This is a guest post. Frank Viola didn’t write it.
When it comes to healthcare, people who are getting close to retirement and people who want to plan early for becoming a senior need to know what is covered and what isn’t. The truth is that Medicare Part A and Part B leave some huge gaps in insurance coverage. So, here’s a closer look at what are your Medicare coverage options, both government and private.
Retirement is often synonymous with several medical problems and needs for most people. As we age, our overall well-being starts to decline. And, unfortunately, without good health insurance, this translates into costly medical services.
What’s even scarier is that health care is often one of the most significant expenses people in retirement face these days. As health care costs continue rising, this can compromise seniors’ financial plans for retirement. In fact,73% of Millennials, 70% of Gen Xers, and 61% of Baby Boomers believe so, according to the 2019 Employee Wellness Survey from PWC.
Now, this takes us to an essential question: How do you plan to manage your healthcare costs in retirement? Is the government’s Original Medicare coverage enough to help you be financially stable even when you have to deal with high healthcare costs? Or is a private Medicare option more suitable?
This article explores the Medicare coverage choices that people need to make for their golden years. It’s important to make an informed choice to cover yourself financially in case of an illness or accident that none of us can predict. Keep reading below to find out more!
Medicare Part A and Part B
Medicare Part A and Part B are known as the original Medicare federal insurance offered by the government. More precisely, when people qualify for receiving Medicare coverage, it’s usually Part A and Part B that they get enrolled in.
Now, the two are different in terms of what they cover. While Medicare Part A generally covers costs as a hospital inpatient, Part B can help pay for doctor visits, preventive healthcare services, lab tests, medical equipment and supplies, and more. Medicare Part A and B generally cover about 80% of all Medicare-approved major medical costs. However, none of the plans cover minor medical services such as dental, vision checks, hearing, or prescriptions. They also don’t cover most alternative health treatments.
Let’s take a closer look at both plans:
Medicare Part A is hospital coverage
As mentioned above, Medicare Part A provides hospital coverage. More precisely, this plan covers costs of hospitalization and skilled nursing that may occur after hospitalization.
But how much does Part A of Medicare cost? Well, depending on how many years they paid Medicare taxes, people may have to pay a premium for Part A coverage. Premiums are basically monthly fees that Medicare beneficiaries have to pay for insurance that covers medically necessary services and preventive services that aren’t included in Part A of Medicare. However, those beneficiaries who have worked and paid FIA taxes for 40 quarters (10 years) don’t pay premiums for this Medicare part.
Beneficiaries of this plan pay a per benefit period deductible amount of $1,452 in 2021. Plus, after the 60th day of hospitalization or skilled nursing, beneficiaries need to pay a coinsurance that costs $363 per day in 2021.
Medicare Part B is medical coverage
Medicare Part B essentially covers medical services and preventive healthcare services, including annual doctor visits and tests like screening for cancer, depression, and diabetes. It also covers medical supplies, diabetes supplies, durable medical equipment, and lab tests.
Typically, people have both A and B Parts to get the most coverage for their healthcare costs. For example, Part A of the coverage program would cover the stay in a hospital, and Part B would cover the medical services received during the stay.
How much does Medicare Part B cost? The annual deductible is $203 in 2021, and the beneficiaries have to pay a monthly premium of $148.50 per month for average earners. High-income earners pay more. Premiums are adjusted annually.
Beneficiaries of Medicare Part B can see any doctor that accepts Medicare-assignment.
Medicare Part C
Medicare Part C, also known as Medicare Advantage, is a private healthcare coverage alternative to the federal Medicare coverage programs, Part A and B. Medicare Part C is rather a privately sold insurance option that covers the same things as Part A and Part B, plus some extra benefits such as prescription drug plans, dental, hearing, and vision. The Medicare Part C was a program that started under the Bill Clinton Administration.
Here’s an explanation of the differences between Original Medicare and Medicare Advantage from an expert: “Where most people getting their Medicare benefits for the first time tend to get into trouble is trying to compare Original Medicare with Medicare Advantage. They are apples and oranges,” David Bynon explains. “With Original Medicare and a Medicare supplement, you pay most of your costs in advance. There are no surprises. With Medicare Advantage, you pay most of your costs when you use healthcare services.” Bynon develops software and mobile apps that help people find the best Medicare Advantage plans for their needs or rule themselves out if they are not good candidates. He suggests that healthy people and people who qualify for both Medicare and Medicaid (dually eligible) are the best candidates, whereas people with chronic health issues do better with Original Medicare and supplemental coverage. Bynon is also the author of a new Amazon book called “Why Medicare Advantage Plans are Bad,” which helps people understand their best coverage options.
