Medicare 101: Understanding Each Part and Expected Cost
Medicare is a federal health insurance specifically for people over the age of 65, those with disabilities, and those with kidney failure. This insurance program helps cover the costs of hospital stays, doctor’s visits, prescriptions, and more. To better understand how Medicare can help you, here are some Medicare basics:
The Different Parts of Medicare
Part A: Hospital Insurance.
Part A provides coverage for hospital stays, nursing home care, hospice care, and limited home health services.
Part B: Medical Insurance.
Provides some coverage for doctor’s visits, outpatient care, medical supplies, and preventative services.
Part C: Medicare Advantage Plans.
Essentially, this is the part of Medicare that covers prescription drugs. The most confusing section in Medicare, Part C is a collection of plans that are offered by a private company to help provide you with Part A and B benefits.
Part D: Prescription Drugs.
This section provides additional drug coverage for those on the original Medicare program, the Medicare Medical Savings Account plan, some Private-Fee-for-Services plans, and some Medicare Cost Plans.
- Each plan has its own list of covered drugs, called formularies, that are divided into different tiers. Each tier determines the cost; the higher the tier, the higher the cost. Formularies sometimes change due to guidelines but are required to provide written notice.
The overall cost of healthcare depends on your plan, your needs, and your prescriptions. There are a few circumstances that can drive the cost of care, including: needing drugs that aren’t on your formulary, late enrollment fees, and choosing out-of-network services. Here is basic breakdown of Medicare costs.
Most drug plans charge a monthly fee in addition to their Part B premium. Only the Medicare Advantage Plan (Part C) or Medicare Cost Plan include the cost of prescriptions in the total amount of the monthly premium. The cost and stipulations of premiums depends on the plans you choose.
- Medicare Advantage programs provide a total cost
- Traditional Medicare requires you to pay premiums for each Part A, B, and D.
- Most only pay for their Part D premium, depending on your income.
- Those with incomes $85,000 single and $170,000 married may have to pay a “Part D income-related monthly adjustment amount (Part D-IRMAA)”
Yearly Deductible for Drug Plans
This is the amount you must pay each year before Medicare begins to contribute. Once you pay your deductible, Medicare pays to for your healthcare and prescription drugs. Although these vary depending on the plan, no plan has a deductible higher than $400 and some have no deductible at all.
This is the amount you pay for each prescription after you pay your deductible. Some Medicare Prescription Drug Plans require different copayments/coinsurance at different tiers and some require none at all. Copayment (Copay) uses a set dollar amount for drugs on each tier; coinsurance requires you to a pay percentage of the cost of the drug
Known as a “donut hole”, this is a temporary limit on what the drug plan covers. This only happens to those that have spent over $3,700. Those that fall into the coverage gap deal with higher costs for prescriptions and denial of coverage.
Late Enrollment Penalty
This is the amount added to your Part D monthly premium when you go without coverage for more than 63 days. The cost depends on how long you went without coverage. Medicare multiplies the national base beneficiary premium by 1% times the number of months you went without credible coverage
Truthfully, Medicare is a complicated system that requires some know-how. Knowing which plan is best can seem impossible, especially when the rules and requirements change each year. This article can serve as a guide to help you understand the basics but we recommend discussing your options with benefits counselor to better understand your options. For those considering residential senior care, many offer on-site senior advisers that may also be able to help.
About the Author: Victoria K. Stickley is a copywriter, editor, and senior content manager based in the Dallas area. Her graduate education in counseling and research has helped immensely in her writing as well as the care she provides for her grandparents. She currently provides support and resources to senior care websites as she learns and experiences senior care first-hand.