Understanding Health Insurance: A Rundown of Medicare’s Four Parts

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You don’t have to be sixty-five to know that Medicare tax and benefit structures have always been a maze. And now that Congress has finally agreed upon and mapped out a new and improved Medicare program, many people are finding themselves more turned around than ever before.

Every few months, more Medicare-related provisions from the 2010 Patient Protection and Affordable Care Act (PPACA) are kicking in. On the whole, this means Medicare recipients are getting better coverage, but it also means that for millions of people, policies are changing right now.

As it becomes more and more apparent that Medicare is going through some rapid changes, anyone rapidly approaching 65 will need to seriously review the program’s new basics. After all, you can’t take full advantage of available coverage until you understand what’s actually in front of you. Learn about health insurance basics over in The Simple Dollar’s Health Insurance Guide.

anyone rapidly approaching 65 will need to seriously review the program’s new basics. After all, you can’t take full advantage of available coverage until you understand what’s actually in front of you

Today’s Medicare: The Basics

Medicare is a taxpayer-supported insurance program for all Americans over sixty-five and disabled Americans of all ages. At last count in 2010, forty-eight million people were enrolled to receive benefits. On average, enrollees find that Medicare will cover 48% of the bill for Medicare-approved treatments (a list that now includes ongoing care for patients suffering from Alzheimer’s disease or multiple sclerosis).

The government oversees the Medicare program, but it is contracted out to various health insurance companies who actually provide the coverage and oversee the services and dispersal of funds. There are several different types of Medicare plans, but the original Medicare has two main parts – A and B. And as of 2006, Parts C and D are offered as option plans.

The AARP mentions that Medicare can be used as a primary health care plan, or as a backup plan to other health insurance, such as a policy that is obtained through the workplace. Keep in mind that Medicare coverage will not pay for all costs involved in medical treatments.

On average, enrollees find that Medicare will cover 48% of the bill for Medicare-approved treatments…Medicare coverage will not pay for all costs involved in medical treatments

Part A – Hospital Insurance

Medicare Part A provides coverage for inpatient care while in a hospital. Often called “hospital insurance,” Part A also provides coverage for skilled nursing facilities, hospice, and home health care.

Benefits under Part A immediately apply upon checking in to an in-patient care facility. There is a deductible, but no additional costs for the first 60 days. After 60 days, there will be additional costs. After a stay in the hospital, patients will often go to a Skilled Nursing Facility where they won’t encounter additional costs for the first 20 days, says the Centers for Medicare and Medicaid Services. A new benefit period will begin after the patient is no longer receiving treatment as an inpatient.

How It Works

Part A is usually given free to those who reach the age of 65 and have put enough into Medicare through regular payroll deductions. Others may also get the same coverage by making monthly payments, which will be based on how many quarterly payments have been paid into the Medicare system.

It is necessary to have paid into Medicare for forty quarters (ten years) to receive full benefits. It is not necessary to be retired to get Medicare.

Medicare must be applied for in order to receive the benefits, but those who are already getting certain types of payments may be automatically enrolled, says the Centers for Medicare and Medicaid Services. This includes people who are already receiving:

  • Social Security benefits
  • Railroad Retirement benefits
  • Benefits for a disability
  • End Stage Renal Disease (ESRD)

Medicare also says that people with ALS (Amyotrophic Lateral Sclerosis, which is also called Lou Gehrig’s disease) are automatically enrolled as soon as their disability starts.

It is necessary to have paid into Medicare for forty quarters (ten years) to receive full benefits. It is not necessary to be retired to get Medicare

Part B – Medical Insurance

Medicare’s Part B coverage is often referred to as Medical Insurance. This part covers the cost of seeing a doctor or other health care provider, any durable medical equipment that may be needed, and home health care. It is not necessary to choose a primary care physician. Some preventive medicine may also be covered to enable those covered to maintain better health, or to prevent current illnesses from becoming worse.

Services covered under Part B are those that would not be covered under Part A. Once enrolled, a Medicare doctor or some other provider can inform you as to whether or not a particular service is covered. It will include services such as the following:

  • Ambulance service
  • Mental health – including inpatient or outpatient
  • Some outpatient prescription drugs
  • Research
  • Getting a second opinion.

How It Works

If you’re not already getting Social Security benefits by the time you turn 65, it will be necessary to enroll in order to get Parts A and B. Schwab reports that it will be necessary to pay a deductible and coinsurance under Part A, but you will need to pay the premiums, a deductible, and an additional 20 percent of medical services covered under Part B.

Be sure to check that any treatment you are due to receive is covered in advance of it actually happening – or you may end up paying the full cost.

If you have another insurance plan, this may provide coverage for some care not covered under Medicare. Some additional costs may also be reduced through Medicaid or Medigap – a form of supplemental Medicare insurance.

check that any treatment you are due to receive is covered in advance of it actually happening – or you may end up paying the full cost

Part C – Medicare Advantage Plans

Part C of Medicare is an option that can be used to replace Parts A and B. It is called Medicare Advantage, and may also be called “MA Plans.” The actual provisions under Part C will vary; some Medicare providers may also offer extra benefits for an additional price.

Everything that is included in the original Parts A and B will be included in all MA plans. Part D, which is prescription drugs, will also usually be included in an Advantage Plan.

How It Works

The companies that offer the MA Plans are private, but their Medicare programs are under the direction of Medicare.

Medicare warns that a number of important rules are determined by the company that offers you a plan. These rules can decide things such as when you can and can’t be referred to a specialist for a certain condition, and the doctors, facilities, or out-of-pocket costs you are allowed to access. They can also change their policies and costs from one year to the next.

The exact services available can vary by state or area. Although the coverage is largely the same, some decisions are put into the hands of the healthcare providers. They might also decide that some procedures are not medically necessary, which would prevent payment.

companies that offer the MA Plans are private, but their Medicare programs are under the direction of Medicare

Part D – Prescription Drug Plans

Prescription drugs are covered through Part D of the Medicare program. And this plan is optional. This coverage requires a monthly payment based on your choice of coverage, and it will often require a deductible and a copayment. Only drugs on the approved list are covered.

How It Works

If you decide to get Part C of Medicare, prescription drug coverage may be offered through that private insurer, and if it is, it will be necessary to purchase it from that company. They will also determine the cost, the copay amount and the deductible.

Once you and your prescription drug plan have paid out a pre-determined amount for the year – something that changes from year to year – you enter into what is commonly known as the “donut hole.” Medicare states that after reaching this amount, the cost of your approved medications will be reduced to 50% of the cost – but you will pay all of the remaining 50% – until you pay enough to get you out of the donut hole.

Medicare’s More Certain Future

Despite all of these expansions, Medicare’s future is looking more secure than it has in decades. Restructured budgets have, so far, kept the program’s spending under control – the cost of supporting each Medicare enrollee only rose by 0.4 percent last year. When compared to the 3.4 percent increase per capita of the gross domestic product (GDP), this is the first time in 40 years that Medicare spending has been less than the GDP.

After a decade of long and seemingly directionless congressional healthcare deliberations, an optimistic Medicare forecast is both comforting and surprising. Access to later-in-life medical care, we’re finally assured, will be a part of our generation’s social legacy.

You can learn just about everything else that you’d need to know regarding Medicare on the following sites:

Medicare.gov
Healthcare.gov
AARP.org

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