If you are just aging into medicare eligibility now, or if you are already enrolled but unsure if your current benefits are including everything they should, you might have questions with regard to what medicare covers under Part A and Part B for 2018. Below we break out in detail everything that is included with Original Medicare, Part A and Part B, as well as what is not covered.
People age 65 and over and people with disabilities qualify for health insurance under the federal program Medicare. The program is broken down into Part A, which covers hospital stays, and Part B, which covers doctor’s office visits. These two together are sometimes referred to as Original Medicare (OM). Medicare Part C, called Medicare Advantage (MA), is a program that replaces Parts A and B with a Medicare-approved plan that pays for hospitalization and doctor visits. Medicare Part D is an add-on plan seniors can buy that covers most of the costs of prescription medicines.
As you can see, there are various answers to the question, “What does Medicare cover?” If you choose Parts A and B or replace them with Part C, that will make a difference. And then there’s Part D, the prescription drug benefit.
Components of Medicare
Medicare Part A – Hospitalization
Part A covers hospital stays for illness or surgery and it also kicks in for nursing home or rehab facility stays. This is the part of Medicare that pays for hospice, home health care and the medicines you receive as an inpatient.
Medicare Part B – Medical Benefits
Medicare Part B pays for doctor’s office visits, mental health care, outpatient rehab, lab work, x-rays and medical equipment. It also pays for the services of your doctor when you’re in the hospital and for most medicines you receive in a doctor’s office.
Medicare Part C – Medicare Advantage
Medicare Advantage is a private insurance plan that replaces Medicare Parts A and B, and you’re guaranteed to get the same benefits. In addition, many plans include coverage for prescription drugs. This type of plan could be structured as a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO). The differences in these plans are explained in more detail below.
Medicare Part D – Prescription Drugs
Part D is an optional plan that costs from $13 to $34 per month for most people. It pays for drugs you use at home, insulin supplies, and some vaccines. Plans vary, and your out-of-pocket maximum will range from zero to $405. Usually, you’ll have a copay for each prescription you get filled, and it may range from $5 to $40. Some plans also charge coinsurance, a percentage of the cost of each drug.
Typical Co-pays for Drugs under Medicare Part D:
- Tier 1: Preferred Generic Drugs ($3 copay)
- Tier 2: Generic Drugs ($10 copay)
- Tier 3: Preferred Brand Name Drugs ($40 copay)
- Tier 4: Non-Preferred Brand Name Drugs (45% of cost)
- Tier 5: Specialty Drugs (30% of cost)
Drugs are classified in tiers based on whether they’re generic or brand name and preferred or not preferred by the insurer. If the drugs you’re currently taking aren’t on the insurance company’s list at all, you and your doctor will have to decide on an alternative medicine that has the same effect. You’ll be allowed a 60-day grace period of continuing on the original drug to give your doctor time to determine the best substitute.
Some plans also require you to pay a certain percentage of each prescription, or a coinsurance charge. If you take costly medications, this percentage could drive up the cost of your coverage. You can look at the copayment, coinsurance and premium costs for each option to determine which is best for you.
Medical Costs Not Covered by Medicare Parts A and B
Some health-related costs aren’t covered by Parts A and B, and this is the reason that so many people choose to replace Original Medicare with a Part C plan.
These are services that are not covered by Parts A and B:
- Dental Care
- Eye Exams
- Hearing Aids & Fittings
- Routine Foot Care
- Long-Term Care
Health Maintenance Organization (HMO)
Hospitals and physicians participating in an HMO are chosen by the insurance provider, and costs for services are negotiated by the insurer to get the most savings. Healthcare providers agree to reduce their fees in exchange for having a guaranteed number of patients. You’ll be required to stay within that network of hospitals and doctors, and out-of-network providers will either be partially reimbursed or not at all. There can also be a yearly limit on the number of doctor’s office visits, and certain tests or treatments may not be approved for coverage. In addition, you’ll need a referral from your primary care physician in order to see a specialist.
These restrictions are offset by lower premiums and deductibles. An HMO with a prescription drug benefit will often have no premium cost above what you would pay for Medicare Part D, so this is a good choice if money is tight. Seeing providers within the network is a reasonable requirement if you have an approved hospital nearby and a choice of physicians in your area.
