Part A: Hospital Insurance – What's Covered and What's Not?

Medicare Part A is your hospital insurance. It primarily covers inpatient hospital stays, care in a skilled nursing facility (following a qualifying hospital stay), hospice care, and some home health care. For most people who have worked and paid Medicare taxes for at least 10 years (40 quarters), Part A is premium-free. This is a significant benefit, but it doesn't mean it's entirely free.

Even with premium-free Part A, you'll encounter a deductible for each benefit period you have a hospital stay. A benefit period begins the day you're admitted as an inpatient and ends when you haven't received any inpatient hospital or skilled nursing facility care for 60 days in a row. You can have multiple benefit periods in a year. As of 2023, this deductible is $1,600 per benefit period. This means if you're hospitalized multiple times in a year, and each hospitalization falls into a new benefit period, you could pay this deductible multiple times.

Beyond the deductible, there are also coinsurance charges for longer hospital stays. For the first 60 days of a benefit period, there's no coinsurance. However, from day 61 to day 90, you'll pay $400 per day. For each lifetime reserve day (you only get 60 of these for your entire life), you'll pay $800 per day. After these reserve days are used up, you'll be responsible for all costs.

It's also important to note that Part A has limitations. It generally doesn't cover custodial care (help with daily living activities like bathing and dressing) if that's the only care you need. It also doesn't cover private hospital rooms unless medically necessary, or meals and television if they are not part of your medical treatment.

Part B: Medical Insurance – The Doctor Visits and Outpatient Services

Medicare Part B covers doctor's services, outpatient care, medical supplies, and preventive services. This is the part of Medicare that covers your routine check-ups, specialist visits, lab tests, X-rays, and durable medical equipment (like walkers or wheelchairs). Unlike Part A, Part B typically has a monthly premium.

The standard monthly premium for Part B in 2023 is $164.90. However, this amount can be higher for individuals with higher incomes. This is known as the Income-Related Monthly Adjustment Amount (IRMAA). If your modified adjusted gross income from two years prior was above a certain threshold, you'll pay an additional amount on top of the standard premium.

Beyond the premium, Part B also has an annual deductible. In 2023, this deductible is $223. Once you meet this deductible, you typically pay 20% of the Medicare-approved amount for most services, including doctor's visits, outpatient therapy, and durable medical equipment. This 20% is your coinsurance, and it can add up quickly, especially for frequent or expensive treatments.

The key takeaway here is that while Part B covers a broad range of essential services, the combination of premiums, deductibles, and coinsurance means you'll be sharing a significant portion of the costs with Medicare.

Part C: Medicare Advantage – A Different Approach to Coverage

Medicare Part C, also known as Medicare Advantage, is an alternative way to get your Medicare benefits. These plans are offered by private insurance companies that are approved by Medicare. They must cover all the services that Original Medicare (Parts A and B) covers, except for hospice care, which is still covered by Part A.

The appeal of Medicare Advantage plans often lies in their potential for lower out-of-pocket costs and added benefits. Many plans offer $0 premiums (though you still have to pay your Part B premium), and they often include prescription drug coverage (Part D) and benefits not typically covered by Original Medicare, such as dental, vision, and hearing services.

However, Medicare Advantage plans come with their own set of costs and rules. While they often have lower monthly premiums, they typically have copayments for doctor visits and hospital stays, rather than the coinsurance structure of Original Medicare. These copayments can vary significantly from plan to plan. For example, a specialist visit might have a $50 copay, or a hospital stay might have a $300 copay per day.

Crucially, Medicare Advantage plans have an annual out-of-pocket maximum. This is a cap on how much you'll pay for covered services in a year. Once you reach this limit, the plan pays 100% of the costs for covered benefits for the rest of the year. This can provide significant financial protection. However, it's vital to understand that this out-of-pocket maximum applies only to services covered by the Medicare Advantage plan, and it does not include your monthly premiums, prescription drug costs, or costs for services that are not covered by the plan.

Another important consideration with Medicare Advantage plans is their network restrictions. Most plans are either Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). HMOs typically require you to use doctors and hospitals within their network, and you'll need a referral to see a specialist. PPOs offer more flexibility, allowing you to see out-of-network providers, but at a higher cost.

