To receive healthcare coverage, many older Americans and those who have certain disabilities rely on Medicare. If you are turning 65 years old, or are getting ready to enroll in Medicare, take a minute to read up about the program, how it works, Medicare benefits, and more.
Here's How Medicare Works
To those of you who are looking into healthcare coverage and follow a path in this direction may be asking a simple question: how does Medicare work? For starters, it helps to know who is actually eligible for it.
There are three basic eligibility categories:
- Individuals 65-years-old or older
- Individuals under 65 who have certain disabilities
- Individuals who have End-Stage Renal Disease
There are different parts of the program that offer different services. When you are researching about how Medicare works, consider all of the different policies available so that you know which one is the right choice for you and your needs:
With each plan, there are different Medicare benefits, premiums, and deductibles. The following sections will go into more details about all this with each individual plan.
How Original Medicare Works
Original Medicare is known as Part A and Part B coverage. So, how does Medicare work this way? Let's break the parts down:
Part A (Hospital Insurance): With this original Medicare plan, you can take advantage of a number of Medicare benefits. This includes hospital care, hospice, home health services, and nursing home care as long as it's not long-term or custodial.
Part B (Medical Insurance): This plan offers two different layers of Medicare benefits. It offers medically necessary services and supplies meant to treat or diagnose medical conditions. In addition, it also covers preventive services such as early-stage detection.
How Medicare Advantage Works
Another part of this insurance program that you can try to sign up for is a Medicare Advantage Plan. This is also known as Part C coverage. How does Medicare work using this method? It is like a partnership with a private company and the Medicare system. With these plans, you can take advantage of the Medicare benefits that come from both Part A and Part B coverage.
In addition to that, most Medicare Advantage Plans offer prescription drug coverage, otherwise known as Part D coverage. Part D can also be purchased separately if you do not want to be a part of an Advantage plan.
Other policies also fall under this type of plan. For instance, you can see PPOs and HMOs in this plan.
How Medicare Supplemental Plan Works
Lastly, there are Medicare Supplement Plans, also referred to as Medigap Plans. It is a policy that assists you in paying for healthcare costs that original Medicare does not cover. Additionally, it can also pay for general services not found under your other healthcare coverage. This includes deductibles, coinsurance, and copayments.
To have a Medicare Supplement Plan, it is necessary that you have Part A and Part B coverage. It can only cover a single person as well, so if you have a spouse and you both want a supplemental plan, then you both have to purchase policies separately.
As for things that you will not see covered under this policy, Medicare Supplement Plans generally do not cover vision or dental care, long-term care, eyeglasses, hearing aids, or private-duty nursing.
Out-of-Pocket Cost Factors
Whatever out-of-pocket costs you may have will be determined by your specific plan. It should be noted that, typically, your plans do not cover everything. What you pay may include the following:
- Copayments
- Coinsurance
- Deductibles
- Monthly Premiums
When it comes to Medicare premiums and a Medicare deductible cost, you can learn more about them in the subsequent sections.
Medicare Premiums
According to the 2018 schedule, most individuals with Part A coverage don't usually pay Medicare premiums. This is known as "premium-free Part A". However, for those that do, you can typically pay $422 for standard Medicare premiums as long as you paid taxes for the plan for less than 30 quarters.
For Part B Medicare premiums, it is typical to see a monthly payment of about $134. That amount can go higher based on your income. Those of you with this plan that also receive Social Security benefits will often pay less.
Medicare premiums for Medicare Advantage Plans will vary depending on each specific plan. However, they can offer different Medicare benefits that the other plans don't have.
Medicare Deductibles
When it comes to a Medicare deductible, like with the premiums, the cost can vary based on the specific coverage you receive. Part A coverage has a Medicare deductible plan for those with coinsurance or hospital inpatient coverage. Generally, you may pay a Medicare deductible cost of $1,340 for each benefit period.
In terms of Part B coverage and coinsurance, your Medicare deductible cost can usually be about $183 a year. Once you have met that payment, you may pay a Medicare deductible of 20% of the approved amount of most doctor services, durable medical equipment, and outpatient therapy.
For Part D coverage, you can see a Medicare deductible of around $405. However, this amount can change on a case-by-case basis. For instance, some may see a far lower deductible. Others may even see a $0 Medicare deductible.
How Medicare Works with Other Insurance
You can also have a plan along with additional insurance. When this occurs, each coverage type you have is dubbed a "payer". In a situation that has more than one "payer", what is known as "coordination of benefits" comes into play. This decides who pays first. In turn, one type of coverage becomes the primary while the other is secondary (or third if you have three coverage plans).
How Is It Funded
This insurance system is funded thanks to two trust fund accounts that are held by the United States Treasury. The funds are only meant to be used for Medicare:
- Hospital Insurance (HI) Trust Fund: This generally receives funding from the payroll taxes that are paid for by most employers, employees, and those that are self-employed. Additional sources for the funding can come from income taxes on Social Security benefits, Part A premiums, and the interest earned on the trust fund investments.
- Supplementary Medical Insurance (SMI) Trust Fund: This is funded typically by funds authorized from Congress, other sources like interest on trust fund investments, and the premiums from those with Part B or Part D coverage.
The HI Trust Fund pays for Part A Medicare benefits and program administration (taxes, paying benefits, etc.). As for the SMI Trust Fund, this pays for Part B Medicare benefits, Part D, and program administration costs.
Medicare Tax
This tax was added in by the Affordable Care Act (ACA), and it originally went into effect in 2013. It is a tax that applies to wages, self-employment income (over certain thresholds), and railroad retirement (RRTA) compensation. You are only liable for the tax if your compensation, wages, or self-employment income exceeds the threshold amount set for your individual filing status.