Preferred Provider Organization (PPO)
Usually, a PPO costs more than an HMO but has more choice and flexibility for the insured person. For example, you can see out-of-network physicians, although the reimbursement will be less and may not count toward the yearly out-of-pocket maximum. You won’t need a referral from your primary care doctor to see a specialist, but seeing doctors within the network will give you the benefit of full coverage and a smaller co-pay.
For urgent care or emergency room visits, you’ll be covered for visits to out-of-network providers, regardless of which type of plan you pick. But a PPO Plan may be the best option if you often travel out of your network area. Choosing a plan that pays a reasonable percentage of out-of-network doctor’s fees allows you to seek medical care in another state without a major hit in the wallet.
How to Choose Between an HMO and a PPO
Look at the differences in the two types of plans to decide which one feels the most comfortable and suits your lifestyle the best. Then compare the prescription drug coverage, copays for office visits, coinsurance for procedures, and other factors to get a clear picture of the costs of each plan. If you prefer seeing your primary care doctor initially when you’re ill, an HMO may suit your needs and offer lower premiums. If it’s important to you to see a specialist without needing a referral, you might decide on the flexibility of a PPO.
It can be confusing when so many factors impact how much you’ll end up spending on a Part C Plan, but there are worksheets that can help with this, often provided by insurers. You’ll be able to get a good idea of how much you can expect to spend with each type of plan. Of course, you don’t have a crystal ball when it comes to how much you’ll need to see the doctor or whether you’ll be admitted to the hospital. The best idea is to base your coverage on your past medical history, the current state of your health, and your upper limit for out-of-pocket expenses. Any medications you take will also factor into costs.
What Is Medicare Advantage?
Medicare Advantage replaces Medicare Parts A and B and often includes a prescription drug plan. This type of coverage is administered by a health insurance provider or health network that includes hospitals and physicians. One of the first choices to make when opting for Part C is the type of plan to choose. Most people decide on an HMO or a PPO. There are benefits to each kind of coverage, and it will depend on your individual needs.
Benefits of Part C Plans – Medicare Advantage Plans
Medicare Advantage, or Part C, must offer the same coverage as Original Medicare to be approved by the federal government. There are different patient treatment guidelines and coverage restrictions depending on the provider, and many plans include a prescription drug benefit. There may be a premium but, for some plans, it’s no more than the part D prescription drug benefit would cost if added to OM. These plans hold down costs by negotiating payments with a network of providers.
These guidelines apply to all Medicare Advantage Plans:
- The out-of-pocket yearly maximum is $6,700.
- Copayments and coinsurance may not be higher than original Medicare for some services, including chemotherapy and dialysis.
- Plans can offer benefits not provided in Medicare Parts A and B, such as vision and dental care.
Extra benefits offered by an MA (Part C) plan may include vision, dental and hearing services not covered by OM. The savings gained through negotiating reduced health care costs are used to provide these extra benefits. Premiums will be based on costs and reimbursements in each particular MA plan.
Wellness checkups, prevention screenings, and even gym memberships are covered by some Medicare Advantage plans. Other perks include free nutrition and healthy living seminars. For an additional premium cost, long-term care in an assisted living facility or nursing home may be included. Since there’s no determination of eligibility when first enrolling in Medicare, this can be a vital benefit for those who are already experiencing health issues.
From Basic Coverage to Complete Comprehensive Care With Few Out Of Pocket Costs
These details should help you understand the choices to make when deciding on a Medicare plan that’s right for you. At one end, there’s the coverage provided by Medicare Parts A and B, which covers doctor’s office visits and hospitalization. At the other end of the spectrum, there are plans that provide generous out-of-network perks along with vision, dental and hearing benefits.
During the Medicare open enrollment period, October 15 to December 7, you can choose the type of coverage that will best meet your needs. Original Medicare doesn’t cover wellness visits, but if you’re signing up for Medicare for the first time, you’ll get a one-time ‘Welcome to Medicare’ checkup. Once you’ve chosen your coverage, you don’t have to do anything each year to remain enrolled in the plan you picked.
The Coverage You Need Will Help You Decide
The cost of Medicare Advantage plans is expected to dip slightly this year, while benefits will remain the same or improve. The Centers for Medicare and Medicaid Services (CMS) is projecting that a record 20.4 million plans will be sold this year, a 9 percent increase since last year. The number of MA plans is growing, and you may have ten or more plans to choose from. Depending on your needs, one of them may be a good alternative to replace OM. In deciding on an insurance plan, just be sure and weigh the pros and cons of all your choices first.