Medicare can be complicated, especially if you are a new enrollee.
But it's important to understand what benefits you will receive so you can decide if you want prescription drug coverage, an Advantage plan or additional coverage through medigap. Below is a quick explanation of each part of Medicare.
Medicare Part A
Part A covers inpatient care at hospitals and skilled nursing facilities as well as hospice and some home health care. If you paid Medicare payroll taxes for at least 40 quarters, the Part A premium is free. For 2021, a $1,484 deductible applies as well as coinsurance for hospital stays longer than 60 days.
Medicare Part B
Part B pays for doctor visits, outpatient care and some home health care. For 2021, the deductible is $203 and the base premium is $148.50 per month. After hitting the deductible, you pay 20% of expenses unless you have either Medicare Advantage or supplemental coverage.
The penalty for failing to enroll at age 65 is a permanent 10% of the monthly premium multiplied by the number of years you could have enrolled but didn't. Exceptions are made for those with coverage through a qualifying employer health plan.
Medicare Part C
Part C is commonly called Medicare Advantage. Beneficiaries are covered for Parts A and B through private insurers instead of traditional government-administered Medicare. Most Advantage plans include prescription drug coverage. For 2021, the average monthly premium is $21.
Medicare Part D
Part D refers to standalone prescription drug coverage through private insurers. If your Advantage plan includes prescription drugs, you don't need Part D. If you elect original Medicare and want medications covered, you will need a Part D plan or a medigap plan that includes prescription drugs, though both are optional.
If you decide after your initial enrollment period that you want Part D, you will pay a permanent 1% penalty of the base premium (currently about $33 per month) multiplied by the number of months that you went without the coverage.
Supplemental coverage is commonly referred to as medigap. This is private insurance to supplement original Medicare coverage. The plans cover part or most of the cost sharing, such as coinsurance and co-payments, for Parts A and B, depending on which lettered medigap plan you choose.
There are 10 plans but as of 2020, new Medicare enrollees are ineligible for Plans C and F. All plans with the same letter provide the same benefits but the cost could vary by insurance company.
Medigap plans typically have higher monthly premiums than Advantage plans but lower out-of-pocket expenses.
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