The ABCDs of Medicare

Medicare is a very confusing topic for many people. In fact, only about half of Americans understand Medicare fully and can make the right choices when it comes time to sign up. This article will help you navigate Medicare by explaining the A, B, C, and D parts of Medicare in detail.

Part A

Original Medicare consists of Part A and Part B.

Think of Medicare Part A as your hospital insurance. Generally speaking, Part A covers inpatient hospital stays, skilled nursing facility care, nursing home care (not including custodial or long-term care), hospice care, and home health care.

There are, of course, stipulations to these services.

For example, to be eligible for inpatient hospital care, the hospital must accept Medicare, and you must be admitted following a doctor’s orders.

Costs Associated with Medicare Part A

Premiums

If you have met the requirements put in place by the federal government, you will not pay any premiums for Medicare Part A. (If you have worked 40 quarters at an eligible employer, you have met the requirement.) Meeting these requirements means that you will have Medicare Part A for “free” since you paid Medicare taxes during your working years.

Deductibles

Medicare Part A comes with a $1600 deductible per benefit period.

After you have paid your deductible, your copayment will vary depending on the services you receive.

Part B

Medicare Part B is your doctor or medical insurance. Part B includes preventive services, doctor care, outpatient services, home health care, and durable medical equipment.

The preventive services include a “Welcome to Medicare” preventive visit, annual wellness visits, many vaccines, cancer screenings, bone density scans, and much more.

Costs Associated with Medicare Part B

Premiums

In 2023, the standard monthly premium for Medicare Part B is $164.90. This premium can be increased for high-income earners. If you fall into the high-income category, read our article about how to reduce your Medicare Part B premium.

Deductibles

The annual deductible for Medicare Part B in 2023 is $226. After you have paid the deductible, your copayment for services will generally be around 20%.

Late-Enrollment Penalty

If you do not sign up for Medicare Part B during your initial enrollment period, you will incur a late-enrollment penalty. (This penalty will not apply if you have creditable coverage outside of Medicare. Read our article for more information about creditable insurance.)

The penalty is an extra 10% for each year you were eligible to sign up but did not enroll. This penalty is added to your monthly premiums and will never be removed.

Part C

We mentioned earlier that Original Medicare consists of Parts A and B. Part C is an option that combines Part A and B and offers extra benefits. It is commonly referred to as Medicare Advantage.

As you may have noticed when discussing Part A and Part B, Original Medicare does not typically cover prescription drugs or dental, vision, and hearing services. However, Medicare Advantage Plans offer coverage for these services.

Private health insurance companies offer Part C plans. Most of the time, a Medicare Advantage Plan will require the member to seek care from providers who are in the plan’s network.

Costs Associated with Medicare Part C

Premiums and Deductibles

Medicare Part C premiums and deductibles will vary by the insurance company. Often, they will have a lower premium (some even have no premium) and a lower out-of-pocket cost than Original Medicare.

It is, however, essential to understand the trade-offs between Medicare Advantage Plans and pairing Original Medicare with a Medigap policy. We’ll discuss Medigap Plans later in this article.

Part D

Medicare Part D holds your prescription drug coverage. If you do not enroll in Medicare Advantage or your Medicare Advantage Plan does not include prescription drug coverage, you will want to enroll in Medicare Part D.

Costs Associated with Medicare Part D

Premiums and Deductibles

Like Part C Medicare Advantage plans, your premium and deductible will vary depending on several factors.

Your income can impact your premium, just as it can with Medicare Part B. If you are considered a high-income earner, you will pay higher premiums.

Other factors include the company you purchase the plan through, your current medications, and what pharmacy you prefer.

You can change your Part D plan each year during the Annual Election Period, from October 15 to December 7.

Late-Enrollment Penalty

Another thing Part D has in common with Part D is the late-enrollment penalty. The same rules apply to Part D as they did with Part B, but the penalty is just 1% versus the 10% seen with Part B.

This is the most common penalty in Medicare. Therefore, even if you are not taking any medications, it is important to enroll in Part D during your initial enrollment or special enrollment period.

The Coverage Gap

The Coverage Gap is also called the Donut Hole and is part of every single Part D plan. This clause is difficult to understand, but it is extremely important if you are taking many medications.

Medigap Plans

These fall outside of the Medicare Parts A – D sector but are included to complete the big picture of Medicare.

If you do not enroll in a Part C plan, you are eligible to enroll in Medigap. Medigap plans are also called Medicare supplemental plans. They are meant to pay the 20% of expenses that Original Medicare does not cover.

Like Part C plans, these are offered by private insurance companies. However, unlike Part C plans, they are regulated by the federal government. This regulation means that these plans are standardized. Therefore, no matter which company you purchase a Medigap plan through, it will be exactly the same.

These plans do not offer prescription drug benefits or additional services like dental, vision, and hearing. You will want to purchase a separate Part D plan and a Dental, Vision, and Hearing (DVH) plan.

Costs Associated with Medigap Plans

Premiums and Deductibles

Your monthly premium and deductible will be the only thing that changes between insurance companies. You will not have better coverage if you purchase Plan G through Company A versus Company B, but your premium may vary.

Premiums are based on which type of plan you choose. Each plan offers different coverage levels.

We’ve just scratched the services of Medicare, but we hope this article has given you an understanding of the big picture. Don’t try to undertake this journey alone. Talk to one of our trusted independent agents. There is absolutely no additional cost, and we can save you time, money, and frustration down the road.