One of the best ways to plan a smooth, enjoyable retirement is to understand what Medicare covers and what you can expect to pay.
Medicare is made up different areas of coverage which include: Part A, Part B, Part C and Part D. Depending on your situation, you can get Medicare coverage through a combination of these Parts. The combination that is right for you will determine what you pay for your coverage.
Expert tip: If you are already enrolled in Medicare, your red, white and blue Medicare card will state whether you have Part A, Part B or both. It also shows the date your coverage begins.
A note from our Benefit Advisors: We know this is confusing. If you have questions, we are here to provide answers. Call us at 1-844-388-6565.
What Does Part A Cover?
Medicare Part A is sometimes referred to as “hospital insurance.” In general, Medicare Part A covers the following:
- Hospital care
- Skilled nursing facility care
- Nursing home care (as long as custodial care isn’t the only care you need)
- Home health services
How Much Does Part A Cost?
Part A includes a monthly premium; however, most people do not have to pay this. You can get “premium-free” Part A if you or your spouse paid Medicare taxes while working for at least 10 years (40 quarters).
If you do not qualify for premium-free Part A, the monthly premium in 2019 is $437. You can find more details about the Part A premium here.
There are additional costs you can expect to pay for various types of care, like if you go into the hospital or require skilled nursing. Here are the details:
- $1,364 deductible for each benefit period
- Days 1-60: $0 coinsurance for each benefit period
- Days 61-90: $341 coinsurance per day of each benefit period
- Days 91 and beyond: $682 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
- Beyond lifetime reserve days: all costs
Expert tip: If you are planning to work beyond age 65, there are important things you need to know about Part A, like how it could impact your Health Savings Account if you have one. Be sure you are aware of these things before making any decisions or changes.
What Does Medicare Part B Cover?
Medicare Part B, sometimes referred to as “medical/doctor insurance,” generally covers two types of medical services. First, it covers medically necessary health services and supplies, like outpatient doctor visits, tests, wheelchairs, walkers, etc. Second, Part B covers preventive services like screenings, annual wellness exams, etc.
A more exhaustive list for Part B coverage, found on Medicare.gov, includes items like:
- Clinical research
- Ambulance services
- Durable medical equipment (DME)
- Mental health
- Inpatient Care
- Outpatient Care
- Partial hospitalization
- Getting a second opinion before surgery
- Limited outpatient prescription drugs
You can also find a long list of Medicare-approved preventive services and screenings on the Medicare.gov website.
How Much Does Part B Cost?
Medicare Part B has a standard annual deductible ($185 in 2019) and a monthly premium ($135.50 for most Medicare enrollees). After the deductible is met, you typically pay 20% of the cost of services and Medicare covers the rest. When budgeting for your Part B expenses, note that there is no cap on the 20% that you will be responsible for paying.
What is Medicare Part C?
While Medicare Part C includes a variety of different plan types, one of the most popular and easily recognized options is Medicare Advantage (MA). MA plans are health insurance plans offered by private insurance companies. These insurance companies are contracted and approved by Medicare to offer plans that roll Part A, Part B and sometimes even Part D benefits into one plan.
What Do MA Plans Cover?
Every MA plan must provide the same basic coverage as Medicare Parts A and B, but many plans also feature extra benefits, like vision, dental and fitness memberships, all in one. Some plans, referred to as Medicare Advantage Prescription Drug plans (or MAPDs), even include prescription coverage. Many retirees find MA options appealing because their benefits are rolled into one plan, they have access to additional features (vision, dental, fitness memberships, etc.), and the plans often feature an out-of-pocket maximum which caps the amount they might have to pay in a given year.
How Much Does an MA Plan Cost?
Just like when buying a car, the amount you pay for an MA plan can vary based on the plan you select and the features it includes. In general, Medicare Advantage plans can include:
- A monthly premium
- Copays and/or coinsurance
- An annual deductible
- An out-of-pocket maximum
During a set time of year (called Medicare’s Annual Enrollment Period), insurance companies are allowed to make changes to their MA plans, meaning costs and benefits can change.