Part D: Prescription Drug Coverage – Managing Medication Costs

Medicare Part D helps cover the cost of prescription drugs. These plans are also offered by private insurance companies. You can get Part D coverage through a standalone Prescription Drug Plan (PDP) that you add to Original Medicare, or it's often included as part of a Medicare Advantage Plan (Part C).

The costs associated with Part D plans can be complex and vary widely. They typically involve a monthly premium, an annual deductible, copayments or coinsurance for your medications, and a coverage gap (also known as the donut hole).

Premiums for Part D plans can range from a few dollars to over $100 per month, depending on the plan and the drugs it covers. Like Part B, Part D premiums can also be subject to IRMAA for higher-income individuals.

Deductibles for Part D plans can be up to $545 in 2023. You pay the full cost of your prescriptions until you meet this deductible. After you meet the deductible, you'll pay a copayment or coinsurance for your medications.

The coverage gap is a unique feature of Part D. Once the total cost of your covered drugs (what you paid plus what your plan paid) reaches a certain limit, you enter the coverage gap. In the coverage gap, you'll pay a higher percentage of the cost for your drugs. For 2023, you pay 25% of the cost for both brand-name and generic drugs while in the coverage gap.

Finally, there's the catastrophic coverage phase. After you spend a certain amount out-of-pocket on covered drugs (including what you paid in the coverage gap), you reach catastrophic coverage. In this phase, your out-of-pocket costs for covered drugs are significantly reduced, and you'll pay a small copayment or coinsurance for the rest of the year.

The complexity of Part D means that comparing plans carefully is essential to finding the most cost-effective option for your specific medication needs.

Deductibles: The Initial Hurdle

A deductible is the amount you pay for covered healthcare services before your insurance plan starts to pay. Think of it as an initial hurdle you need to clear each year (or benefit period, in the case of Part A) before your insurance kicks in. As we've seen, Part A has a deductible per benefit period, while Part B has an annual deductible. Medicare Advantage plans may or may not have deductibles, and if they do, they can vary significantly.

The impact of deductibles is straightforward: the higher the deductible, the more you'll pay out-of-pocket before your insurance starts contributing. This is a key factor to consider when comparing plans, especially if you anticipate needing significant medical care.

Copayments and Coinsurance: Sharing the Cost

Once you've met your deductible (for Part B and some Part D plans), you'll typically pay either a copayment or coinsurance for services. These are different ways of sharing the cost:

• Copayment (Copay): This is a fixed amount you pay for a covered healthcare service, usually when you receive the service. For example, a doctor's visit might have a $20 copay, or a prescription might have a $10 copay. Copays are common in Medicare Advantage plans.
• Coinsurance: This is your share of the costs of a covered healthcare service, calculated as a percentage (e.g., 20%) of the allowed amount for the service. You pay coinsurance after you've met your deductible. For example, if Medicare approves a service at $100 and your coinsurance is 20%, you'll pay $20. Original Medicare (Parts A and B) primarily uses coinsurance.

The difference between copays and coinsurance can be significant. A fixed copay might be easier to budget for, while coinsurance means your out-of-pocket cost will vary depending on the total cost of the service.

The Out-of-Pocket Maximum: Your Financial Safety Net

This is perhaps the most important concept for understanding your potential maximum financial exposure. The out-of-pocket maximum is the most you'll have to pay for covered services in a plan year. Once you reach this limit, your health insurance plan pays 100% of the costs of covered benefits for the rest of the year.

Original Medicare (Parts A and B) does not have an out-of-pocket maximum. This means that if you have very high medical expenses, you could theoretically pay an unlimited amount out-of-pocket for services covered by Original Medicare. This is a major reason why many people with Original Medicare opt for a Medigap policy or a Medicare Advantage plan, both of which typically include an out-of-pocket maximum.

Medicare Advantage plans are required to have an out-of-pocket maximum, but the amount can vary. It's crucial to know this limit when choosing a plan. Remember, the out-of-pocket maximum for Medicare Advantage plans typically does not include your monthly premiums, prescription drug costs, or costs for services not covered by the plan.

Long-Term Care: A Significant Expense

This is one of the most significant areas where Medicare falls short. Medicare generally does not cover long-term care, which includes assistance with daily living activities like bathing, dressing, eating, and toileting. This type of care is often needed due to chronic illnesses, disabilities, or aging.

