September 15 through 21 is National Medicare Education Week. Scheduled one month before Medicare annual open enrollment starts on October 15, the education week is dedicated to helping you to better understand Medicare. If you are over the age of 65, you usually will have a red, white and blue Medicare card. Most adults, including those on Medicare, do not know what Medicare Parts A, B, C and D cover.
How well do you understand the alphabet soup of Medicare Parts A, B, C and D? The original Medicare since 1966, and prior to 1997, the only Medicare, are Parts A and B. You are generally eligible to enroll in Medicare at age 65. You are generally automatically enrolled in Medicare if you are already receiving Social Security or Railroad Retirement Board benefits when you turn 65, you are under 65 and have a disability, or you have ALS (Amyotrophic Lateral Sclerosis, also called Lou Gehrig’s disease).
If you are not automatically enrolled in Medicare Parts A & B, you have a seven month initial enrollment period that begins three months before the month you turn 65, includes the month you turn 65, and ends three months after the month you turn 65. When you are receiving Social Security or Railroad Retirement Board benefits, you typically are enrolled in Medicare Part A at no additional charge. If you are not eligible for premium-free Part A, you can buy it during certain enrollment periods at a cost of up to $411 per month. in 2016.
Part A mostly covers hospitalizations, certain home health services following a hospital stay, hospice care and short-term rehabilitation care in a skilled nursing facility. When you are enrolled in Part A, you generally are also enrolled in Part B, but at a cost to you.
The monthly premium for Part B paid by most previous Medicare enrollees in 2016 is $104.90. This is the same premium amount as in 2015 because you did not get a cost-of-living increase for 2016 Social Security benefits. If your income is above a certain level, your monthly premium could be as high as $389.80 in 2016. If you do not sign up for Medicare Part B when you are first eligible, then your monthly premium is increased by a late enrollment penalty.
Part B usually covers medically necessary services or supplies for the diagnosis or treatment of your medical condition and certain preventative services. These may include doctors’ visits, outpatient care and therapy, durable medical equipment, medical supplies, laboratory diagnostic services and certain home health services.
Even if you have Medicare Parts A and B, there are many medical expenses that are not covered. These include deductibles, co-pays, custodial long-term care and many listed non-covered services and procedures. Because of these non-covered expenses, you generally can buy a Medicare supplement or Medigap private health insurance policy that will cover some of these expenses that are not covered by Medicare Parts A and B.
Medicare Parts A and B have been around a long time. Medical care providers know what they are going to be reimbursed for Medicare. Since 2003, if you are eligible for Medicare Parts A and B, you can opt-out of the original Medicare Parts A and B and have those replaced by Medicare Part C, also called a Medicare Advantage plan.
Part C Medicare Advantage plans were started in 2003 as part of the Medicare Modernization Act, the same Act that created the Medicare Part D prescription drug coverage. The Medicare Advantage program is essentially a repackaging of the Medicare+Choice program which has been around since 1997.
With Medicare Part C Advantage plans, you have the private insurance versions of Medicare Parts A and B. If you have signed up for a Medicare Part C Advantage plan, you are no longer covered by Medicare Parts A and B, even if you have your red, white and blue Medicare card that says you do. Your Medicare coverage is now governed by the private health insurance contract you entered into with the insurance company.
There are numerous Medicare Part C Advantage plans around and coverages vary from state to state, county to county and plan to plan, even within the same insurance carrier. Medicare Part C plans are often times health maintenance organizations (HMOs) or preferred provider organizations (PPOs). If you incur non-provider or out of network medical expenses with a PPO, you may have higher co-pays or no coverage at all.
Medicare Part C Advantage plans have to be the actuarially equivalent Medicare Parts A and B. So if they cover expenses that are not covered by original Medicare parts A and B, such a dental or optical, then they probably do not cover other expenses that are covered by original Medicare Parts A and B, or have higher co-pays or deductibles. However, Medicare Part C Advantage plans are prohibited from charging higher cost-sharing requirements than original Medicare Parts A and B for certain covered services such as chemotherapy, dialysis and skilled nursing care
The biggest downside of Medicare Part C Advantage plans is that you cannot purchase a Medicare supplement or Medigap insurance policy to pay for non-covered medical expenses, deductibles and co-pays, like you can with original Medicare Parts A and B. You are stuck with the Medicare Part C Advantage plan limitations. All non-covered medical expenses, deductibles and co-pays and are out of pocket. For this reason, Medicare Advantage plans are often referred to as Medicare Disadvantage plans.
Starting in 2006, if you are eligible for Medicare Parts A and B, you are also eligible for a Medicare Part D prescription drug plan for an additional monthly premium paid to a private insurance company. There are numerous Part D prescription drug plans from which to choose and which have varying premiums, deductibles, co-pays and coverages.
Many Part C Advantage plans include the Medicare Part D prescription coverage as part of their plan. Be careful when you sign up for Medicare Part D prescription coverage so you do not unknowingly also sign up for a Medicare Part C Advantage plan. Many seniors have inadvertently signed up for a Medicare Part C Advantage plan when they thought they were only signing up for a Part D prescription drug plan.
In addition, as with Medicare Parts A and B, if you do not enroll in Medicare Part D when you are initially eligible, there is a penalty premium that you would have to pay when you eventually do enroll in the program. In order to minimize your premiums, you may want to enroll in Medicare Parts A, B and D as soon as you are eligible. You may be able to get special help with your Medicare premiums if your income and/or assets are below a certain level.
With the tools that are available to you, you should be able to find the most appropriate coverages at the most economical prices to meet your health care needs.
By Matthew M. Wallace, CPA, JD
Published edited September 18, 2016 in The Times Herald newspaper, Port Huron, Michigan as: Getting to know the alphabet soup of Medicare