What Is Medicare? Ultimate, No-BS Guide For 2021

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    What is Medicare

    Richard Feynman famously said, “If you think you understand quantum mechanics, you don’t understand quantum mechanics.”

    Most Americans would say the same about Medicare these days…

    However, understanding this program is essential for those nearing or over 65, as it can keep your health and pocketbook in great shape.

    Below, we’ve put together a brief, straightforward guide to help you understand this essential program.

    Original Medicare

    Medicare Advantage

    Medicare Supplement Insurance ("Medigap")

    Medicare Eligibiliity & Enrollment

    Medicare Costs

    Medicare FAQs

    1. Medicare = Federal Health Insurance

    Medicare is a federal health insurance program established in 1965 and managed by the United States federal government.  It is funded through taxes, premiums, and general treasury revenue.

    Medicare provides health insurance coverage for Americans aged 65 or older and certain younger adults with disabilities, regardless of their income or medical history.

    Part A
    (Hospital)
    Part B
    (Doctors)
    Part D
    (Prescriptions)

    What Is Original Medicare?

    Original Medicare is a fee-for-service health plan that has two parts: Part A (Hospital Insurance) and Part B (Medical Insurance).

    After you pay a deductible, Medicare pays its share of the Medicare-approved amount, and you pay your share (coinsurance and deductibles).

    Original Medicare is issued by the Federal Government.

    Medicare Advantage covers the same services as Plan A and Plan B, but is issued by private insurers, who are reimbursed by the Federal Government.  Medicare Advantage plans often cover additional services, such as dental and eyecare, as we’ll discuss below.

    Medicare Part A (Inpatient Care)

    Medicare Part A is the Hospital Insurance program that helps cover inpatient care.

    This includes semi-private accommodations if medically necessary, general hospital services, hospice care, and some home health visits. It also covers skilled nursing facilities for a limited period when recovery from an illness or surgery requires supervision by a medical professional.

    Medicare Part A
    (Hospital)
    Medicare Part B
    (Medical)

    Medicare Part B (Outpatient Care)

    Medicare Part B has two components

    • Medical Insurance (also known as “outpatient insurance”) which offers coverage for doctor’s office visits, lab tests, x-rays, outpatient surgeries, etc.
    • Outpatient Prescription Drug Coverage provided through private companies approved by Medicare that can help you pay for prescribed medicines or drugs not covered under your plan.

    Medicare Part D (Prescription Drugs)

    Medicare Part D prescription drug coverage is provided by private insurance companies.

    It helps people with Medicare pay for self-administered prescription medicines (drugs) by working out discounted prices with participating pharmacies in your area.

    You must enroll separately through an approved private insurer if you wish to have this additional coverage of over-the-counter medications or insulin injections excluded from original medicare plans.

    2. Medicare Advantage ("Part C")

    You can get your Medicare coverage through Original Medicare or a Medicare Advantage Plan (like an HMO or PPO).

    If you have Original Medicare, the government pays for your health care directly.

    Medicare Advantage plans, sometimes called “Part C” plans, are offered by private health insurers approved by Medicare. Medicare pays these companies to cover your Medicare benefits.

    Medicare Advantage Pros
    Medicare Advantage Cons

    What Does Medicare Advantage Cover?

    Medicare Advantage Plans must cover all of the services that Original Medicare covers except hospice care.  (Original Medicare covers hospice care even if you’re in a Medicare Advantage Plan.)

    Medicare Advantage plans provide all of your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage.  In addition:

    • Most Medicare Advantage Plans include Medicare prescription drug coverage (Part D)
    • Many plans also offer extra benefits such as dental care, eyeglasses, or wellness programs, like gym memberships (Silver Sneakers)

    However, note that these additional benefits (those beyond Part A & B) can change from year to year.

    These private insurance plans have varying benefit structures, including HMOs, PPOs, Special Needs Plans, etc., much like standard health insurance policies available today.

     If you have Medicare Advantage, you are still required to pay your Part B premium (in addition to your monthly premiums for your Medicare Advantage plan itself).

    Who Is Eligible For Medicare Advantage?

    If you are eligible for Medicare Parts A and B (and live in the plan’s service area), you are eligible to purchase a Medicare Advantage plan.

    Note that individuals with end-stage renal disease (permanent kidney failure) generally can’t join a Medicare Advantage Plan.

