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Medicare 101 Understanding Medicare

There are four parts of Medicare: Part A, Part B, Part C, and Part D. In general, the four Medicare parts cover different services, so it's essential that you understand the options so you can pick your Medicare coverage carefully.

Key Takeaways:

If you qualify for Medicare and don't know where to start, Assurity Benefits Group has state licensed benefits advisors who can help enroll you in Medicare Advantage, Medicare Supplement Insurance, and Prescription Drug Part D plans.

Maybe you’re getting close to the age of 65 or simply want to understand how Medicare works so you can help a family member or friend. While some people who sign up for Medicare are retired, others are still working. Whatever your situation, you become eligible for Medicare when you reach 65 and, in most cases, must enroll. In fact, if you are already receiving Social Security, you'll be enrolled in Medicare automatically the month you turn 65. The card will arrive in the mail.

Medicare Part A covers the costs of hospitalization. When you enroll in Medicare, you receive Part A automatically. For most people, there is no monthly cost, but there is a $1,408 deductible in 2020.

Services covered under part A may include surgeries, inpatient care in hospitals, skilled nursing facilities, hospice care, and home healthcare services.

Additionally, if you’re hospitalized, a deductible applies, and if you stay for more than 60 days, you have to pay a portion of each day’s expenses. If you’re admitted to the hospital multiple times during the year, you may need to pay a deductible each time.

Medicare Part B: Doctors and Tests

Medicare Part B covers a long list of medical services including doctor’s visits, medical equipment, outpatient care, outpatient procedures, purchase of blood, mammograms, cardiac rehabilitation, and cancer treatment.

You’re not required to enroll in Part B if you don’t have “creditable coverage” from another source, such as an employer or spouse's employer.

You pay a monthly premium for Part B. In 2020, the cost was $144.60, up from $135.50 in 2019. If you're on Social Security, this may be deducted from your monthly payment.

If you don’t enroll and you don’t have creditable coverage from another source, you may have to pay a penalty if you enroll later.

The annual deductible for Part B is $198 in 2020. Once you meet the deductible, you pay 20% of the Medicare-approved cost of the service, provided your healthcare provider accepts Medicare assignment. But beware: There is no cap on your 20% out-of-pocket expense.

For example, if your medical bills for a certain year were $100,000, you could be responsible for up to $20,000 of those charges, plus the charges incurred under Part A and D umbrellas. There is no lifetime maximum.

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What Parts A and B Don't Cover

The largest and most important item that traditional Medicare doesn’t cover is long-term care if the only care you need is custodial. If you are diagnosed with a chronic condition that requires ongoing long-term personal care assistance, the kind that requires an assisted-living facility, Medicare will cover none of the cost. However, Medicare will cover the costs for acute-care hospital services, for patients who are transferred from an intensive care or critical care unit. Services covered could include head trauma treatment or respiratory therapy.

Medicare Part C: Medicare Advantage Plan

Part C, also known as Medicare Advantage, is an alternative to traditional Medicare coverage. Coverage normally includes all of Parts A and B, a prescription drug plan (Part D), and, depending on your choice of a Medicare Advantage plan, other possible benefits. Part C is administered by Medicare-approved private insurance companies that collect your Medicare payment from the federal government. Depending on the plan, you may or may not need to pay an additional premium for Part C. You still need to pay your Medicare Part B premium. You don’t have to enroll in a Medicare Advantage plan but for many people, these plans can be a better deal than paying separately for Parts A, B, and D. Beneficiaries will still pay separate premiums if they don’t choose to have the Part “C/D” premium taken out of their Social Security check.

Medicare Part D: Prescription Drugs

Prescription drug coverage, known as Part D, is also administered by private insurance companies. Part D is required unless you have a prescription drug plan from another source, including any Medicare Advantage plan. Depending on your plan, you may have to meet a yearly deductible before your plan begins covering your eligible drug costs. Some Part D plans have a co-pay. Medicare prescription drug plans have a coverage gap—a temporary limit on what the drug plan will cover. The coverage gap is often called the “doughnut hole,” and this gap kicks in after you and your plan have spent a certain amount in combined costs. For example, in 2020 the donut hole occurs once you and your insurer combined have spent $4,020 on prescriptions. Once you have paid $6,350 in out-of-pocket costs for covered drugs, you have reached the level of "catastrophic coverage," for 2020 in out-of-pocket costs for covered drugs. This means you are out of the prescription drug “donut hole” and your prescription drug coverage begins paying for most of your drug expenses again.