What is Medicare?
Many people have an idea of what Medicare is, but do not understand the details or the costs. Medicare is the Federal health insurance program for disabled and senior citizens who are over 65 and no longer covered by another insurance plan.
Medicare is made up of four distinct parts, but only 2 of them are delivered from the government, Part A and Part B. The other two parts are purchased from a private insurance company, but those plans must follow federal and state guidelines. At the bare minimum you will need to have parts A, B and D to avoid any Medicare penalties. There are late enrollment penalties for Medicare Part A, Medicare Part B and Medicare Part D. These penalties will last the entire time you are on Medicare.
The Parts of Medicare:
- Part A: The Medicare Part A is your hospitalization insurance. It has a per period deductible and pays 80% of the Medicare approved costs. Most usually get Part A premium free if they have worked for 40 quarters and paid Medicare tax. It can also in some instances be purchased for a monthly premium.
- Part B: Medicare Part B is the insurance coverage for the doctor and durable equipment (oxygen, wheel chairs). It has an annual deductible and pays 80% of the Medicare approved amount. Part B has a monthly premium that is determined by your income from the previous two years.
- Part C: Medicare Part C is a Medicare Advantage plan, and is not a mandatory part of Medicare. A Medicare Advantage Plan, is provided from a private insurance agency that has contracted with CMS or Medicare. They have premiums ranging from $0.00 on up and, depending on your location and plan choice. Medicare Advantage Plans are actually the private insurance company administrating your Medicare benefits and are not Medicare Supplement Plans.
- Part D: Medicare Part D is the prescription drug coverage, to avoid a penalty, you will need to purchase a part D even if you do not currently take any prescriptions. Part D’s have a monthly premium, deductible and copay or coinsurance on prescriptions. The copay and/or coinsurance will be determined by the tier of your prescription and the plan that you have.
Costs of Medicare
There are different scenario’s for the costs of Medicare, such as past income, and work history. Most people will have Medicare Part A premium free and pay $134.00 (2018) for Part B.
The part B premium will be automatically be deducted from your Social Security check. If you are not receiving Social Security benefits, you will be billed for the Part B premium quarterly. The Part B premium will be paid for the entire time you have Medicare and will still be charged if you join a Medicare Advantage plan or purchase a Medicare Supplement Plan.
Medicare Supplement Plans
There are ways to cover the the deductibles and coinsurance/copay left by original Medicare, they are called Medicare Supplement plans or Medigaps. These are plans sold by a private insurance company and the prices vary from what state you are in and which plan you choose. In most states there are 10 Medicare Supplement Plans, they are standardized by the letters A-N. By standardized I mean that a Plan A from Company X must have the exact same benefits as a Plan A from Company Y, the benefits that are offered are mandated by CMS (Medicare).