Another thing essential to know about Part C is that you have to be enrolled in Medicare Parts A and B to purchase a Medicare Advantage coverage plan.
How much does Medicare Advantage cost? A premium is usually paid for this plan, and beneficiaries can only see certain medical services providers within a network. The total cost of the Medicare Part C will depend on the plan selected.
Note that people who join the Medicare Part C plan must also continue to pay for their Medicare Part B premiums, including all additional premiums set by the plan.
Medicare Part D
Medicare Part D is another private plan approved by Medicare. More precisely, Part D is the plan that covers prescription drugs that people don’t get covered by Part B. These are typically medications that need to be administered by a medical specialist, such as infusions or injections.
Each Part D coverage plan can vary in cost and specific drugs covered. Each plan has a list of drugs covered by the cost tier.
There are four phases of coverage for the Medicare Part D:
- Annual deductible- this phase starts with the first prescription plan year. Beneficiaries pay the full cost of the prescription until the spending adds up to the amount of the deductible.
- Initial coverage- This phase begins when the plan has no deductible or when the prescription payments made by the beneficiary have been made equal to the plan’s deductible. The stage ends after the amount spent by the beneficiary and the plan on covered drugs add up to the initial coverage limit set by Medicare, which is $4,130 in 2021.
- Coverage gap- This phase begins when the beneficiary and the plan have collectively spent the initial coverage limit on the covered drugs. If the beneficiary enters the gap, they have to pay 25% of the plan’s cost for covered brand-name drugs and 25% of the plan’s cost for covered generic drugs. The phase ends when the TrOOP costs (true out-of-pocket costs) on covered drugs reach the catastrophic spending limit, which is $6,550 in 2021.
- Catastrophic coverage- This phase begins when TrOOP reaches the annual catastrophic spending limit, in which case the beneficiary pays a low coinsurance or copayment cost, set by Medicare, for all the covered prescription drugs. The beneficiary remains in this phase until the end of the plan year.
Note that stand-along Part D coverage plans are not compatible with Medical Advantage plans (Part C plans) that include Part D coverage. Also, note that the Social Security Administration offers extra help to people who can’t afford their premiums and medications.
Medigap
Medigap is extra private healthcare insurance that beneficiaries can buy from private companies to fill the “gaps” in terms of costs from the Original Medicare, including copayments, deductibles, healthcare if the beneficiary travels outside of the US, first three pins of blood.
Beneficiaries have to pay a monthly premium for a Medigap policy, and these plans are only available to people who already have Medicare Part A and Part B. People who only have a Medicare Advantage plan cannot get a Medigap plan. A Medigap plan only covers one person. What’s more, note that any standardized Medigap plan will be guaranteed renewable, even if you have health problems. In other words, the provider won’t be allowed to cancel your Medigap policy as long as you pay your monthly premiums.
Medicare Savings Programs
Medicare Savings programs are federally funded programs that assist people who can’t afford to pay for their own premiums and copayments. In other words, they help people who have limited income and resources and can’t afford to pay some or all costs of their Medicare premiums, deductibles, copayments, and coinsurance.
The requirements to be eligible for a Medicare Savings program are:
- To be a resident of the US or the District of Columbia
- To be aged 65 or older
- To receive social security disability benefits
- To have a specific disability or permanent kidney failure, even if the beneficiary is under age 65
- To meet standard income and resource requirements.
Note that there are four types of Medicare Savings Programs, and which one you qualify for will depend on your individual circumstances.
Final Words
That being said, Medicare is composed of five main types of healthcare insurance, Parts A, B, C, D, and Medigap. Some of the plans are federal offered healthcare coverage plans, while others are private insurance policies. These choices provide plenty of options for retired people to pay for their healthcare needs. If an individual can’t afford to pay for any of these plans or more, there is also an option under the form of Medicare Savings Programs.
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