Have you just become eligible for Medicare and are confused by all the options available? You’re not alone. Just like buying a car, you can have many different makes and models of Medicare plans to choose from, not just one. And that’s because Medicare isn’t just one thing – it’s divided into 4 parts, each offering something different. In this article we will be discussing the differences between Medicare Part A and B.
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It’s likely you’ve never had your Medicare options laid out for you as a simple set of choices. Our goal here is for you to leave knowing the basic choices available to you when you have Original Medicare.
- To be clear, this will only outline your options within the scope of Medicare insurance.
- If you keep employer coverage or choose to participate in non-insurance related products (such as religious medi-share style policies), then this will not help you with those options.
To be able to choose wisely among all options, we must first understand what Original Medicare (Medicare Part A and B) actually covers, which benefits are mandatory and which are optional. While it’s nice to have both these components of your Medicare benefits, they also come with some limitations. That’s why many retirees like to enroll in a Medicare Advantage or Medicare Supplement plan.
Three Kinds of Coverage
Most are surprised to hear that it’s ONLY three. With as much mail and advertising that you’ve come across, you may be thinking that there should be plenty more. In all honesty, there are many options within these three kinds of coverage, but there are only three main ways to manage your Medicare insurance.
1. The Bare Necessities
Sometimes you just want to look for the bare necessities.
In terms of your Medicare options, this is when you just have:
- Original Medicare (Part A & B)
- Prescription Drug Plan (Part D)
You can go to any provider in the country that accepts Medicare, which you will find is a vast majority. You are only responsible for your Part B premium (some exceptions apply where you are also responsible for Part A) and the premium for a Drug Plan.
For reference, the average Part B premium is $148.50 per month and the average Drug Plan premium is about $43.07 per month.
It’s important to note that Original Medicare doesn’t cover all medical related services.
This isn’t necessarily bad, but both of the following two options are set up to lower Original Medicare copays & coinsurances and may cover extra services not covered by Original Medicare.
So, this option is likely to have the highest out-of-pocket costs for services. For a list of what’s not covered under Original Medicare, please refer to our article on “What Medicare doesn’t Cover”.
Because Medicare has penalties for not enrolling in Part B and Part D when eligible, this option will ensure you don’t pay any penalties.
2. The Upgrade
This option is easy to grasp as long as you understand the first.
We are simply taking “The Bare Necessities” (Original Medicare and a Drug Plan) and adding a Medicare Supplement (Medigap) plan.
A Medicare Supplement is a plan that simply supplements your Original Medicare by picking up some or all of your Original Medicare deductibles, copays and coinsurances.
“The Upgrade” comes with an additional cost. This option is often the most expensive because it maintains the network freedom of Original Medicare, while eliminating the unpredictable out-of-pocket costs associated with “The Bare Necessities”.
On top of your Original Medicare and Drug Plan costs, you will have to pay anywhere from $40-$150 per month for a Medicare Supplement plan as a 65 year old. These plans are often priced based on your age and county. So, as you get older these prices will also increase.
For this reason, on average only around 17-20% of a given county will choose to enroll in “The Upgrade”.
Medicare Supplement plans have enrollment restrictions depending on your health, but there are certain times when you can enroll during a guaranteed acceptance window. If you are just now starting to receive Medicare benefits or are within two months of leaving employer coverage, then you are eligible for guaranteed acceptance into one of these plans.
Available Supplement plans are Classified by Letters of the Alphabet
There are up to 11 kinds of Supplement plans available classified by letters of the alphabet, which offer various levels of coverage.
The more coverage a plan offers, the higher price in premium it will be. Among the various levels of coverage, there is a plan that shifts all of your Original Medicare shares of costs to be paid for by the Supplement. This is known as the F plan.
With this plan, it’s possible to pay your monthly premiums and subsequently nothing more for all Medicare covered services received. Just show your insurance cards without worry about potential out-of-pocket costs.
3. The All-Inclusive Package
Many people find an all-inclusive package to be of great value.
They save on costs by bundling everything. This is what a Medicare Advantage Plan (Part C) does.
Often, the services you need are provided onsite or through an approved vendor.
You can generally upgrade your package to provide more value as well as choose a bundle package that is tailored for you.
A Medicare Advantage Plan is when a private company manages your Original Medicare in exchange for lower shares of cost and increased coverage. By law, at minimum, these plans have to offer: at least what Original Medicare covers, an extensive network of physicians, and a quality of care on par with Original Medicare.
True to the metaphor, on average anywhere from 30-50% of a given county will be enrolled into “The All-Inclusive Package”.
Let’s first talk about the advantages of this option.
- They will have either a low or $0 premium, lower shares of cost for most all of your Original Medicare benefits.
- Many Medicare Advantage plans offer primary care and specialist visits as well as diagnostic tests at no cost.
- A maximum out-of-pocket limit for all medical services received within a given year is automatically included.
