Understanding Medicare A, B, C & D

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If you are approaching age 65, you have a lot of company. There are 75 million Baby Boomers on the verge of retirement. Over the next twenty years, an average of 10,000 each day will reach age 65.¹ And when you turn 65, you have to apply to Medicare.

Medicare contains four components: Parts A, B, C, and D. Each component contains many rules that beneficiaries and their caregivers are required to learn. Following are some of the main points you should know —

Medicare Part A: Hospital Insurance

This insurance is designed to help cover the following:

● Inpatient care in hospitals, including rehabilitation facilities

● Care provided in a skilled nursing facility or hospice for a limited period

● Home health care

For inpatient hospital care, Medicare typically covers a semi-private room, meals, general nursing, drugs, and other hospital services and supplies. For Long Term Care, Medicare may cover a maximum of 100 days during a benefit period if a doctor certifies that a patient needs daily skilled care.

Cost: No premium if you or your spouse paid Medicare taxes while you were working. For 2015, there is a deductible of $1,260 before coverage begins. You may expect to pay a portion of the cost for a hospital stay of more than 60 days during a benefit period.

Medicare Part B: Medical Insurance

Part B helps to cover physician services, outpatient care, preventive services, durable medical equipment, and certain home health care. Although the scope of Part B is extensive, there are many services — such as dental care, routine eye exams, hearing aids, and others — that are not covered as part of this program.

Cost: A deductible of $147 for 2015 plus 20% of Medicare-approved amounts for medical services. With Original Medicare, the standard 2015 premium is $104.90 per month. Single beneficiaries with incomes above $85,000 and couples earning more than $170,000 pay higher premiums.

Medicare Part C: Offered by Private Insurers

Also known as Medicare Advantage plans, Part C consists of insurance plans provided by private carriers. Medicare pays a fixed amount every month to a private insurer for providing care. In return, Medicare Advantage plans include drug coverage, emergency and urgent care. Some plans may cover services that are not covered by Medicare, which may result in lower out-of-pocket fees for beneficiaries.

Cost varies according to the level of coverage. You should contact the plans that interest you to learn the details and to compare the costs and levels of coverage with Medicare Part A and Part B.

Medicare Part D: Prescription Drugs

If you have Original Medicare (Part A plus Part B), you can add drug coverage by obtaining it from an insurer approved by Medicare through Part D. Sign up for Part D as soon as you become eligible for Medicare. If you wait and try to sign up during a subsequent enrollment period, you may be charged a late enrollment penalty and be required to pay higher premiums for life.

Costs: There is a monthly premium, an annual deductible, and copayments. There is a coverage gap, commonly called the “donut hole” that works as follows: After a beneficiary and the insurer pay $2,860 for prescription drugs during a benefit period, the beneficiary will pay 47.5% of the plan’s covered brand-name prescription drugs until out-of-pocket expenses total $4,700, at which point catastrophic coverage takes effect. Effective the following calendar year, a new benefit period begins with applicable premiums, copayments, and other costs.

Part D may be included if you have a Medicare Advantage plan. Find out whether your plan includes prescription coverage as part of its program.

Medicare’s rules can be confusing for many people. Their website, www.medicare.gov, can be a valuable resource. Every year, Medicare also mails “Medicare & You” to beneficiaries and makes this fact-filled publication available online. You may want to review it to make sure you have an up-to-date understanding of the Medicare program.

¹ U.S. News & World Report 3/23/2012

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