Medicare Basics: A, B, C and D

Medicare Basics: A, B, C, and D

If you are new to Medicare or soon will be, or even if you’ve been on it awhile, then you might not know much about it, other than: It is incredibly complicated and overwhelming. A couple of huge questions for everyone are:

1. Exactly what benefits do I get from the federal government in my Medicare?

2. What do all the choices mean for me for insurance that adds onto my Medicare benefits?

The answers, unfortunately, have a lot of pieces to them. But, we can simplify it a lot by looking at Medicare’s alphabet soup, which is: Part A, Part B, Part C, and Part D.

A very important thing to realize is this:
Part A and Part B are benefits that come purely from the federal government alone. Parts A and B involve the federal government directly paying hospitals and doctors for your services. In contrast, Part C and Part D are “privatized,” which means that the benefits are paid from private insurance companies, using federal money — your Medicare money — which is given to the insurance company. Here’s a short, simplified description of Parts A, B, C, and D:

Part A
In Part A, the government pays hospitals for most all of your expenses when you are a hospital “in-patient,” which means you are staying overnight, and are not on observation status. The full amount of the hospital stay is typically paid for, EXCEPT the first $1,184, which is called the Part A in-patient deductible. Part A also pays for the first 100 days of skilled nursing home care.

Part B
In Part B, the government pays for two things: (1) Hospital bills, for most all of your expenses when you are a hospital “out-patient.” “Out-patient means: Everything done when you go in and out the same day; or, stay overnight but are on observation status; and Part B also pays for (2) All services by physicians, and some other medical providers. In Part B, there are two things that are NOT paid for by the government:
(1) The first $147 of expenses each year (Jan. 1 – Dec. 31). This is called the Part B annual out-patient deductible.
(2) Twenty percent (20%) of the remaining expenses. In other words, the government pays 80%, and the 20% that you pay is called your Part B co-pay, or co-insurance.

What do I do about the Part A deductible, the Part B deductible, and the Part B co-pays?
You have three choices:
1) Pay these amounts yourself, whenever you incur those bills.

2) Pay a monthly premium to an insurance company, for a Medicare Supplement (or “Medi-gap”) insurance policy. Some people have coverage provided as a retirement benefit from their employer. Another variation of this — sort of — is a Medicare Advantage policy, described below in Part C. These policies will pay Part A and B deductibles and co-pays for you.

3) Sign up, if you are eligible, for the Citizens Federation’s Senior Partners Care program. Also note: Parts A and B do NOT pay anything for prescription medications that you take at home.

Part C
In Part C, which is also known as Medicare Advantage plans, the government does NOT pay hospitals or doctors directly. Instead, it hands over YOUR Medicare money (over $600 per month) to an insurance company. You also pay a monthly premium to the insurance company. The insurance company, in turn, uses all this money to pay the hospitals and doctors. Whatever is left over, the insurance company gets to keep for itself. This means a few important things:

(1) When you sign up for a Part C Medicare Advantage plan, you are taking yourself OUT OF Part A and Part B. You cannot be in A & B, and C, at the same time. It’s one or the other, period.

(2) The insurance company decides what the hospitals and doctors get paid; and

(3) If the insurance company does NOT pay for something, the hospital or doctor CANNOT bill the federal government for it, and therefore YOU have to pay the entire amount.

(4) Also, when you do sign up, you are locked in for the rest of the calendar year. You CANNOT just decide mid-year to switch to a different plan. However, if you feel the insurance company or agent did not tell you, when you signed up, important things that you needed to know, then you can ask Medicare for special permission to leave Part C, and return to Parts A and B, in mid-year. The Citizens Federation can tell you how to do this.

Long story short: You have to be very careful, and be sure of what coverage you are buying when you sign up for a Medicare Advantage plan. In Minnesota, you can get excellent, non-biased advice from the Senior Linkage Line (call: 1-800-333-2433) Medicare Advantage plans, which are all Part C, generally have a lower premium, for the same coverage, for Medicare Supplement plans which work with Parts A and B. But, the federal government vastly overpays these insurance companies, and much of the money just ends up as insurance company profit. The Affordable Care Act (“Obamacare”) is starting to reduce these overpayments.

Part D
Part D is the Medicare part that pays for prescription drugs that you take at home. (Also known as “out-patient prescriptions.”) You can ONLY get your drug benefit, which is over $100 a month, by getting a Part D policy from an insurance company. You can get a Part D policy by itself, regardless of how you are getting your doctor and hospital bills covered. There are scores of Part D drug policies to choose from, with premiums around $30 or so a month, up to ones over $100 a month. In general, the ones with smaller premiums have the largest deductibles and co-pays, and the policies with higher premiums have lower deductibles and co-pays.

Part D policies have what is called the “donut hole,” which is a gap in the coverage. In 2013, this gap starts when you hit $2,970 for the year in drug expenses. If you go over $4,750, then the gap ends and coverage resumes. When you are in the donut hole, for 2013, you get, thanks to the Affordable Care Act (“Obamacare”), a 50% discount on the price of brand name drugs, and 14% off the price of generic drugs. These discounts grow each year until 2020, when the donut hole gap is fully eliminated. Part D policies lock you in on a Jan. to Dec. basis, just like Medicare Advantage.

People with very low income can get a Part D policy at little or no cost. To find out, and to apply if you are eligible, contact your nearest Social Security office.