While Medicare Part A may cover a limited stay in a skilled nursing facility (up to 100 days) if it follows a qualifying hospital stay and you need skilled nursing or rehabilitative services, it does not cover the custodial care that most people need in the long term. This means that if you require ongoing assistance with daily living, you will likely have to pay for it yourself, through savings, or through long-term care insurance.

Dental, Vision, and Hearing: Often Not Included

Original Medicare (Parts A and B) generally does not cover routine dental care, eye exams for prescription glasses or contacts, or routine hearing tests and hearing aids. These are considered non-medical benefits by Original Medicare.

Some Medicare Advantage plans do offer coverage for these services, often with copayments or coinsurance. If you have Original Medicare and need these services, you'll typically pay for them out-of-pocket or through separate private insurance policies.

Durable Medical Equipment (DME): What You Might Pay For

Durable Medical Equipment (DME) refers to equipment prescribed by your doctor for use in your home, such as walkers, wheelchairs, hospital beds, and oxygen equipment. Medicare Part B covers DME, but there are often cost-sharing requirements.

You'll typically pay your Part B deductible, and then 20% coinsurance for most DME. Some DME items may be rented rather than purchased, and the rental costs can add up. It's important to confirm with your provider and Medicare what portion of the cost will be covered and what your coinsurance will be.

Travel and Accommodation for Medical Treatment

Medicare generally does not cover the costs of travel or accommodation to and from medical appointments or treatments, even if the treatment itself is covered. This includes transportation, lodging, and meals when you need to travel to receive care, especially if you have to go out of your local area for a specialist or a specific procedure.

Experimental or Investigational Treatments

Medicare covers treatments that are considered medically necessary and proven. If a treatment is still considered experimental or investigational, Medicare may not cover it. This can be a significant financial burden if you are seeking cutting-edge or novel therapies for serious conditions.

Choosing the Right Medicare Plan for Your Needs

This is arguably the most impactful decision you'll make. Your needs, health status, and budget will dictate which plan is best. Consider these questions:

• Do you want more predictable costs or lower upfront costs? Original Medicare with a Medigap plan often has higher premiums but lower out-of-pocket costs when you use services. Medicare Advantage plans often have lower premiums but higher copayments/coinsurance when you use services.
• Do you need prescription drug coverage? If you have Original Medicare, you'll need to enroll in a Part D plan. Many Medicare Advantage plans include Part D.
• Do you need coverage for dental, vision, or hearing? If so, a Medicare Advantage plan might be a better fit, as these benefits are often included.
• Do you have a preferred doctor or hospital? Check if they are in the network of any Medicare Advantage plan you are considering.

Take the time to compare the total costs, including premiums, deductibles, copayments, coinsurance, and out-of-pocket maximums, for plans available in your area.

Understanding Medigap (Medicare Supplement Insurance)

Medigap policies are sold by private insurance companies and can help fill the gaps in Original Medicare (Parts A and B). These gaps include deductibles, copayments, and coinsurance. Medigap policies are standardized, meaning they are identified by letters (e.g., Plan G, Plan N) and offer the same basic benefits regardless of the insurance company selling them.

Medigap policies have monthly premiums, which can vary by plan and insurer. However, once you pay your Medigap premium and your Original Medicare deductible, your out-of-pocket costs for covered services are typically much lower, and some plans cover the Part B deductible and coinsurance entirely. If you choose Medigap, you cannot also have a Medicare Advantage plan.

Leveraging Medicare Savings Programs

These are federal and state programs designed to help people with limited income and resources pay for their Medicare costs. They can significantly reduce your out-of-pocket expenses.

• Qualified Medicare Beneficiary (QMB): Helps pay for Part A and Part B premiums, deductibles, coinsurance, and copayments.
• Specified Low-Income Medicare Beneficiary (SLMB): Helps pay for Part B premiums.
• Qualifying Individual (QI): Helps pay for Part B premiums.
• Qualified Disabled Working Individual (QDWI): Helps pay for Part A premiums for disabled individuals who are working and have lost premium-free Part A.

These programs have income and asset limits, so it's worth checking if you qualify. You can find more information through your State Health Insurance Assistance Program (SHIP) or by contacting Medicare directly.

Comparing Part D Prescription Drug Plans

The cost of prescription drugs can be a major component of your healthcare expenses. When choosing a Part D plan:

• Check the formulary: Ensure your regular medications are covered and in which tier (which affects your copay/coinsurance).
• Compare deductibles and copayments: Look at the total cost for your specific medications.
• Understand the coverage gap: Factor in how much you might pay if you enter the donut hole.
• Look for preferred pharmacies: Some plans offer lower costs at specific pharmacies.

