Although the essentials remain the same, the Medicare program changes at least a little every year. Cost sharing changes are the most common, but new legislation also brings adjustments to coverage. This post answers common questions like how does Medicare work with other insurance, what it costs in 2020, and how the program started.
Medicare is a government program that provides health insurance to people who are aged 65 or older. It also provides coverage for people under age 65 if they have a disability, End-Stage Renal Disease (ESRD), or amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease).
The Medicare system is broken into parts, with each part covering a different healthcare need. Original Medicare includes Parts A and B. To help cover the cost of prescription medication, Medicare Part D launched in 2006.
Also known as hospital insurance, Medicare Part A covers services received as an inpatient at a hospital or skilled nursing facility. It also covers hospice care and some home healthcare services (after a qualifying hospital stay).
Also known as medical insurance, Medicare Part B covers medically necessary outpatient services and supplies as well as care designed to prevent or detect illness. This includes:
There is also limited coverage for outpatient prescription drugs. This typically means medications you rely on a healthcare provider to administer, such as injections, and drugs infused via DME.
Medicare Part D helps cover the cost of prescription drugs. A perfect example of Medicare changes as the result of legislation, Medicare Part D is part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, more commonly known as MMA.
You can add a Part D plan to Original Medicare as well as any Medicare Advantage (MA) plan that does not include prescription drug coverage.
There are two ways to supplement your Medicare coverage: Medicare Advantage and Medicare Supplement Insurance, more commonly known as Medigap.
Medicare Advantage plans resemble the group health plans available through many employers. Private insurance companies sell Advantage plans, with costs and benefits varying according to the plan and provider. All MA plans must offer at least the same coverage you get with Original Medicare. However, most offer additional benefits, such as prescription drug coverage, routine vision and dental services, and fitness plans like SilverSneakers.
President Clinton signed Medicare+Choice in 1997. In 2003, the name changed to Medicare Advantage.
Medigap plans are also sold by private insurance companies, with each insurer setting its own price. However, the benefits of each plan are standardized, so that Plan A is the same no matter where you live or who your provider is.
The Omnibus Reconciliation Act of 1980 brought us Medigap as we know it today.
The fight for healthcare goes all the way back to 1912 and President Teddy Roosevelt, who ran on a campaign of national health insurance. Presidents Truman and Kennedy both fought for some form of national health insurance as well. Kennedy pushed for a national program to benefit seniors in response to a study that revealed 56 percent of Americans over 65 did not have health insurance.
Legislation signed by President Johnson in 1965 demonstrated the importance of Medicare, with American seniors finally receiving coverage in 1966. The first two beneficiaries were former President Harry Truman and his wife, Bess.
Many people have health insurance when they turn 65, through either their job or their spouse’s. If you have other insurance, federal law dictates whether Medicare is your primary or secondary insurance carrier. Federal law also sets the guidelines as to what constitutes creditable coverage.
Your primary insurance pays first for all claims, with your secondary insurer paying any remaining amount. If your employer-sponsored plan qualifies as creditable coverage, you can use it as your primary insurance. This means you may delay Medicare enrollment without facing late fees. Or, you can sign up for Medicare and use it as your secondary insurance, leaving you with little to no out-of-pocket costs.
Whether that’s a good idea depends entirely on your unique circumstances. For example, if you have heavy out-of-pocket costs through your primary insurance, paying the monthly premium for Medicare Part B may be worth it.
Some people choose to sign up for Medicare Part A even if they have insurance when they turn 65, since most people qualify for premium-free Part A. We nearly always recommend doing this. The only exception is if you contribute to a health savings account (HSA), since these contributions bar you from enrolling in any part of Medicare. If your spouse contributes to the HSA but you don’t, then you can enroll in Part A.
Creditable coverage describes any plan that pays roughly what Medicare does for the same services. An employer-sponsored group health plan is considered creditable if it (1) offers the same level of coverage that Medicare does and (2) the company employs at least 20 people.
Most other types of insurance do not qualify as creditable coverage. This includes:
All of the above also applies if you qualify for the plan under your spouse’s employment.
Please see our post, What Is Medicare Creditable Coverage?, for more information.
Although the Medicare program covers the vast majority of costs for covered services, beneficiaries do have some out-of-pocket expenses. These include:
Your costs for Medicare Part D, Medicare Advantage, and Medigap plans vary according to the plan and provider you choose.
Out-of-pocket costs for Medicare Part A may include the monthly premium, deductible, and co-insurance.
Most people paid Medicare payroll taxes for the required 40 quarters (10 years) to qualify for premium-free Part A. If you or your spouse did not meet that requirement, your 2020 Medicare Part A premium is either $458 (less than 30 quarters) or $252 (between 30 and 39 quarters).
