The Parts of Medicare

As you approach the magic age of 65, you are probably starting to think about becoming eligible for Medicare. And you most likely have lots of questions. Is it free? Or does it cost me money? What does it cover?

Probably the best place to start is in understanding Medicare’s “parts.”  Medicare has conveniently segmented the various coverage options into four different parts: Part A, Part B, Part C, Part D, and Medigap. Let’s take a quick look at each part.

Medicare Part A, Hospital Insurance

Medicare Part A is your hospital insurance. Think of it as your room and board during hospital stays, including meals. It covers the cost of a semi-private room, home health care, and the cost of skilled nursing facility stays. It also covers blood transfusions requiring more than three pints of blood.

Medicare Part A is free for most people, as long as they have worked at least 10 years in the U.S.

Medicare Part B, Medical Insurance or Outpatient Insurance

Medicare Part B is your outpatient insurance. It covers preventive care, doctor visits, and lab work. It covers outpatient services that are deemed medically necessary, such as diagnostic imaging. Many of these procedures happen in a hospital. However, they fall under Part B because a physician provides the service.

Part B also covers more expensive things such as surgeries, ambulance services, emergency care, chemotherapy, radiation, and dialysis. You need to have Part B if Medicare will be your primary or only coverage so that you don’t have to pay for expensive treatment out of pocket.

If you have no other coverage, such as employer coverage, it’s very important to have both Part A and Part B. The standard monthly Part B premium in 2019 is $135.50 or higher, depending on your income.  If you make over $85,000 as an individual tax filer or over $170,000 on a joint return, you can expect to pay more for Part B.

One of the most important things to know about Medicare Part A and Part B is that in most cases, if you don’t sign up for Part A (if you have to buy it) and Part B when you’re first eligible, you may have to pay a late penalty. See Initial Enrollment Period for more information.

Medicare Part C, aka Medicare Advantage Plans

Medicare Part C is just another name for private Medicare insurance and is referred to as Medicare Advantage. Medicare Advantage plans are private health plans you can choose instead of Medicare. They typically include Part A, Part B, and sometimes Part D from one insurance carrier.

Medicare Advantage plans are like HMOs or PPOs. They typically have lower premiums than Medigap plans, but you may pay more copays. So they are not necessarily cheaper in the long run.

Medicare Part D, Prescription Drug Coverage

Medicare Part D provides coverage for retail prescription drugs. These plans are provided by private insurance carriers. You don’t enroll in them through the Social Security office.

Like Parts A and B, if you don’t join a Medicare drug plan when you’re first eligible, you’ll likely pay a late enrollment penalty if you join a plan later. And to make matters worse, you’ll generally pay this penalty for as long as you have Medicare prescription drug coverage. Signing up during your Initial Enrollment Period can save you money down the road.

Medigap, Medicare Supplement Insurance

Medicare pays for much, but not all, of the cost for health care services and supplies. Medicare Supplement Insurance policies can help pay some of the remaining costs, such as copayments, coinsurance, and deductibles. These plans are also called Medigap policies and are sold by private companies. Medigap policies are standardized and must follow federal and state laws.

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