Ron Elledge is a seasoned Medicare consultant and author of “Medicare Made Easy.” As a Medicare expert, he regularly consults beneficiaries on Medicare rules, regulations, and strategies.
Original Medicare is a federal health insurance program available for people over 65, people with disabilities, and for those with ALS and end-stage kidney disease. It includes both Part A (hospital insurance) and Part B (medical insurance) and works on a fee-for-service basis. This means that you can go to any doctor or hospital that accepts Medicare, but you’ll be required to pay any associated costs that Medicare doesn’t cover. You’ll also be responsible for monthly premiums, deductibles, and copays.
Once you’re enrolled in Original Medicare you can also sign up for other supplemental insurance plans to help you cover medical costs that Medicare doesn’t cover. These plans are offered through private insurers and provide different types of benefits. These include:
- Medicare Advantage plans (also known as Part C) are set up like an HMO or PPO with yearly maximum out-of-pocket costs, and may also provide coverage for dental, vision, and hearing needs, which Original Medicare doesn’t cover.
- Part D plans cover prescription drugs.
- Medigap insurance can help cover the costs of deductibles, copayments, and coinsurance. (Note: Those born after January 1, 2020 cannot use Medigap insurance to cover Part B deductible costs.)
Medicare Part A
Part A is considered the “hospital” portion of Medicare, meaning it covers in-patient stays at hospitals and skilled nursing facilities (these are typically not considered nursing homes), hospice care, lab tests, surgical care, and home health care.
Most people do not have to pay a monthly premium for Medicare A. Part A is based on if you or your spouse paid into the Medicare tax program during your employment. However, even if you don’t qualify for premium-free Medicare A, the premium you will pay is still based on how long you or your spouse worked while paying Medicare taxes. In 2020, if you paid taxes for less than 30 quarters, you will pay $458 per month. But if you worked and paid taxes between 30 and 39 quarters, your monthly premium will be $252.
There are also very specific rules about how much Part A will cover, which change every year. In 2020, Part A requires a deductible of $1,408 for each benefit period and a $352 co-insurance daily fee for each day after 60 days of care is reached (before 60 days, there is no coinsurance fee). After 91 days, that co-insurance rate increases to $704 for each lifetime reserve day and after lifetime reserve days are used up, you are required to pay all costs.
Medicare Part B
Medicare Part B refers to the “medical insurance” portion of Medicare, so it covers doctor’s visits, certain outpatient care like X-rays and lab tests, outpatient surgery, emergency services, some medical supplies, and preventative care, like a yearly wellness check.
There is a monthly premium fee you will have to pay with Medicare Part B. In 2020, the monthly premium cost is $144.60. However, the exact monthly fee you will pay is based on your income. If your yearly gross income exceeds a certain amount, you will be required to pay both the monthly premium and an Income Related Monthly Adjustment Amount (IRMAA).
In addition to a monthly premium and an IRMAA, Medicare Part B has a deductible you have to meet before coverage kicks in. After your deductible is met, you are usually responsible for 20% of the costs of your health service.
What isn’t covered by Original Medicare?
Original Medicare doesn’t cover everything you might need for your healthcare. First, Original Medicare does not include Part D, which is coverage for prescription drugs. If you enroll in Original Medicare and choose a Supplement plan instead of an Advantage plan, you will need to enroll in a stand-alone Part D plan and pay for its associated monthly premiums separately.
Additionally, Original Medicare will not cover the following health-related needs:
- Long-term care, also called custodial care. Custodial care is considered care for normal activities of daily life, such as getting dressed, using the restroom, or getting dressed. These are tasks you may need assistance with, but do not require highly-skilled professionals to perform. Because most nursing homes are considered custodial care, they are not usually covered by Medicare insurance.
- Dental. Most dental care, as well as dentures, are not covered through Medicare.
- Vision. Routine vision care is not part of Medicare, nor are eye exams specific to getting prescription glasses.
- Hearing. Any hearing care, including hearing aids and exams and check-ups for fitting hearing aids, are not covered.
- Cosmetic Surgery. Cosmetic surgery would include any enhancements or procedures that are not deemed medically necessary.
- Acupuncture. Acupuncture, even through a licensed provider, is not covered with Medicare.
- Routine foot care. Foot care that is considered routine — such as getting your toenails clipped — is not covered under Medicare. Foot care that requires a specialist may be covered, however.
