Medicare is the largest public health insurer in the country, covering more than 55 million Americans. It’s a huge program with lots of moving parts. And the four most important parts follow the alphabet: A, B, C, and D. Here’s what you need to know.
Medicare Part A
What it covers: Inpatient hospitalization, hospice care, inpatient care in a skilled nursing facility (not custodial or long-term care), home health care, and inpatient care in a religious nonmedical health care institution
The details and cost: You are automatically enrolled in Part A when you turn 65 if you’re receiving benefits from Social Security or the Railroad Retirement Board (RRB). (However, you’ll get your Medicare card three months before your birthday.) If you’re not getting Social Security or RRB benefits, you have to sign up for Medicare.
If you or your spouse paid Medicare taxes while working, you’re in luck – there’s usually no premium for you! Otherwise, you may have to pay up to $460 a month in 2020. For everyone with Part A coverage, you may have to pay deductibles, copayments, or coinsurance, which vary depending on the service. There is no cap on your annual out-of-pocket costs.
Medicare Part B
What it covers: Medically necessary doctors’ services, outpatient care, durable medical equipment, mental health services, several preventive services, and home health services
The details and cost: Like Part A, you are automatically enrolled at age 65 if you’re getting benefits from Social Security or the RRB. However, you can drop the coverage if you don’t want it. If you don’t sign up for Part B when you’re first eligible but change your mind later, you may have to pay a late enrollment penalty for as long as you have Part B.
The Part B premium for 2020 is $144.30, although it might be higher depending on your income. There is also a deductible ($197 for 2020), after which you typically pay 20% of the Medicare-approved amount of the service. No cap is provided for annual out-of-pocket expenses. However, most preventive services are free.
Medicare Part C
What it covers: Also called a Medicare Advantage Plan, this is offered by Medicare-approved private companies. These plans include all the benefits covered under Parts A and B. In addition, most cover prescription drugs and other benefits not included in Medicare Parts A and B, such as vision, dental, and hearing services.
The details and cost: You pay the Part B premium and, in some instances, an additional premium for the Medicare Advantage Plan. Unlike Parts A and B, Medicare Advantage out-of-pocket costs are capped each year. Once you reach this limit, you’ll pay nothing for covered services.
Medicare Part D
What it covers: This is the newest part of Medicare, added in 2006. It provides prescription drug coverage and, like Part B, is voluntary. (People with Medicare Advantage typically get their drug coverage through their plan.)
The details and cost: If you’re not in a Medicare Advantage plan, you can sign up for a prescription drug plan and pay a monthly premium, which varies based on the plan. Many also have deductibles and copayments.
Most Medicare Part D drug plans have a coverage gap, called the “donut hole.” Once you and Medicare together spend a certain amount on drugs ($4,020 in 2020), you are “in the hole” and pay 25% of the plan’s cost for covered brand-name and generic drugs. Once you spend $5,000 out of pocket, you climb out of the gap, and Medicare covers most of your costs for the rest of the year.