutwhat is NOT covered under Medicare Part B:

  • Eye exams
  • Dental care, dentures
  • Hearing aids
  • Cosmetic surgery

You should know that you will automatically be enrolled in Part B, unless you opt out. In terms of cost, the standard premium is $114.60 per month for 2020. Premiums increase for individuals with annual incomes over $87,000 (single tax filer) or $174,000 (married filing jointly). These premiums are deducted directly from Social Security payments so it’s a cost that you will not see directly. There is also a $198 annual deductible. After satisfying the deductible, then Part B covers 80% of costs.

Part C: Think of an all-inclusion choice. It combines Parts A and B (and sometimes D).

Also referred to as Medicare Advantage, Part C is the private insurance alternative to the federally run Medicare. These plans cover everything that Medicare Parts A and B cover, but some plans even cover dental and vision care, which as mentioned earlier, is specifically excluded from Part B. Some Medicare Advantage plans additionally wrap prescription drugs (Part D) into their coverage. These plans are either health maintenance organizations (HMOs) which allow you to be referred to a specialist by a primary care physician or a preferred provider organization (PPOs), which offer a network of doctors that you can choose from without a referral.

Out-of-pocket costs for Part C vary by plans, but you can expect premiums, deductibles, and co-pays.

Part D: Think prescription drugs. It covers:

The cost of self-administered prescription drugs. However, you should know that there is a wide variety of covered drugs across plans. Every Medicare prescription drug plan has a list of covered drugs. Most require a premium and have deductibles as well as co-pays.

Lastly, Medigap, or Medicare supplemental insurance, is extra health insurance sold by private insurance companies. Medigap is  designed to offset the costs associated with Medicare deductibles and coinsurance.

There it is. That’s your blueprint for the coverage and costs of Medicare. Hopefully, you were able to learn a thing or two and can now participate in those lively Medicare conversations in the future. If you have questions about how Medicare and healthcare costs play into your financial plan and future, reach out to us. We are always here to offer advice.