There are four parts to Medicare, which are simply labelled A, B, C, and D. Parts A and B are often referred to as Original Medicare. Part C is often called Medicare Advantage, and it is a managed care plan that wraps Parts A, B, and D together in one package. Part D is the standalone Medicare prescription drug plan.
Part A: To begin, let’s talk about Medicare Part A, which is the coverage for your hospital care, along with limited services in a nursing home (Skilled Nursing Facility or SNF), some home health services and Hospice (end of life) services. If you are going to turn 65, are a U.S. citizen (or have been a legal resident for at least 5 years), have Social Security or Railroad Retirement Board benefits, you will automatically be enrolled in the hospital coverage part of Medicare (Part A). If you are not receiving Social Security yet, you will need to fill out an application to enroll in Medicare. The key to receiving free Part A benefits is for you or your spouse to have worked and paid Medicare taxes for at least ten years.
If you are admitted to a hospital, Original Medicare requires a deductible and coinsurance. However, if you have a Supplement or Medigap plan, those costs are covered for an entire year after Original Medicare coverage has been used up. Read more here about Medigap coverage.
Medicare Part A is known for covering inpatient hospital costs, but it also covers other services like semi-private rooms, meals, general nursing, inpatient drugs and other hospital services and supplies while you are in the hospital.
Part B: Medicare Part B covers physician services, outpatient services, ambulance services, equipment like wheelchairs, mental health services and some types of prescription drugs, such as injectable drugs you might get in a doctor’s office or outpatient clinic. Part B is not required or automatically provided to you. It is voluntary, and you can turn it down. However, if you turn it down, there is a substantial penalty if you decide later on that you want it after all. The longer you wait to you sign up for Part B, the higher your premium will be.
There is a monthly premium for Part B which is based on your income, and starts at $148.50 a month in 2021 and may be as high as $504.90 in 2021 if you make more than $500,000 a year.
Part C: This part of Medicare is what people commonly call Medicare Advantage. Medicare contracts with private insurance plans like HMOs (and PPOs) to provide Part A and B services (and usually prescription drug coverage too) to Medicare beneficiaries. This program actually started in 1966 when Medicare was first enacted, but it didn’t gain popularity until the 2000s when managed care plans began to grow. There are currently 26.5 million Medicare Advantage members in 3,350 plans around the country.
You can read more about Medicare Advantage, its pros and cons here, but basically these plans bundle the benefits of Part A, B, and usually D into one package. These plans restrict your use of providers to a network they develop, but in return you may get extra benefits like vision, dental and even hearing aids at a low or zero monthly premium. Medicare pays these plans a fixed amount per month to take care of you. If they spend less, they get to keep the change, which they may return to you in more benefits.
Part D: Medicare first started covering outpatient prescription drugs in January, 2006. You may be taking very few prescription drugs now and think you don’t need Part D. But like Part B, however, there is a penalty for waiting to get Part D until after you enroll in Medicare. For every month that you do NOT obtain Part D coverage, you will face a late enrollment penalty of 1% for every month of what is called the “national base beneficiary premium”, or $33.06 in 2021. If you have what is called “creditable” drug coverage through a current or former employer or the VA or other individual insurance plans, those plans must tell you the rules for avoiding late Part D penalties. Check with those plans before you turn down Part D.
Finding a Part D plan that works for you requires research. Our Advisors can help if you call 844 913-1177, but you can also go on the Medicare website and search for plans there.
OpenMedicare helps seniors navigate some of their most important decisions around health and wellness.