Because Original Medicare does not cover all healthcare costs, some people may purchase supplemental coverage through private insurers to help pay some of the services Medicare doesn’t cover. We’ll cover two types of ancillary coverage — Medigap insurance and Medicare Advantage plans.
What is Medigap insurance?
Medigap insurance is supplemental private health insurance that is specifically offered to cover the “gaps” in Original Medicare coverage. For example, it can help cover the costs of deductibles (except your deductible for Part B for those born after January 1, 2020), copayments, and coinsurance.
Medigap insurance is only available for people who are enrolled in Original Medicare — it’s not legal for anyone on a Medicare Advantage Plan to have Medigap insurance. Unlike Original Medicare, which you apply for directly on the Social Security’s website, Medigap insurance is purchased from a private insurance company. You’ll pay a separate monthly premium to the insurance company for your Medigap insurance policy.
Although Medigap is designed to cover the “gaps” of Original Medicare, it doesn’t cover all your extra costs. For instance, Medigap insurance does not cover certain health expenses, including long-term care, vision care and eyeglass, dental care, hearing aids, or private-duty nursing care.
What is Medicare Advantage?
Also known as Part C, Medicare Advantage covers everything that Original Part A and Part B does, but is offered through private insurers. Some Medicare Advantage plans also offer additional coverage for vision, hearing, and dental benefits; most plans also include a Part D prescription plan.
Original Medicare Part A and Part B only covers 80% of the costs of medical services; Medicare Advantage plans cover everything Part A and Part B cover, but charge a small copayment or coinsurance for services. Most Part C plans also have set yearly maximum out-of-pocket costs.
Specific costs per plan vary as each private insurer sets its own pricing, which must be approved by Medicare. In many areas of the country you will pay a $0 premium for Advantage Plans, however a monthly premium may be incurred and will be in addition to your Part B premium. Plan pricing can also be affected by whether other benefits are included in the plan.
Original Medicare vs. Medicare Advantage
Whether you choose Original Medicare or a Medicare Advantage plan will depend on your healthcare needs and financial situation. Original Medicare is a fee-for-service plan that allows you to go to any doctor or hospital that accepts Medicare. It only pays for 80% of services received, which may not be cost effective for some individuals.
Medicare Advantage on the other hand covers everything Part A and Part B covers, but charges a small copayment and coinsurance for services. Some plans also include ancillary services like vision, hearing, and dental benefits, which may make Medicare Advantage more cost effective for some.
|Original Medicare||Medicare Advantage|
|Cost||Monthly Part A & B premiums; Yearly deductible; 20% coinsurance after deductible is met for Medicare-covered services with participating provider||Varies; may include a monthly premium, copayments, coinsurance, and deductibles. Part A and B premiums are paid separately.|
|Allowed to choose your provider||Any Medicare provider who accepts Medicare||Varies; many plans cover in-network providers only, while others charge more for out-of-network providers.|
|Referrals||Not needed||May be needed for specialty care|
|Prescription drug coverage||Not included; purchase Part D separately||Many plans include a Part D plan|
|Extra benefits||No||Some plans include vision, hearing, dental benefits, and more|
|Out-of-pocket limit||None; you are responsible for costs not covered by plan.||Yes; care is covered 100% once you reach your yearly limit.|
- 1. “2020 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare”, Developed jointly by the Centers for Medicare & Medicaid Services (CMS) and the National Association of Insurance Commissioners (NAIC) [Accessed August 2020] Available at: https://www.medicare.gov/Pubs/pdf/02110-medicare-medigap-guide.pdf
- 2. “What’s Not Covered by Part A and Part B”, U.S. Centers for Medicare & Medicaid Services, [Accessed August 2020], Available at: https://www.medicare.gov/what-medicare-covers/whats-not-covered-by-part-a-part-b
- 3. “What Part A Covers”, U.S. Centers for Medicare & Medicaid Services, [Accessed August 2020], Available at: https://www.medicare.gov/what-medicare-covers/what-part-a-covers
- 4. “What Part B Covers”, U.S. Centers for Medicare & Medicaid Services, [Accessed August 2020], Available at: https://www.medicare.gov/what-medicare-covers/what-part-b-covers
- 5. “Medicare Benefits”, Social Security Administration [Accessed August 2020], Available at: https://www.ssa.gov/benefits/medicare/
- 6. “Medicare Costs at a Glance”, U.S. Centers for Medicare & Medicaid Services, [Accessed August 2020], Available at: https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance