Facts About Medicare

Medicare is a federal program that provides health insurance to retired individuals, regardless of their medical condition. Here are some basic facts about Medicare that you should know.

What does Medicare cover?
Medicare coverage consists of two main parts: Medicare Part A (hospital insurance) and Medicare Part B (medical insurance). These parts together are known as Original Medicare. A third part, Medicare Part C (Medicare Advantage), covers all Part A and Part B services, and may provide additional services. A fourth part, Medicare Part D, offers prescription drug coverage that can help you handle the rising costs of prescriptions.

Medicare Part A (hospital insurance)
Generally known as hospital insurance, Part A covers services associated with inpatient hospital care. These are the costs associated with an overnight stay in a hospital, skilled nursing facility, or psychiatric hospital, including charges for the hospital room, meals, and nursing services. Part A also covers hospice care and home health care.

Medicare Part B (medical insurance)         
Generally known as medical insurance, Part B covers other medical care. Physician care–whether you received it as an inpatient at a hospital, as an outpatient at a hospital or other health-care facility, or at a doctor’s office–is covered under Part B. Laboratory tests, physical therapy or rehabilitation services, and ambulance service are also covered. Medicare Part B also covers 100 percent of the cost of many preventative services and an annual wellness visit.

Medicare Part C (medicare Advantage)
A Medicare Advantage plan is a private health-care plan that contracts with Medicare to provide Part A and Part B benefits. A Medicare Advantage plan covers all of the services that Original Medicare covers except hospice care. Some plans offer extra coverage for expenses not covered by Original Medicare such as vision, hearing, dental, and other health expenses. Most also offer prescription drug (Part D) coverage. Several types of Medicare Advantage plans may be available, including health maintenance organization (HMO) plans, preferred provider organization (PPO) plans, private fee-for-service (PFFS) plans, and special needs plans (SNPs). You can choose to enroll in either Original Medicare or a Medicare Advantage plan. If you enroll in a Medicare Advantage plan, you’ll generally pay a monthly premium for it, in addition to your Part B premium.

Medicare Part D (prescription drug coverage)
All Medicare beneficiaries are eligible to join a Medicare prescription drug plan offered by private companies or insurers that have been approved by Medicare. Although these plans vary in price and benefits, they all cover a broad number of brand name and generic drugs. Medicare prescription drug coverage is voluntary, but if you decide to join a plan, keep in mind that some plans cover more drugs or offer a wider selection of pharmacies (for a higher premium) than others. You can get information and help with comparing plans on the Medicare website, medicare.gov.

What is not covered by Medicare Parts A and B?
Some medical expenses are not covered by either Part A or B. These expenses include:

  • Your Part B premium
  • Deductibles, coinsurance, or co-payments that apply
  • Most prescription drugs
  • Dental care
  • Hearing aids
  • Eye care
  • Custodial care at home or in a nursing home

Medicare Part C may cover some of these expenses, or if you are enrolled in Original Medicare you can purchase a supplemental Medigap insurance policy that will help cover what Medicare does not.

Are you eligible for Medicare?
Most people age 65 or older who are citizens or permanent residents of the United States are eligible for Medicare Part A (hospital insurance) without paying a monthly premium. You are eligible at age 65 if:

  • You receive or are eligible to receive Social Security or Railroad Retirement Board benefits based on your own work record or on someone else’s work record (as a spouse, divorced spouse, widow, widower, divorced widow, divorced widower, or parent), or
  • You or your spouse worked long enough in a government job where Medicare taxes were paid

In addition, if you are under age 65, you can get Part A without paying a monthly premium if you have received Social Security or Railroad Retirement Board disability benefits for 24 months, or if you are on kidney dialysis or are a kidney transplant patient.

Even if you are not eligible for free Part A coverage, you may still be able to purchase it by paying a premium. If you are not eligible for free Part A coverage, contact the Social Security Administration to see what options are available to you.

Although Medicare Part B (medical insurance) is optional, most people sign up for it. If you want to join a Medicare managed care plan or a Medicare private fee-for-service plan, you’ll need to enroll in both Parts A and B. Please note, Medicare Part B is never free; you will have to pay a monthly premium for it, even if you are eligible for premium-free Medicare Part A.

How much does Medicare cost?
Medicare deductible amounts and premiums change annually. Here is what you will pay in 2018 if you are enrolled in Original Medicare:

Premium Deductible Coinsurance
Part A (hospital) None for most people, but non-eligible individuals pay up to $422 per month (if they have 39 or fewer quarters of Medicare-covered employment)

 

$1,340 per benefit period

 

$335 a day for the 61st to 90th day each benefit period; $670 a day for the 91st to 150th day for each lifetime reserve day (total of 60 lifetime reserve days); $167.50 a day for the 21st to 100th day each benefit period for skilled nursing facility care

 

Part B (medical) The standard Part B premium amount is $134 (subject to an income-based adjustment). However, some people who get Social Security benefits will pay less than this amount ($130 on average). See below for more information.

 

$183 per year

 

After satisfying a deductible if one applies, you normally pay 20 percent of the approved amount for medical expenses (20 to 40 percent for outpatient mental health services, 20 percent for hospital charges for outpatient hospital services, nothing for laboratory services)

 

If you have your premiums deducted from your Social Security benefits, and the increase in your benefits for 2018 will not be enough to cover the Medicare Part B increase, then you may pay less than the standard Part B premium ($130 on average). Otherwise, you may pay the standard Part B premium of $134. You will also pay the standard Part B premium of $134 (or higher) if:

  • You enroll in Part B for the first time in 2018.
  • You do not get Social Security benefits.
  • You are directly billed for your Part B premiums.
  • You have Medicare and Medicaid, and Medicaid pays your premiums.
  • Your modified adjusted gross income as reported on your federal income tax return from two years ago is above a certain amount.

The table on the following page shows what you will pay if you are in this group.

Beneficiaries who file an individual income tax return with income that is: Beneficiaries who file a joint income tax return with income that is: Beneficiaries who file an income tax return as married filing separately with income that is: Monthly premium in 2018:
$85,000 or less $170,000 or less $85,000 or less $134
Above $85,000 up to $107,000 Above $170,000 up to $214,000 N/A $187.50
Above $107,000 up  to $133,500 Above $214,000 up to  $267,000 N/A $267.90
Above $133,500 up to $160,000 Above $267,000 up to $320,000 N/A $348.30
Above $160,000 Above $320,000 Above $85,000 $428.60

Beneficiaries with higher incomes have paid higher Medicare Part B premiums since 2007. To determine if you are subject to income-related premiums, the SSA uses the most recent federal tax return provided by the IRS. Generally, the tax return you filed in 2017 (based on 2016 income) will be used to determine if you will pay an income-related premium in 2018.

Since Original Medicare does not cover every type of medical care, and you will have to pay deductibles and coinsurance, you may want to buy a Medicare supplemental insurance (Medigap) policy.

If you are enrolled in a Medicare Advantage plan, you will generally pay one monthly premium for that plan in addition to your Medicare Part B premium. Each Medicare Advantage plan has different premiums and costs for services, and coverage varies, so what you will pay depends on the plan you have.

How do you sign up for Medicare?
You will be automatically enrolled in Medicare when you turn 65 if you are already receiving Social Security benefits, or when you apply for Social Security benefits at age 65. In either case, the SSA will notify you that you are being enrolled.

Although there is no cost to enroll in Medicare Part A, you will pay a premium to enroll in Medicare Part B. If you have been automatically enrolled in Part B, you will be notified that you have a certain amount of time after your enrollment date to decline coverage. Even if you decide not to enroll in Medicare Part B during the initial enrollment period, you can enroll later during the annual general enrollment period that runs from January 1 to March 31 each year. However, you may pay a slightly higher premium as a result.

If you decide to postpone applying for Social Security past your 65th birthday, you can still enroll in Medicare when you turn 65. The easiest way to apply for Medicare is online at ssa.gov.

Author: Paragon Financial Partners

Paragon Financial Partners, Inc. is a Registered SEC Investment Advisor. The topics discussed herein are for informational purposes only and should not be considered as a solicitation or offer to purchase or sell any securities. The financial strategies and guidelines discussed herein may not be appropriate for everyone as each individual circumstance is unique. Please review all tax information with your tax professional. Please review all legal information with your legal professional. If you have any questions or would like to speak with us, please contact us by phone at (310) 557-1515 or by email at info@paragonfinancialpartners.com.

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