What Does a Medicare Supplement Cover?
Medicare Supplement plans, also known as Medigap, are health insurance policies sold by private insurance companies. Medicare Supplements are designed to be paired with Medicare Parts A and B to “fill in the gaps” that Medicare does not cover (like copays, coinsurance and deductibles). Many retirees like Medicare Supplements because they can help protect you from high medical expenses and you rarely receive any bills in the mail. However, you will likely pay a higher monthly premium for a Medicare Supplement compared to a Medicare Advantage plan.
If you choose to purchase a Supplement, your coverage from both Medicare and your Supplement work together. In other words, Medicare pays its share of approved covered health care costs and then sends the remaining balance to your Supplement insurance company. At this point, as long as the services or procedures are qualified, your Supplement will pay most or all of the remaining costs, based on the plan chosen.
Expert tip: Supplement plans will usually cover the cost of care provided by any doctor, hospital or facility that accepts Medicare.
It’s important to note that a supplement plan only supplements your other benefits—meaning you must receive your Part A, Part B and Part D benefits through another source. If you do not enroll in these other important coverage areas, you could incur one or more penalties.
Because Medicare Supplements do not offer Part D benefits, you will need to enroll in a stand-alone Medicare Part D prescription drug plan or another form of creditable drug coverage (meaning coverage equal to or greater than Medicare’s minimum standards of coverage).
How Much Do Medicare Supplements Cost?
Many health insurance companies sell Medicare Supplements. However, each plan can vary in levels of coverage and cost. Medicare Supplements’ plan benefits and costs can also change each year, but unlike Medicare Advantage plans, these changes are not tied to Medicare’s open enrollment. Rather, these changes are unique to your plan and insurance company. While the majority of Supplement enrollees do not receive bills for health care expenses, you do pay a monthly premium.
What Does Medicare Part D Cover?
Medicare Part D is prescription drug coverage available to anyone with Medicare Part A and/or Part B. Much like Medicare Part C, Part D plans are offered by private insurance companies.
Reminder: Many MA plans include Part D coverage and are referred to as MAPD plans. Medicare Supplements do not include prescription coverage and therefore require enrollees to purchase a separate Part D plan
How Much Does Part D Cost?
Actual costs of Part D plans, as well as the amount you pay for your medications, are set by the insurance companies and approved by the government.
Most Part D plans include:
- A monthly premium
- An annual deductible
- An out-of-pocket maximum
- A prescription drug formulary
- Coverage phases (Initial Coverage Phase, the Coverage Gap or the Donut Hole and the Catastrophic Coverage Phase)
Your costs will vary based on the medications that you take and the plan you choose. Like with Medicare Advantage and Supplement plans, insurers can make changes to their plans’ benefits and costs. If your income is above a certain level (adjusted gross income of $85,000 per individual or $170,000 for a married couple filing jointly), you will also pay a Part D surcharge. This additional charge is due on top of your plan’s monthly premium.
Other Important Factors to Be Aware Of
“Provider networks” describe a list of doctors, facilities, hospitals, etc. that have contracted with insurance companies to provide medical service to their members. Many Medicare Advantage plans and Prescription Drug plans feature “in-network” and “out of network” benefits. Understanding this difference can have a significant impact on your health care costs each year.
If your plan features a network, and you choose to receive medical care from a doctor or hospital that is in-network, you will pay the contracted amount for that service. However, if you see a doctor or go to a facility that is out of network, you will likely pay a higher amount for the care you receive. Likewise, if you have your prescriptions filled at an in-network pharmacy versus an out-of-network pharmacy, you will likely save money.
How Medicare Works with Other Insurance
Depending on your situation, you may have both Medicare and another form of insurance, perhaps through an employer. There are specific rules for these types of situations determining which insurance pays first and how much you can expect to owe after both coverages have paid their share.