Medicare Parts A, B, C and D: Costs and coverage explained

 
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Medicare is complicated with a lot of “moving parts.” Understanding the different components may feel overwhelming, but it is important that you do so in order to make the best coverage choices for your situation and as part of your overall retirement planning.

There are many different parts of Medicare, each with their own costs and coverage levels, so we have broken them down to help make them easier to understand.

Medicare Part A covers hospital care, skilled nursing facility care, nursing home care (as long as this isn't the only care you need), hospice care and home healthcare.

Per Medicare.gov, “most people don't pay a monthly premium for Part A (sometimes called ‘premium-free Part A’).” However, there are costs you will have to deal with. For 2018, that includes:1

  • An annual deductible of $1,340 for in-patient hospital stays.
  • A $335 per day coinsurance payment for in-patient hospital stays for days 61 to 90.
    • After day 91 there is a $670 daily coinsurance payment for each lifetime reserve day used.
    • After the maximum 60 lifetime reserve days are exhausted, there is no more coverage under Part A for inpatient hospital stays.
    • Costs for private-duty nursing, a phone or a television in your room are not covered.2
  • There is a 20 percent copay for Medicare-approved durable medical equipment.
  • Medicare does not cover any room and board costs for hospice care in your home or in a nursing home if that is where you live.
  • There is a $167.50 coinsurance payment for days 21 to 100 for a skilled nursing facility stay.
    • After day 100 you are responsible for all costs.
  • There is a 20 percent copay for mental health services connected with a hospital stay.

 

Medicare Part B covers the medical insurance portion of original Medicare. Costs for Part B include:3

  • A standard monthly premium of $134 for 2018.
  • You will pay the standard premium in 2018 if:
    • You enroll in Part B for the first time in 2018.
    • You don't receive Social Security benefits.
    • You are billed directly for your Part B premiums.
    • You have Medicaid which pays your premiums. The state will pay the standard amount on your behalf.
    • Your modified adjusted gross income for 2017 was over $85,000 (or $170,000 for joint filers). You will pay the standard premium plus an income-related monthly adjustment amount, based on the level of your income.
  • If you don't enroll in Medicare Part B as soon as you are eligible, you could be assessed a late enrollment penalty when you do enroll. The penalty could range as high as a 10 percent increase in your premium for each 12-month period that you were eligible but not enrolled.
  • There is a $183 annual deductible for 2018. After the deductible, you will pay a 20 percent copay for most doctor services while hospitalized, durable medical equipment and outpatient therapy.
  • There is a 20 percent copay of the Medicare-approved amount for doctor visits to diagnose a mental health condition after the deductible. If you receive these services at a hospital outpatient department or clinic, additional copays or coinsurance amounts may apply.
  • There is a 20 percent copay of the Medicare-approved amount for outpatient services after the deductible.

 

Medicare Part D is the prescription drug coverage portion of Medicare. The cost of these plans varies, as they are offered through private insurance companies. There are some costs you should be aware of:4

  • There is a late enrollment penalty if you do not enroll in an approved Medicare drug plan (including a Medicare Advantage plan) at the time you are first eligible or do not have creditable coverage or coverage through another Medicare health plan that offers Medicare prescription drug coverage.
    • This penalty for 2018 would be the “national base premium,” which is $35.02 per month times the number of months that you were not covered. This would be assessed at the time you do enroll and would represent a permanent cost to you. Note that the base premium increases each year and so will your penalty.5
  • If you earn over $85,000 ($170,000 for joint filers) for the base year there is an additional amount added to your Part D premium.
  • Plan premiums, the drugs that are covered, deductibles, coinsurance and copays will vary by plan, so you must check and compare plans each year based on your needs, the prescription drugs you take, etc.

 

Medicare Advantage or Part C plans are offered by private insurers and cover the services of original Medicare (Parts A and B). Many include prescription drug coverage. Medicare Advantage plans vary in terms of coverage, cost, deductibles, coinsurance and copays, so again, it is important to do your homework based upon your needs.

Many Medicare Advantage plans offer low or zero dollar premiums plus a variety of coverages and benefits that are not offered by Original Medicare (Medicare Parts A and B). This might be a good option for you to consider.

Note the costs listed above are not a complete list of all costs you might incur while enrolled in Medicare.

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