Background
Medicare is a federal health insurance program that pays for a variety of health care expenses. Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), a division of the U.S. Department of Health & Human Services (HHS). Most Medicare beneficiaries are senior citizens aged 65 and older. Adults with certain approved medical conditions (such as Lou Gehrig’s disease) or qualifying permanent disabilities may also be eligible for Medicare benefits.
Similar to Social Security benefits, Medicare is an entitlement program. Most U.S. citizens earn the right to enroll in Medicare by working and paying a minimum required period of federal and state taxes. If you did not work long enough to be entitled to Medicare benefits, you may still be eligible to enroll, but may have to pay more.
There are four different parts to the Medicare program. Parts A and B are often referred to as Original Medicare. Part C, which is known as Medicare Advantage, is private health insurance. And Part D, which is coverage for prescription drugs.
In the details below, you will find out more about Medicare insurance plans, with an overview of the four parts.
The types of Medicare programs offered in the United States are often referred to as Part A, Part B, Part C and Part D. Here is a rundown of each “part” of the Medicare program.
Medicare Part A
Medicare Part A is a hospital insurance. This plan covers inpatient hospital care, limited time in skilled nursing facilities, limited home health care services, and hospice care.
Most Medicare Part A beneficiaries do not pay a monthly premium to receive this coverage. Under this Original Medicare part; this is called a “premium-free Part A.” In most cases, if you worked at least 10 years (40 quarters) and paid Medicare taxes during your time of work, you are eligible for premium free Part A. Otherwise, you may pay a monthly premium.
Medicare Part A does not typically cover the full amount of hospital bills, so you may be responsible for a share in the cost. There is also a deductible that must be met prior to Medicare benefits beginning. Once this deductible has been met Medicare will then pay 100% of your costs for up to 60 days in a hospital or up to 20 days in a skilled nursing facility.
After this occurs, you pay a flat amount up to the maximum number of covered days on the Medicare Part A policy. Your Part A benefits cover some of the costs for a total of 90 days in a hospital and 100 days in a skilled nursing facility. Medicare also will cover up to 60 “lifetime reserve days.” These days are days you stay in the hospital longer than 90 days in a row.
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Medicare Part B
Medicare Part B is medical insurance. Your Part B benefits cover certain non-hospital medical expenses like doctor’s office visits, blood tests, X-rays, diabetic screening and supplies, and outpatient hospital care. For this part of Original Medicare, you must pay a monthly premium. For those with higher incomes, the fee may be higher. For low income beneficiaries, Medicaid may assist you in covering your Part B premiums.
Medicare Part B beneficiaries are often responsible for their share of health care costs. Each year a deductible will need to be paid before Medicare Part B benefits kick in. After this is paid you will generally pay 20% of your medical bill if you go to a participating Medicare doctor. Medicare will pay the full cost of many lab tests and services requested by your participating Medicare doctor.
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Medicare Part C
Medicare Part C is also known as Medicare Advantage. This is insurance that often includes all Medicare coverage types in one health plan. These plans are offered by private insurance companies contracted with CMS. You must be enrolled in Part A and Part B in order to enroll in Part C, Medicare Advantage. Medicare Advantage plans offer benefits and services not covered by Parts A&B and often offer low copayments. You may need to continue to pay your Part B premium if you have a Medicare Advantage plan.
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Medicare Part D
Medicare Prescription Drug Coverage, or Medicare Part D, provides individuals with optional prescription drug coverage. Medicare Part D is available as a stand-alone prescription drug plan through a private insurance company. Part D is also available through some Medicare Advantage plans.
As long as you are enrolled in Medicare Parts A and/or B, you have the option to choose a Medicare prescription drug plan. In order to receive Medicare Part D, you must join a plan run by a private insurance company approved by Medicare. Each prescription drug plan will vary in cost and the drugs covered by the plan.
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Medicare Subsidies
What is the Medicare Low Income Subsidy?
Eligible beneficiaries who have a limited income may qualify for a government program that helps pay for Medicare Part D prescription drug costs.
Medicare beneficiaries that receive low-income subsidy (LIS) will receive assistance in paying for their Part D monthly premium, annual deductible, coinsurance and copayments. Individuals enrolled in extra help programs do not have a gap in prescription drug coverage, also know as a coverage gap, or the Medicare “donut hole”. The amount of subsidy depends on an individual income compared to Federal Poverty level and resource limitations that are set by the Social Security Act.
Medicare Extra Help eligibility
You may qualify for a low-income subsidy under Medicare Part D if the following applies:
- Your annual income and assets are below the eligibility thresholds. The Medicare Extra Help program eligibility limits may change from year to year.
- Your annual income is higher than the eligibility limit, but you support other family members
who also live in the same household as you, or if you live in Hawaii or Alaska. - Assets that count toward eligibility include:
- Cash and bank accounts, including checking, savings, and certificates of deposit
- Real estate outside of your primary residence
- Stocks and bonds, including U.S. savings bonds
- Mutual funds and IRAs
Calculating your eligibility for the low-income subsidy, Medicare does not count resources such as your home (or primary residence); insurance policies, or a car. Many people qualify for Medicare Extra Help savings and don’t know that they qualify. The best way to find out if you qualify is to apply.
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