    3. Medicare Supplemental Insurance ("Medigap")

    Original Medicare pays for many, but not all, health care services and supplies.

    A Medicare supplement policy fills in the gaps of what’s not covered under Original Medicare coverage.  These policies are therefore often called “Medigap” policies.

    Medicare supplement plans (e.g., Medicare Plan F or Medicare Plan K) are private insurance.  They help pay some of the health care costs that Original Medicare doesn’t cover (like copayments, coinsurance, deductibles, and other out-of-pocket costs).

    If you have Original Medicare and a Medigap policy, Medicare will pay its share of the Medicare-approved amounts for covered health care costs. Then your Medigap policy pays its share.

    Medigap vs. Medicare Advantage

    While they both involve health care coverage from a private insurance company, Medigap plans and Medicare Advantage plans are entirely different.

    Medicare Advantage is an alternative way to get the benefits available through Original Medicare.

    On the other hand, Medigap supplements your Original Medicare benefits by paying for costs that Original Medicare does not cover.

    Note that many Medigap policies provide additional coverage.  This might include:

    • Foreign travel emergency coverage
    • Routine vision care
    • Dental care

    Medigap Regulations

    All Medigap policies must follow Federal and state laws designed to protect you, and policies must be identified as “Medicare Supplement Insurance.” Medigap insurance companies in most states can only sell you a “standardized” Medigap policy.  Each standardized Medigap policy must offer the same basic benefits, no matter which insurance company sells it. All plans offer the same basic benefits, but some offer additional benefits. You can choose which plan meets your needs.

    Note: In most states, standardized policies, or plans, are identified by the letters A, B, C, D, F, G, K, L, M, and N, and each type of plan generally contains the same benefits in all states. In Massachusetts, Minnesota, and Wisconsin, benefits will be labeled differently, but each state’s policies are standardized.

    4. Medicare Eligibility & Enrollment

    Americans aged 65 or older, certain younger adults with disabilities, and those with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant) are eligible for Medicare.

    Medicare eligibility requirements vary depending on the circumstances.

    Medicare Enrollment Period
    Eligibility spans the month of your 65th birthday + the 3 months before and after

    How Do I Sign Up?

    You can enroll online anytime during open enrollment periods that are typically twice per year (typically January/February and June through Sept 30).

    You may be required to provide proof of age (typically a birth certificate) and documentation showing any pre-existing conditions you have through medical records review by an approved physician before coverage begins.

    5. Medicare Costs

    The monthly premium for Part B standard coverage is contingent upon your annual income, personal circumstances, and living location. You may also be required to meet a yearly deductible before benefits kick in. Depending on where you live (region of the US or Canada), overall medical expenses not covered by insurance will vary due to geographical price variances beyond our direct control as a private company offering supplemental plans through this website.

    If you don’t buy it when you’re first eligible, your monthly premium may go up 10%. (You’ll have to pay the higher premium for twice the number of years you could have had Part A, but didn’t sign up.)

    Medicare Part A Costs

    Most people do not have to pay a monthly premium for Part A.

    However, if you have not paid Medicare taxes for 40 quarters (10 years), you will have to pay a Part A premium:

    • If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $471
    • If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $259

    Below, we’ve detailed the costs for common services covered under Part A.

    • $0 for home health care services.
    • 20% of the Medicare-approved amount for Durable Medical Equipment (DME).
    • $0 for hospice care
    • You may need to pay a copayment of no more than $5 for each prescription drug and other similar products for pain relief and symptom control while you’re at home. In the rare case your drug isn’t covered by the hospice benefit, your hospice provider should contact your Medicare drug plan to see if it’s covered under Medicare Drug Coverage (Part D)
    • You may need to pay 5% of the Medicare-approved amount for inpatient respite care
    • Medicare doesn’t cover room and board when you get hospice care in your home or another facility where you live (like a nursing home)
    • $1,484 deductible for each benefit period .
    • Days 1–60: $0 coinsurance for each benefit period.
    • Days 61–90: $371 coinsurance per day of each benefit period.
    • Days 91 and beyond: $742 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime).
    • Beyond lifetime reserve days : All costs.
    • $1,484 deductible for each benefit period .
    • Days 1–60: $0 coinsurance per day of each benefit period.
    • Days 61–90: $371 coinsurance per day of each benefit period.
    • Days 91 and beyond: $742 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime).
    • Beyond lifetime reserve days : All costs.
    • 20% of the Medicare-Approved Amount for mental health services you get from doctors and other providers while you’re a hospital inpatient.
    • Days 1–20: $0 for each benefit period
    • Days 21–100: $185.50 coinsurance per day of each benefit period
    • Days 101 and beyond: All costs

    Medicare Part B Costs

    The standard Part B premium amount in 2021 is $148.50.

