June 22, 2020

Edited 07/09/20

What is Medicare? All Coverage Explained

Medicare has many different parts associated with coverage. Learn about the different parts and how much it will costs.

Medicare is a government health care plan for those 65 and over. If you’re close to 65, it’s important to understand what you can and can’t expect to get from Medicare coverage in the future. Medicare doesn’t cover everything and depending on your health, you need to see what the gaps are. This will help you determine whether you need any supplemental health insurance.

What is Medicare?

Medicare is health insurance for Americans age 65 and over, funded by the federal government. There are different parts associated with Medicare. Medicare Part A covers inpatient hospital stays, emergency care, hospice care, and home health care. Whereas Medicare Part B covers physician office visits, outpatient hospital stays, preventive screenings, certain home health services, and durable medical equipment. Together, Medicare Part A and Medicare Part B are referred to as “Original Medicare.” 

Private insurers offer Medicare Advantage, also known as Medicare Part C, which usually covers some services that the other parts don’t cover, such as dental, hearing and vision care. 

Medicare Part D covers prescription drugs. 

Who Can Get Medicare?

You qualify for Medicare benefits if you’re at least 65 years old and a U.S. citizen or a permanent legal resident for the past five years. Medicare also covers some younger people who are disabled, have end-stage renal disease (such as permanent kidney failure), or have amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease.You can enroll in Medicare Part A and/or Part B by using the website www.SocialSecurity.gov, calling Social Security or visiting a local Social Security office in person.

What’s the Cost of Medicare?

Medicare can range depending on your state and if you plan to add supplemental coverage. It’s important to understand the cost of healthcare in retirement to see if your savings can provide you the coverage you need. To get an estimate of your Medicare costs, you can enter your zip code in Silvur and Silvur will project your Medicare costs under your projected expenses. In addition, try to build your emergency fund to cover accidents that you can’t foresee in the future.

Cost for Medicare Part A

Medicare Part A is free for most Americans because they paid federal taxes while they were working. It has no premium as long as you already receive retirement benefits from Social Security or the Railroad Retirement Board, or if you or your spouse had Medicare-covered government employment. 

If you don’t qualify for premium-free Medicare Part A, you can buy it. For those who paid Medicare taxes for less than 30 quarters, the standard Part A monthly premium is $458. If you paid Medicare taxes for 30-39 quarters, the standard Part A monthly premium is $252.

Cost for Medicare Part B

For Medicare Part B, the standard monthly premium is $144.60 in 2020. (This premium could be higher if your income is greater than $87,000 per year for individual tax filers or $174,000 for joint tax filers.) The annual deductible for Medicare Part B is $198 in 2020.

Keep in mind that you may have to pay a late enrollment penalty if you don’t enroll in Medicare Part B when you first become eligible at age 65. Your monthly premium may increase by 10% for each year you could have had Part B, but didn’t sign up. 

If you have employer-sponsored health insurance because you and/or your spouse are working, ask your benefits manager whether you have group health plan coverage, as defined by the IRS. People with group health coverage based on current employment may be able to delay taking Medicare Part A and Part B without having to pay a late enrollment penalty.

What are the costs for Supplements and Alternatives?

Medicare Part C: Medicare Advantage Plan

The costs for Medicare Part C and Medicare Part D vary greatly by plan and location.

Some Medicare Part C plans, also known as Medicare Advantage Plans, have a monthly premium, but others don’t. For plans with a premium, the average premium is $28 per month. It should be known that the Medicare Advantage Plan acts as an alternative to Original Medicare Part A and Part B. Therefore, you can have Medicare Advantage Plan coverage without having Original Medicare.

Medicare Part C and Part D plans also might require a copayment, which is a fixed fee, such as $20 for an office visit or $50 for an emergency room visit. Depending on your plan details, you also might have to pay coinsurance, which is based on a percentage of the total charge for the service or prescription. 

All Medicare Part C plans have an out-of-pocket limit. This is the maximum amount you will pay out of pocket for covered services for the year. Once you reach your out-of-pocket limit, the plan will pay for all covered medical care, as long as you continue paying your premiums. For Medicare Part C plans in 2019, the average out-of-pocket limit was $5,059. This limit cannot be higher than $6,700 for in-network services or $10,000 for out-of-network services. 

Medicare Part D: Prescription Drugs Plan

Each Medicare Part D plan has its own list of covered drugs, called a formulary. All Medicare drug plans have negotiated to get lower prices for the medications on their list, so using those drugs will usually save you money.

Your total cost for prescription drug coverage will depend on the plan you pick, whether you go to a pharmacy in your plan’s network or whether the prescriptions you take are on your plan’s formulary. In your Part D plan, you may have to pay a deductible, but it won’t be more than $435 in 2020. You will have to pay a late enrollment penalty if you go without prescription drug coverage after you turn 65.

What are Medicare Supplement Policies?

A Medicare Supplement plan, sometimes called Medigap, is a private insurance plan that helps you pay for some of the health care costs that Medicare doesn’t cover. This could include copayments, coinsurance, and deductibles.

Medigap plans typically don’t cover long-term care, prescription drugs, dental, vision, hearing aids or private nursing care.

The cost of Medigap plans varies widely, so be careful when comparing prices to ensure that you are assessing equivalent plans. You must have Medicare Part A and B before you can buy a Medigap plan. 

Medigap coverage may be a good choice for people with a lot of chronic conditions and medical expenses that aren’t covered by Medicare.

What is not covered by Medicare?

Medicare does not cover the following:

  • Hearing aids and exams for fitting them
  • Eye exams and eyeglasses
  • Dentures
  • Most dental care
  • Cosmetic surgery
  • Acupuncture
  • Massage therapy
  • Long-term care
  • Routine foot care

Generally, Medicare will not cover any medical care outside the United States.

What about Medicaid? 

Medicaid is a government-funded health insurance program for low-income people of all ages. Along with medical care, Medicaid pays for long-term nursing home care. 

If you meet the state and federal qualifications for Medicare and Medicaid, you can be enrolled in both programs at the same. In that case, Medicaid would pay for some of your health care expenses that Medicare does not cover. 

Depending on income level, you may receive assistance from Medicaid to pay for your Medicare premiums, deductibles or copays. You automatically qualify for lower prescription costs through a Medicare program called Extra Help, if you have both Medicare and Medicaid coverage or Supplemental Security Income (SSI) benefits.

Medicare is an important safety net for senior citizens who no longer have access to employer-sponsored health insurance. It encourages people to get the medical care they need and keeps many retirees from experiencing bankruptcy, home foreclosure and other financial crises. Knowing what to expect from Medicare can help you plan better for your financial and physical health.