In our June 26, 2020 article, “When and How to Enroll in Medicare,” we outlined important dates and the process for signing up for Medicare. You may recall when enrolling in Medicare you have two broad categories to choose from: Original Medicare or Medicare Advantage. In this article, as part of our continued series on Medicare, we will discuss the various parts of Original Medicare. Rest assured, in future articles with will discuss Medicare Advantage (sometimes referred to as Medicare Part C) in more detail as well as optional Medigap policies which can be added onto Original Medicare.
Original Medicare is offered directly by the federal government and consists of Part A, Part B, and an optional Part D.
What is covered under Original Medicare?
1. Part A covers inpatient medical costs for hospital expenses, hospice, and home health care.
2. Part B covers outpatient medical costs like doctor visits and lab work, however, there is a 20% coinsurance for these costs with no maximum limits.
3. Optional Part D coverage is for prescription drugs and is an optional addition to Original Medicare, but usually included in Medicare Advantage plans.
As a reminder, you may owe a late enrollment penalty if you go without a Part D Plan (or a Medicare Advantage Plan that includes prescription drug coverage) for 63 days or more after your Initial or Special enrollment period. And to add insult to injury, you pay this penalty for as long as you have the Medicare drug plan.
4. Optional Medigap Plans, which we will cover in more detail in a future article, are supplemental insurance plans that help individuals fill in the gaps in Original Medicare Coverage, the most significant one being the 20% coinsurance on Part B coverage for outpatient medical costs like doctor visits. These plans are standardized by the government. As of January 2020, there are 8 plans that can be sold to individuals. You can compare plans at the Health Care Financing Administration's website, medicare.gov.
What are the various costs?
1. Part A (inpatient care, hospitals, hospice)
a. Premiums:
Free if you paid into Medicare for at least 10 years.
b. Deductibles (the amount you pay before the insurance begins paying for covered costs), copays (fixed dollar amounts you pay), and coinsurance (a percentage you pay) costs:
The deductible is $1,408 in 2020 per “benefit period” (not per year). A benefit period begins when you go into the hospital or skilled nursing facility and ends when you have been out 60 consecutive days. Part A has a $352 coinsurance cost per day for every day after day 60 in the benefit period.
2. Part B (outpatient care, doctor visits, labs)
a. Premiums:
$144.60/month if your modified adjusted gross income (MAGI) is under certain thresholds. For example, for married filing jointly in 2020, if your 2018 MAGI is $174,000 or under, you will pay $144.60/month Part B premium.
b. Deductibles (the amount you pay before the insurance begins paying for covered costs), copays (fixed dollar amounts you pay), and coinsurance (a percentage you pay) costs:
Deductibles are $198/year in 2020. After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services.
Unfortunately, there is no limit to your out-of-pocket costs each year. Your 20% portion could be very high. As a reminder, many Original Medicare participants choose additional, optional Medigap Policies (which we discuss in further detail in a future article) to help cover the unlimited 20% coinsurance costs of Medicare Part B.
3. Part D (prescription drugs), optional coverage:
a. Premiums:
Premium costs vary depending on which plan you choose. The national average for 2020 is $32.74 per month.
b. Deductibles (the amount you pay before the insurance begins paying for covered costs), copays (fixed dollar amounts you pay), and coinsurance (a percentage you pay) costs:
Deductibles and coinsurance vary by plan.
Be aware that Part D coverage has what is called a “coverage gap” which begins when your total drug cost (what the insurance pays plus what you pay) reaches $4,020 in 2020. At this point Medicare Part D plans stop paying for your drugs until your catastrophic coverage kicks in when your personal drugs costs are more than $9,719 in 2020. If you expect your medications to cost more than $4,020/year, look for one of very few plans that offer to pay for drugs during the coverage gap.
Where can I get Medicare healthcare services, and do I need pre-authorization?
1. In most cases you do not need a referral to see a specialist.
2. Generally, you do not need to get a service or supply approved ahead of time for it to be covered.
3. You can go to any doctor or hospital that takes Medicare anywhere in the U.S.
4. It does not generally cover any care outside the U.S. So, if you are a retiree who enjoys international travel, you may be able to buy a Medigap policy that covers care outside the U.S. or by a travel insurance policy that covers healthcare outside the U.S.
Need some help?
Please let us know if we can help you better understand your Medicare choices and help you navigate through the enrollment process. We are Caesarstone Advisors are happy to help.
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