The Basics of Health Care for Medicare-Eligible Individuals
Overview of Health Care Alternatives: When you become eligible for Medicare you will have two fundamental alternatives for your health care coverage, which will result in some new ID cards in your wallet or purse. On the one hand, you can end up with three separate ID cards (the 3-card option); (1) Medicare Parts A and B, (2) your Medicare Supplement (Medigap), and (3) your stand-alone Prescription Drug Plan (Medicare Part D). On the other hand, you can end up with one ID card for your Medicare Advantage coverage (the 1-card option). This is a major decision, and the choice is yours - but, we recommend that you talk with us about the differences. Here is a summary of the key factors that differentiate the two alternatives. Your choice depends on your risk tolerance and your budget.
Medicare at a Glance: "Medicare" is the federally defined and controlled program that provides basic health insurance for individuals who are: (A) 65 years of age or older, (B) under 65 years of age with certain disabilities, or (C) of any age with end-stage renel disease (ESRD: Permanent kidney failure required dialysis or a kidney transplant). Medicare consists of four PARTS.
The Four PARTS of Medicare
Medicare Part A (Hospital Insurance)
- Part A is generally free for most beneficiaries. Part A addresses the cost of inpatient care in a hospital or skilled nursing facility, but not long-term care in a nursing home. It also covers hospice and some home health care.
- Medicare Part A pays all but $1,484.00 for the first 60 days of Hospital Inpatient services. For days 61 through 90 Medicare pays all but $371.00 per day, and for days 91 - 150 Medicare pays all but $742.00 per day. Beyond 150 days of inpatient hospital care, Medicare Part A pays nothing for Hospital Inpatient services.
- Medicare Part A pays 100% of the first 20 days of Skilled Nursing / Home Care charges. After 20 days Medicare Part A pays all but $185.50 per day for an additional 80 days. Beyond 100 days of Skilled Nursing care, Medicare pays nothing; that's when Long Term Care insurance would take over.
Medicare Part B (Medical Insurance)
- Part B of Medicare has a standard monthly premium of $148.40. Individuals who have high incomes are subject to an Income Related Monthly Adjustment Amount (IRMAA). The premium paid for Part B helps cover doctor services, medical tests, hospital outpatient care, some home health care and durable medical equipment. Part B coverage includes many preventive services, such as flu shots and mammograms. It also covers a few medications, such as shots you get in a doctor's office and certain oral cancer drugs.
- The Medicare Part B Annual Deductible for 2021 is $203.00.
- In general Medicare Part B pays 80% of physician's services and other Part B covered expenses, after the deductible has been met.
Medicare Part C (Medicare Advantage Plans)
- This is an alternative to original Medicare (Parts A & B). Medicare Advantage plans are administered by private insurance companies and cover the same benefits as Parts A, B, and usually D. Some also include extra benefits, such as dental, vision or hearing services.
- Typically there are a number of restrictions with a Medicare Advantage plan; PPO / HMO networks, geographical service areas, etc.
- If an individual elects to utilize a Medicare Advantage plan, that individual cannot enroll in a Medicare Supplement plan.
- Monthly premiums are typically the same or slightly more than the appropriate Medicare Part B premium. However, because of deductibles, coinsurance factors and copays, savings can be temporary or nonexistent if services are required.
Medicare Part D (Prescription Drug Coverage)
- Medicare drug plans are managed by private insurance companies in partnerships with pharmacies. This coverage can be obtained two ways: If you have original Medicare (Parts A & B), you can enroll in a separate Part D plan. If you have a Medicare Advantage plan (Part C), prescription drug coverage often is included in the package.
- Monthly premiums and price lists (called Formularies) differ with each plan. The plan with the least expensive monthly premium is often not the most cost effective alternative. The "best" prescription drug plan will normally be the one with the lowest total annual cost, including all the monthly premiums and the cost of your prescriptions at the pharmacy.
- There is a penalty for not enrolling in a Part D plan when you are first eligible to do so, unless you have a "creditable" coverage alternative.
- Acceptable creditable alternatives include the VA and most employer / union insurance plans.
The Decision Process: Which PARTS and PLANS are best for you? That depends! For a detailed discussion about the factors that should be considered, read this Decision Process Document.