- A maximum out-of-pocket limit is great for those concerned about catastrophic costs that could potentially arise from what life unexpectedly deals you.
- Lastly, they will often cover a variety of additional services that Original Medicare doesn’t cover.
- These can include: glasses and eye exams, hearing aids, over-the-counter medications, gym benefits, and more. These additional benefits vary by plan.
Lookout For Plans that have Network Restrictions
As we alluded to earlier, these plans do have network restrictions. This means that the doctors you wish to see must accept the plan you choose.
Please take note that just because they accept Medicare does not mean that they will necessarily accept any Medicare Advantage plan.
Since these plans are “The All-Inclusive Package”, your doctors will all have to be participating providers for the same plan in order for you to see them in-network. This generally won’t be an issue, but it’s important to do your homework before choosing an enrollment option. Networks are developed within and across counties.
So, your doctors will often have a few Medicare Advantage plans that they accept.
If you are interested in the most bang for your buck and are okay with doing your due diligence prior to making your choice, then “The All-Inclusive Package” may be the option for you.
Medicare Part A
Medicare Part A will be free if you have worked and paid Medicare taxes for at least 40 quarters (10 years) in the United States.
Most people don’t pay a monthly premium for Medicare Part A, due to work history.
If you don’t qualify for premium-free Part A, you can buy Part A.
Premium-Free Part A
Medicare Part A is also called “original Medicare.” Most people get premium-Free Medicare part A. This is the insurance plan that covers:
- hospital stays and services
- skilled nursing facilities
- walkers and wheelchairs
- hospice care
It even covers home healthcare services if you’re unable to get to a hospital or skilled nursing facility.
You usually don’t pay a monthly premium for Medicare Part A (Hospital Insurance) coverage if you or your spouse paid Medicare taxes for a certain amount of time while working. In the world of Medicare, this is sometimes called “premium-free Part A.”
You can get premium-free Medicare Part A at 65 if:
- You already get retirement benefits from Social Security or the Railroad Retirement Board.
- You’re eligible to get Social Security or Railroad benefits but haven’t filed for them yet.
- You or your spouse had Medicare-covered government employment.
If you’re under 65, you can get premium-free Medicare Part A if:
- You got Social Security or Railroad Retirement Board disability benefits for 24 months.
- You have End-Stage Renal Disease (ESRD) and meet certain requirements.
Part A premiums
People who buy Part A will pay a premium of either $274 or $499 each month in 2022 depending on how long they or their spouse worked and paid Medicare taxes.
In most cases, if you choose to buy Medicare Part A, you must also:
- Have Medicare Part B (Medical Insurance)
- Pay monthly premiums for both Part A and Part B
Contact Social Security for more information about your options, or give us a call at (866) 711-8203. We’ll be happy to help you navigate the Medicare maze and show you the different options you have for your Medicare healthcare coverage.
Medicare Part B
Medicare Part B premium will cost $170.10 per month and may be deducted from Social Security checks, Railroad Retirement checks or personal check each month.
This amount may vary in a few situations. Individuals with income over $91,000, or filing jointly with incomes over $182,000 pay an increased premium, up to $578.30 per month based on the income related monthly adjustment amount (IRMAA).
Those With Medi-Cal may have their Medicare Part B premium paid by the state.
Medicare Part B Deductible and Coinsurance
You pay $233 per year in 2022 for your Medicare Part B deductible. After your deductible is met, you typically pay 20% of the Medicare-approved amount for these:
Part B annual deductible:
- Most doctor services
- Outpatient therapy
- Durable medical equipment (DME)
- Clinical laboratory services: You pay $0 for Medicare-approved services.
- All services listed below (out patient mental health services & outpatient hospital services)
Outpatient mental health services:
- You pay nothing for your yearly depression screening.
- 20% of the Medicare-approved amount for visits to your doctor or other health care provider to diagnose or treat your condition.
Outpatient hospital services:
You usually pay 20% of the Medicare-approved amount for the doctor, hospital, or other health care provider’s services.
For services that can also be provided in a doctor’s office, you may pay more for outpatient services you receive in a hospital than what you would pay if you received the same care in a doctor’s office.
However, the hospital outpatient copayment for the service is capped at the inpatient deductible amount of $1,556.
Part B Premiums
The standard monthly premium for Medicare Part B enrollees will be $170.10 for 2022, an increase of $21.60 from $148.50 in 2021.
An estimated 2 million Medicare beneficiaries (about 3.5%) will pay less than the full Part B standard monthly premium amount in 2022 due to the statutory hold harmless provision, which limits certain beneficiaries’ increase in their Part B premium to be no greater than the increase in their Social Security benefits.
The annual deductible for all Medicare Part B beneficiaries is $233 in 2022, an increase of $30 from the annual deductible $203 in 2021. Premiums and deductibles for Medicare Advantage and Medicare Prescription Drug plans are already finalized and are unaffected by this announcement.