The 2020 Medicare Part A deductible is $1,408 per benefit period. A benefit period begins the day you are admitted as an inpatient and ends after you go 60 consecutive days without receiving inpatient care. That means you may have several benefit periods in a single year, and therefore several deductibles.
Co-insurance for Medicare Part A in 2020 for each benefit period is:
You get 60 lifetime reserve days (unless you have a Medigap plan, in which case you get 365).
Finally, your cost for staying in a skilled nursing facility is $0 for the first 100 days (per benefit period). You then pay $176 per day through day 100, and 100 percent of the costs after day 100.
Medicare Part B costs are a little easier to understand. The standard premium for Medicare Part B is $144.60 in 2020. If your annual income is greater than $87,000 (filing single) or $174,000 (married filing jointly), your premium may be higher.
The 2020 Medicare Part B deductible is $198. You pay all out-of-pocket costs for covered services until you meet your annual deductible. After that, you’re only responsible for the co-insurance, which is usually 20 percent of the Medicare-approved amount (assuming your provider accepts assignment).
Medicare covers Americans aged 65 and older. You may also qualify if you are a permanent resident who has lived in the United States for at least 5 years.
You can also get Medicare if you qualified for Social Security disability benefits for 24 months. If you have ALS, you don’t have to wait 24 months. Instead, you qualify the first month you qualify for disability. In addition, people with ESRD can get Medicare before they turn 65.
No, you don’t have to sign up for Medicare. But, if you don’t enroll in Medicare when you become eligible, and then try to enroll later, you face significant penalties if you don’t qualify for a Special Enrollment Period (SEP).
Many people delay signing up because they already have coverage through their job. If said coverage is considered creditable, then they qualify for an SEP and can enroll in Medicare later without incurring late fees.
If you delay enrollment and do not qualify for an SEP, penalties can be pretty stiff – especially if a lot of time has gone by.
The reason for the penalties is to encourage people to enroll in Medicare when they first become eligible. The program relies on the participation of healthier, younger people to help control consts.
The calculation for Medicare Part D’s late penalty is very different. It’s levied any time you go 63 days or more without prescription drug coverage. And, like Part B, you pay this penalty for the entire time you have Medicare.
Medicare bases the late fee calculation on the national base beneficiary premium, which is $32.74 in 2020. You pay 1 percent of this amount for every month you went without prescription drug coverage, and then round that number to the nearest dime. The calculation looks like this:
The penalty changes every year, because the national base beneficiary premium changes every year.
To qualify for Medicare, you need to be either a U.S. citizen or a legal, permanent resident who has lived in the United States for at least 5 years.
What Are Medicare Eligible Providers?
Medicare eligible providers are those who accept assignment, meaning they agree to provide covered services at the price approved by Medicare. This includes:
It may also include companies that provide durable medical equipment, lab work, and any other entity you rely on for healthcare.
The internet offers a plethora of information about Medicare.
For more information on the Medicare plans available in your area, use our Find a Plan tool. It’s both free and simple. Just enter your location information, coverage start date, and hit Continue to review Medicare plans in your area.
Since 2015, Kolt Legette has helped clients navigate the often-confusing world of insurance. His number one goal is protecting the medical and financial wellbeing of every person he speaks with, whether they choose to buy insurance or not. Kolt loves representing the best brands in medical insurance as it allows him to provide side-by-side comparisons for his clients. This allows the client to decide which company works best for them. By putting the needs of the client above everything else, Kolt helps real people find affordable health insurance solutions for their most pressing healthcare needs. With his belief that peace of mind is priceless, Kolt's goal in every interaction is to make sure every person he speaks to leaves with the peace of mind they rightfully deserve.
The MedicareUSA website is operated by HealthPlanOne, LLC a licensed health insurance agency based in Connecticut; in California d/b/a HPOne Insurance Agency, license #OF30784. HealthPlanOne, is a licensed and certified representative of Medicare Advantage HMO, PPO and PPFS organizations and stand-alone prescription drug plans with a Medicare contract. Enrollment in any plan depends on contract renewal.
For a complete list of available plans please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult www.medicare.gov.
The purpose of this communication is the solicitation of insurance. Contact will be made by an insurance agent/producer or insurance company.
Medicare supplement plans are not connected with or endorsed by the U.S. Government or the federal Medicare program.
The Centers for Medicare and Medicaid Services (CMS) does not review or approve Medicare Supplement plan information.
Other Pharmacies are available in the plans' networks.
Last Updated 12/21/2018