Many people look forward to qualifying for Medicare as a benefit of growing older and they reach that threshold not really understanding what it’s all about. There are many parts to Medicare so let’s break them down and learn “Medicare 101”.
Medicare Part A is the most basic portion of the plan, and simply put it covers hospital care. For most people it is premium free as this is what we pay for during our working years. We are automatically enrolled in Part A as we approach our 65 birthday (this may change to 67 due to the Debt-Ceiling Agreement). Part A covers home health care, hospice care, hospital stays (after a deductible of $1,132, in 2011, for the 1st 60 days, $283 for days 61 through 90 and $566 for days 91 through 150) and 100 days of skilled nursing facility (covered at 100% for the first 20 days and after $141.50 deductible per day for days 21 through 100 thereafter you are responsible for all costs).
Unlike Part A, Part B is elective and is not free, we pay a premium and generally speaking it increases each January 1st. The monthly premium for 2011 is $110.50 if your annual income is less than $85,000 for individuals or $170,000 for married couples. There is a financial penalty if you don’t sign up for Part B when you first become eligible at your 65th birthday. You can sign up for Part B penalty free beginning 3 months prior to your 65th birthday and up to 4 months after.
Medicare, Part B, helps pay for Doctor’s services(for 2011 a deductible of $162 applies and then we are responsible for 20% of expenses); outpatient medical and surgical services and supplies; diagnostic tests; ambulatory surgery center facility fees for approved procedures; durable medical equipment such as wheelchairs, hospital beds, oxygen, and walkers; and some other medical services that Part A does not cover, such as the services of physical and occupational therapists, and some home health care, when these services are medically necessary. Medicare, Part B, does not pay for prescription drugs, cosmetic surgery, and routine physical exams.
Part C is/are Medicare Advantage Plans (like an HMO, EPO or PPO) that are sold by private insurance companies and are approved by Medicare. These Plans combine Part A and Part B coverage. In most cases, Part C plans are a lower cost alternative and usually provides extra benefits and includes prescription drug coverage. Benefits are provided with co-pays and generally there are network providers (higher co-pays for out of network providers if one has a PPO).
Part D is the prescription drug coverage that is provided by private companies approved by Medicare. It is elective coverage however if not purchased at time of eligibility a penalty of 1% per month is added to the premium (that adds up to 12% per year). Part D can be purchased as either a stand- alone plan or be part of an approved Advantage Plan. If purchased as a stand-alone it will have a separate premium. Part D is slightly complicated in its design, the maximum 2011 deductible is $310 (some plans don’t require it) we then pay a co-pay until the portion paid by coverage hits $2840. Once reached you now are in the infamous “donut hole” while in the gap, as of 2011 you receive a 50% discount on covered brand name drugs (it is expected that by 2020 the gap will be closed). When our out of pocket costs have reached (including deductible and co-pays) $4550 your Part D plan will cover most of the costs of your medications for the balance of the year. Then it begins all over again.
There are many decisions to make when our eligibility period is obtained and all options should be explored with a qualified agent so that at 65 we are ready to make our choices.
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