Since 2007, a beneficiary’s Part B monthly premium is based on his or her income. These income-related monthly adjustment amounts (IRMAA) affect roughly 5 percent of people with Medicare Part B.
The total premiums for high income beneficiaries for 2022 are shown in the following table:
Beneficiaries who file individual tax returns with income: | Beneficiaries who file joint tax returns with income: | Income-related monthly adjustment amount | Total monthly premium amount |
---|---|---|---|
Less than or equal to $91,000 | Less than or equal to $182,000 | $0.00 | $170.10 |
Greater than $91,000 and less than or equal to $114,000 | Greater than $182,000 and less than or equal to $228,000 | $68.00 | $238.10 |
Greater than $114,000 and less than or equal to $142,000 | Greater than $228,000 and less than or equal to $284,000 | $170.10 | $340.20 |
Greater than $142,000 and less than or equal to $170,000 | Greater than $284,000 and less than or equal to $340,000 | $225.60 | $442.30 |
Greater than $170,000 and less than $500,000 | Greater than $340,000 and less than $750,000 | $374.20 | $544.30 |
Greater than or equal to $500,000 | Greater than or equal to $750,000 | $408.20 | $578.30 |
What’s Not Covered With Medicare Part A and B?
Original Medicare (Medicare Part A and B) will not cover any home health services that are not medically necessary.
This includes having someone help you with bathing, going to the bathroom, cleaning the house, shopping, or any other service that can fall under assisted living with home health.
This would also include any nursing homes or assisted living facilities.
To receive coverage for these services you must either pay out of pocket, have a long term health policy, or have Medi-Cal.
Non-Medical Home Health
Medicare doesn’t cover everything. If you need services Medicare doesn’t cover, you’ll have to pay for them yourself, unless you have other insurance or a Medicare health plan that covers them.
Ancillary Services
There are many services that are considered “extra” that aren’t covered under Original Medicare (Medicare Part A and B). These include:
- Most dental care, including dentures, dental procedures or cleanings, fillings, dental plates, tooth extractions, and checkups
- Over-the-counter medications and items
- Hearing aids
- Routine foot care
- Eye exams and prescription glasses
- Acupuncture and Chiropractic
- Delivered Meals and Food Cards
- Transportation for medical appointments
Part D
Medicare Part A and B does not include prescription drug coverage. Some medications may be covered when administered within a doctors office.
Outside of the doctors office any pharmacy filled medications will require a prescription drug plan (PDP) to be purchased from a private company. Medicare requires you to purchase a PDP, and you may be subject to a penalty if you do not enroll into a PDP when you first receive Medicare Part A and B benefits.
Any Medicare Beneficiary who does not enroll into a PDP and does not have Creditable Coverage will incur a 1% penalty of the National Drug Premium average for every month the beneficiary is without Creditable Drug Coverage. If you have any of the following below then you are not required to buy a PDP and will not incur a penalty.
Examples of Creditable Coverage:
- Group/Employer Coverage
- VA
- TriCare
Other Medicare Plan Options
Now that you understand what is covered with original Medicare (Medicare Part A and B), your options for additional coverage will make sense.
If you have Original Medicare (Medicare Part A and B) as your primary insurance, then you have three roads to choose from as to how you may manage and maximize your coverage.
Medicare Part D
The most basic option is to just enroll into Medicare Part A and B of Original Medicare and add a Prescription Drug Plan to avoid any penalties. This option allows for freedom and low monthly costs, but higher copays, coinsurances and risk
Medicare Supplement
This option is when you enroll into Medicare Part A and B of Original Medicare, purchase a Medicare Supplement, and add a Prescription Drug Plan to avoid any penalties. This option offers freedom at a higher monthly premium, but can potentially have the lowest out-of-pocket expenses when receiving care
Medicare Advantage
This option is well-known as a combination program. A private company manages your Medicare Part A and B, covers many services excluded by Medicare, and often includes a drug plan at no extra cost. These plans have low-to-no monthly premium, low-to-no copays for many services, and include coverage for many services not covered by Original Medicare; all with the only stipulation that you stay within network
How A trust Local Medicare Broker Can Help You
We hope that now you will be more educated than most of your peers and even most healthcare professionals! Believe it or not, most healthcare professionals do not understand or know what your Medicare options are either. Many times they are only aware of what your options are with them, and even then they might not know how those options affect your costs and experience with others in the healthcare industry. This is why it’s important for you to know your options and have a way of navigating your healthcare. We recommend partnering with a trusted Local Medicare broker to take this lesson a step further and help teach you what your specific options are based on your needs and circumstances. Brokers are not allowed to charge you anything for their services. They are paid fairly and evenly by the health plan, no matter which option you choose. To learn more, please refer to our class on “How do Medicare Brokers get Paid?”
For questions, a review of your situation, support in enrolling into Medicare or any other Medicare related service, please contact us by scheduling the link below to make an appointment with a Medicare agent.