Using Medicare's Plan Finder tool on Medicare.gov can be invaluable for comparing Part D plans based on your prescription needs.

Maximizing Preventive Care Benefits

Original Medicare covers many preventive services at no cost to you, meaning you won't pay a deductible, copayment, or coinsurance for them. These services are designed to help you stay healthy and catch potential problems early.

Examples include:

• Annual Wellness Visits
• Flu shots
• Certain cancer screenings (mammograms, colonoscopies, prostate cancer screenings)
• Diabetes screenings and counseling
• Cardiovascular disease screenings
• Bone mass measurements

Taking advantage of these free preventive services can help you stay healthier and potentially avoid more costly treatments down the line.

How much does Medicare cost per month?

The monthly cost of Medicare varies significantly depending on which parts you enroll in and your income level. For Part A, most people don't pay a premium if they or their spouse paid Medicare taxes for at least 10 years. If you don't qualify for premium-free Part A, the monthly premium can be $278 or $505 in 2023, depending on your work history.

For Part B, the standard monthly premium in 2023 is $164.90. However, individuals with higher incomes pay more (IRMAA). If you have a Medicare Advantage plan (Part C), you still pay your Part B premium, and the plan itself may have an additional premium, which can range from $0 to over $100 per month.

For Part D (prescription drug coverage), premiums vary widely by plan, typically ranging from about $7 to over $100 per month. Again, higher incomes can result in higher premiums.

So, a person with premium-free Part A and the standard Part B premium would pay at least $164.90 per month. Adding a Part D plan could increase that by another $7 to $100+, and a Medicare Advantage plan might have its own premium on top of the Part B premium.

What is the average monthly cost of Medicare?

It's challenging to pinpoint a single average monthly cost because it depends so heavily on individual choices and circumstances. However, if we consider someone with premium-free Part A and the standard Part B premium, their base cost is $164.90 per month. If they also enroll in a typical Part D plan with a $30 premium, their total would be around $194.90.

Many Medicare beneficiaries also opt for Medicare Advantage plans. These plans often have $0 premiums (beyond the Part B premium), but they have copayments and coinsurance for services. The overall cost can be lower if you use fewer services, but higher if you have significant healthcare needs and high copays.

It's more useful to think about the potential costs rather than an average, as your actual expenses will be determined by your plan choices and your health.

What is the most expensive part of Medicare?

The most expensive part can be interpreted in a few ways:

• Monthly Premium: Part B generally has the highest standard monthly premium among the core parts of Medicare. However, Part D and Medicare Advantage plan premiums can also be substantial, especially for those with higher incomes or plans with extensive benefits.
• Potential Out-of-Pocket Costs: Without an out-of-pocket maximum, Original Medicare (Parts A and B) can lead to the highest potential out-of-pocket expenses if you have very extensive or prolonged medical needs. This is because there's no cap on your coinsurance payments.
• Specific Services: Inpatient hospital stays (Part A) can incur significant costs due to the benefit period deductible and daily coinsurance for longer stays. Similarly, complex medical treatments or surgeries covered by Part B can result in substantial coinsurance payments if you haven't met an out-of-pocket maximum (as in a Medicare Advantage plan).

Ultimately, the most expensive part for an individual will depend on their healthcare utilization and the specific plan they choose.

What is not covered by Medicare?

As we've touched upon, Medicare does not cover everything. Key areas that are typically not covered by Original Medicare include:

• Long-term care (custodial care): Assistance with daily living activities.
• Most dental care: Cleanings, fillings, extractions, dentures.
• Most vision care: Routine eye exams, eyeglasses, contact lenses.
• Most hearing care: Hearing tests, hearing aids.
• Cosmetic surgery: Unless medically necessary (e.g., after an accident or for breast reconstruction after mastectomy).
• Most foot care: Routine care for conditions like bunions or flat feet.
• Acupuncture: Except for chronic low back pain in certain circumstances.
• Prescription drugs: Unless you enroll in a Part D plan or have a Medicare Advantage plan that includes drug coverage.
• Services outside the U.S.: With some limited exceptions.

It's crucial to check the specific coverage details of your Medicare plan or Original Medicare to understand what is and isn't covered.