Navigating the Seas of Medicare - Know What Medicare Plan A and Plan B Cover

Medicare is an essential program for seniors, probably equal in importance to Social Security in providing benefits to insure the health and financial well-being of individuals over the age of 65, people under 65 with certain disabilities or people of any age with End-Stage Renal Disease. In fact, the importance of Medicare is growing. A recent analysis found that by the year 2055, the cumulative lifetime benefits for a 65-year-old with a median income from Medicare is estimated to be higher than those he or she would receive from Social Security.

Although most people understand the importance of Medicare and have at least some idea of how it works, there are still many aspects to this coverage that, if left misunderstood, could cause issues down the line. Learn more about Medicare and make sure you are aware of your coverage options and expenses, so you don’t experience any surprises that could adversely affect your retirement.

Medicare in a Nutshell

After you qualify, you are eligible to enroll in Original Medicare. The following information provides a brief overview of Part A and Part B of Medicare. For complete information about Medicare and a full explanation of Medicare benefits, consult Medicare and You 2018 and Welcome to Medicare, published by Centers for Medicare and Medicaid Services or visit their websites at www.cms.hhs.gov or www.medicare.gov.   

Medicare Part A coverage helps cover the expenses associated with hospitalization and other medical costs incurred to treat an illness or injury. Part A covers such things as:

• Inpatient hospital care
• Treatment in a skilled nursing facility or from a licensed home health care provider and
• Hospice care.

Medicare Part B can help cover a wide range of medically necessary and preventative services including:

• Inpatient and outpatient physician services
• Lab services
• Ambulance transport
• Mental health care
• Home health care and
• Outpatient hospital treatment.

In addition, Part B can help cover some durable medical equipment like wheelchairs and walkers.

If you are signed up for benefits under Medicare Part A and/or B, you are eligible for prescription drug coverage under a Part D plan. Even if you don’t need prescription medication, Part D is a wise choice. Just like any other insurance, it can protect you when you need it, and enrolling in the Part D plan with the lowest premium in your area ensures that you have coverage if you should suddenly need it.

Let’s take a closer look at Medicare Part A and Part B.

Premiums and Deductibles*

As far as premiums go, most Medicare beneficiaries do not have to pay a premium for Medicare Part A coverage because they – or their spouse – have already paid for it via payroll taxes taken out while they were working. If you do not qualify for premium-free coverage, you may have to pay a deductible each month.  If you buy Part A, you'll pay up to $422 each month in 2018. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $422. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $232.

In most cases, if you choose to buy Part A, you must also have Medicare Part B and pay monthly premiums for both. If you have to pay a monthly premium for Medicare Part A, you may decide to delay enrollment in Part A as well and sign up during your Special Enrollment Period. If you enroll in Medicare during a Special Enrollment Period, you generally won’t have to pay a late enrollment penalty.

There is a deductible for Medicare Part A coverage. As of 2018, that deductible is $1,340 for each benefit period. In addition, there is also a co-insurance payment that is your responsibility should you find yourself needing inpatient hospital care. Your co-insurance varies based on the length of your stay:

The 2018 hospital co-insurance you pay per benefit period varies based on the length of your hospital stay:

• 1 through 60 days: $0 co-insurance after $1,340 deductible is met
• 61 through 90 days: $335 per day co-insurance
• 91 through 150 days: $670 per day co-insurance for each lifetime reserve day (you may get up to 60 lifetime reserve days in your lifetime)

After your lifetime reserve days are used up, Medicare typically doesn’t cover your inpatient hospital stay

If you require care in a skilled nursing care facility, you will also be required to pay for co-insurance. The amount you pay per benefit period also varies based on the length of your stay. As of 2018, your responsibility is as follows:

• 1 through 20 days: $0 co-insurance
• 21 through 100 days: $167.50 per day co-insurance
• 101 days and beyond: You are responsible for all costs - unless you have a separate insurance policy that covers these costs. 

The Medicare Part B premium is set each year by the Center for Medicare and Medicaid Services (CMS) and is subject to change. According to the 2018 figures, the amount you pay may vary depending on your situation, including when you signed up for Part B.

Here’s how to help determine what you’ll pay for your Part B premium:

The current standard Part B monthly premium is $134 (or higher, depending on your income). Most Medicare beneficiaries pay less than this. You may have to pay the standard amount or higher if any of the following apply to you:

• You enrolled in Part B for the first time in 2018.
• You do not receive Social Security.
• You're billed directly for your Part B premium.
• Your Part B premium could be higher than $134 if your income is higher than a certain amount (see below). 

If you are covered under both Medicare and Medicaid, and the Medicaid program pays for the cost of your premiums, you may also have to pay the standard amount or higher. If you qualify, your $134 premium is paid by Medicaid.

Note that your Medicare Part B premium can increase due to the late enrollment penalty. If you don’t enroll in Medicare Part B during your Initial Enrollment Period, or if you drop Part B and then get it again later, you may pay a penalty for as long as you have Part B. For 2018, the late enrollment penalty is calculated by multiplying 10% by each full 12-month period that you could have had Part B, but didn’t sign up for it. This amount is applied to your monthly premium for as long as you have Part B.

If you delayed enrolling in Part B coverage due to having health coverage from another source, such as an employer-sponsored plan you or your spouse may have been enrolled in, you may avoid the late enrollment penalty. If this is the case, you can enroll through a Special Enrollment Period when you or your spouse stop working or that other health coverage ends, whichever comes first.

Premiums can be higher for beneficiaries with annual household incomes that exceed specific thresholds. See below.

2018 Medicare Part B premiums based on income (as reported on your 2016 tax return)**

The yearly deductible for Medicare Part B in 2018 is $183. Once you’ve met the deductible, in most cases you will be required to pay co-insurance equivalent to 20% of the Medicare-approved amount charged by providers for your health care services. Many preventive services are also provided at no cost to you; these services are available without requiring you to meet your deductible.

As you can see, although Medicare Part A and Part B cover many medical expenses, they don’t cover everything. Even with this coverage, you are still responsible for deductibles, co-insurance and copayments. Other items, including dental care, eye exams, hearing aids and dentures are also not covered. And, Part A and Part B coverage doesn’t take care of costs associated with situations that require long-term care. This is where Medicare Supplement coverage comes in, with its ability to help pay for things that Original Medicare doesn’t cover.

Protect you and your family from costly out-of-pocket costs with Medicare Supplement coverage. A Medicare Supplement insurance policy enables you to see any physician or provider anywhere in the country who accepts Medicare. Coverage begins immediately and is Guaranteed Renewable for life, as long as premiums are paid on time.

To learn more about the many benefits of Medicare Supplement coverage, visit bankersfidelity.com/medicare-supplement-insurance.

*Deductibles and co-pays shown for 2018; subject to change each year by federal government.

**Amounts shown for 2018; subject to change each year by the federal government.

https://www.medicare.gov/
https://www.medicare.gov/Pubs/pdf/10050-Medicare-and-You.pdf
https://www.cms.gov/Medicare/Medicare.html