    Most people pay the standard Part B premium amount. If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.

    Part B annual deductible:  In 2021, you pay $203 for your Part B deductible. After you meet your deductible for the year, you typically pay 20% of the Medicare-Approved Amount for these:

    • Most doctor services (including most doctor services while you’re a hospital inpatient)
    • Outpatient therapy
    • Durable medical equipment

    Below, we’ve listed the cost for other common services covered under Part B:

    • You pay $0 for Medicare-approved services
    • $0 for home health care services
    • 20% of the Medicare-Approved Amount for durable medical equipment
    • You pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you’re a hospital inpatient), outpatient therapy, and durable medical equipment
    • You pay nothing for your yearly depression screening if your doctor or health care provider accepts assignment
    • You pay 20% of the Medicare-approved amount for visits to your doctor or other health care provider to diagnose or treat your condition. The Part B deductible applies
    • If you get your services in a hospital outpatient clinic or hospital outpatient department, you may have to pay an additional copayment or coinsurance amount to the hospital
    • You pay a percentage of the Medicare-Approved Amount for each service you get from a doctor or certain other qualified mental health professionals if your health care professional accepts assignment
    • You also pay coinsurance for each day of partial hospitalization services you get in a hospital outpatient setting or community mental health center, and the Part B deductible applies.
    • You usually pay 20% of the​​​​​​​ Medicare-approved amount for the doctor or other health care provider’s services. For services that can also be provided in a doctor’s office, you may pay more for outpatient services you get in a hospital than you’ll pay for the same care in a doctor’s office. However, the hospital outpatient copayment for the service is capped at the inpatient deductible amount.
    • In addition to the amount you pay the doctor, you’ll also usually pay the hospital a copayment for each service you get in a hospital outpatient setting, except for certain preventive services that don’t have a copayment. In most cases, the copayment can’t be more than the Part A hospital stay deductible for each service.
    • The Part B deductible applies, except for certain preventive services . If you get hospital outpatient services in a critical access hospital, your copayment may be higher and may exceed the Part A hospital stay deductible.

    Medicare Part C Costs

    • Monthly premium:  The Part C monthly premium varies by plan

    • Deductibles, copayments, & coinsuranceThe amount you pay for Part C deductibles, copayments, and/or coinsurance varies by plan. Look for specific Part C plan costs, and then call the plans you’re interested in to get more details

    Medicare Part D Costs

    • Monthly premium:  The Part D monthly premium varies by plan (higher-income consumers may pay more)

    • Deductibles, copayments, & coinsurance:  The amount you pay for Part D deductibles, copayments, and/or coinsurance varies by plan. Look for specific Medicare drug plan costs, and then call the plans you’re interested in to get more details

    6. Medicare FAQs

    Medicare is our country’s health insurance program for people age 65 or older and younger people receiving Social Security disability benefits. The program helps with the cost of health care, but it doesn’t cover all medical expenses or the cost of most long-term care.
    Many people are working past age 65, so how does Medicare fit in? It is mandatory to sign up for Medicare Part A once you enroll in Social Security. The two are permanently linked. However, Medicare Parts B, C, and D are optional and you can delay enrollment if you have creditable coverage.
    Medicare is funded by the Social Security Administration. Which means it’s funded by taxpayers: We all pay 1.45% of our earnings into FICA – Federal Insurance Contributions Act – which go toward Medicare. Employers pay another 1.45%, bringing the total to 2.9%.
    Medicare and Medicaid are both Federal health insurance programs; the key difference is eligibility. Medicare eligibility is based on age or disability. You’re eligible for Medicare if you’re 65 or over or have a specific illness. Medicaid is based on income. You’re eligible for Medicaid services if your income is below a certain level.
    Rikin Shah

    Rikin Shah

    Rikin is the Founder & Head of Content at GetSure. He is a licensed life, accident & health insurance agent, with over 10 years of experience in the financial services industry. He holds a B.S. in Applied Mathematics from Columbia University and an MBA from The Stanford Graduate School of Business.

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