Does Medicare seem overly complicated? Don’t worry, you’re not the only one who feels that way.
Medicare is best understood when broken down into its four component parts, A through D.
Medicare Part A - Hospital
As we grow older we’re more likely to find ourselves in situations that require a stayover in the hospital.
Medicare Part A limits the expense of hospital stays.
Medicare recipients are covered, nearly in full, for up to 60 days of hospital care.
A deductible of $1,216, however, must first be satisfied before benefits kick in.
If you stay in the hospital for longer than 60 days, then you will be charged a copayment of $315 for each additional day. If your stay exceeds 90 days, then you tap into what are called “lifetime reserve days.”
You have 60 lifetime reserve days, and each day taken requires a copayment of $630.
Medicare Part B - Medical
Medicare Part B pays the doctor.
Doctors’ bills may include lab tests, ambulances, outpatient visits, surgeries, supplies, and other services.
Medicare requires a copay for some services, usually 20%. The annual deductible for Part B is approximately $150.
Premiums for Part B are assessed on the basis of income.
The baseline premium for 2016 enrollment is about $120 and increases steadily for higher-income households. The chart below is adapted from Medicare.com and shows how Medicare Part B premiums are scaled in 2016:
Medicare Part C – Medicare Advantage
Parts A and B are known as “Original Medicare.”
Part C gives patients the option to customize their medical coverage by choosing from one of several “Medicare Advantage” plans offered by private companies.
Premiums for Medicare Advantage plans will be the same or more than premiums for Original Medicare. Medicare Advantage plans can be useful if you want to lower your out-of-pocket expenses or want a prescription drug plan other than Medicare Part D.
You can use Medicare’s “Plan Finder” tool to shop for Advantage plans available in your area.
You can also click the link to learn more about the best ways to get the most out of your Medicare Advantage plan.
Medicare Part D – Prescription Drugs
Medicare’s prescription drug benefit is the newest component of the Medicare program.
There is no premium for Medicare Part D for individuals making $85,000 or less or couples making $170,000 or less.
For higher income brackets, Part D premiums range from $12 to $70 and are added to your part B premium.
Different Part D plans offer different copays for various “tiers” of drugs. For example, a certain tier may require a copay of $10.
Other plans may structure out-of-pocket expense by requiring you to pay “coinsurance.”A coinsurance payment is a specific percentage share of the drug’s total cost.
Part D plans can be reviewed using the “Plan Finder” tool or the Medicare handbook that will be mailed to you before your enrollment period begins.
The Bottom Line
The bottom line is that Medicare is complicated.
It can seem overwhelming, and honestly, every decision can feel as though the stakes are very high. It doesn't have to be this way. Education, planning, and some help along the way can be the difference between a stressful transition to Medicare, and a smooth one.
Bryan is a the Senior Finance Contributor for ClydeBank Media. He specializes in the worlds of tech and finance, having both authored and collaborated with industry veterans on a variety of titles. Listen for his voice when searching for investment strategy and financial wellness tips. Bryan’s newest investing course is available now on the ClydeBank Media Campus.