Explore Medicare Options

Most older adults use Medicare as their primary health insurance. Medicare offers multiple options so it can be confusing to know what each covers and which to choose. This article details Original Medicare Parts A and B, plus the newer prescription drug option, Part D. Learn about Part C, Medicare Advantage plans, in a separate article.

Do You Qualify for Medicare?

Before diving into Medicare Parts A and B, it helps to understand who is eligible. Medicare covers those aged 65 and older, along with younger persons with disabilities and end-stage renal failure. To qualify at age 65:

• You must have been a U.S. resident for at least five years

• You or your spouse must have paid Medicare taxes for at least 10 years

Medicare Part A - Hospitalization

Medicare Part A covers some in-patient hospital expenses, skilled nursing care, nursing home care under certain circumstances and hospice care. Coverage is limited to 90 days per hospital stay and includes coinsurance costs. If your hospital stay lasts over 90 days, “lifetime reserve days” come into play.

On the positive side, you pay no premiums for Part A if you paid Medicare payroll taxes while you worked. For long-term care in a nursing home, you pay the following for each benefit period:

• Nothing for the first 20 days

• Coinsurance amount for days 21 through 100

• All costs for each day after 100 days

As you can see, Medicare Part A has some gaps that could potentially be expensive. This is why many people consider purchasing a Medicare supplement plan to cover them. 

Medicare Part B – Medical

Medicare Part B helps cover medically necessary doctors’ services, outpatient care, home health services, durable medical equipment and other medical services. Part B also covers many preventive services.

You pay nothing for most covered preventive services as long as you receive them from a doctor or other qualified health-care provider who accepts the assignment. This means the physician agrees to the amount Medicare pays as full payment. Some doctors accept Medicare reimbursements as partial payments but want to be paid more.

Medicare Part D – Prescription Drugs

The newest part of the Medicare program covers prescription drugs. It is available to anyone with Medicare. There are two ways to obtain Medicare Part D.

1. Medicare Prescription Drug Plans These prescription drug plans (PDPs) add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee‑for‑Service (PFFS) plans, and Medicare Medical Savings Account (MSA) plans. You must have Part A or Part B to join a Medicare PDP.
   

2. Medicare Advantage Plans These plans are similar to Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs) that offer prescription drug coverage.  

Deductibles, Copayments and Limits 

Medicare requires enrollees to pay part of their health care costs at the point of service. This can be confusing because costs vary by the kind of service you receive. For this reason, many people purchase Medigap plans to cover costs. Below are where out-of-pocket costs may come in with Medicare Parts A and B, and for prescription drugs. Visit medicare.gov  for specific costs for each category.

Hospital Stays

• You will pay a deductible for each “benefit period.” This period begins the day you are admitted to the hospital and ends 60 days after discharge. You could have multiple benefit periods and pay the deductible more than once in a year.

• Co-payments may also be due, depending on how many days you are in the hospital. They usually kick in after day 60 and then increase after day 90 until your lifetime coverage limit is reached. At that point you may be responsible for all costs.

Remember that after lifetime reserve days are used, Medicare typically doesn’t cover your inpatient hospital stay.

Skilled Nursing Facility (SNF)

Medicare only covers skilled nursing facilities if you have a qualifying three-day hospital stay. If you want a possible SNF stay covered, make sure you are not in the hospital for observation. There is no deductible for these services, however you will pay a co-pay for days 20 to100. On day 101, you will pay all expenses unless you have a separate insurance policy that will help pay the costs.

Home Health Care

There is no deductible or copayment for home health care with Medicare Part A.

Part B Covered Medical Services

Costs for medical services, outpatient care (including most emergency room visits) and medical equipment include an annual deductible which is currently just over $200. You will also pay 20% of expenses as co-insurance.

Prescription Drugs Part D

Deductibles and copayments vary according to the prescription drug plan you choose.

Coverage Limits

Medicare coverage is limited for some medical services and result in expenses that you must cover. One of the largest gaps results from the lifetime maximum on hospital days—which includes the 90-day benefit period plus the 60 lifetime reserve days. Once benefits are exhausted, you pay all hospital costs. Similarly, you are limited to 100 SNF days in each benefit period. Hospital lifetime reserve days cannot be used for extra SNF care after day 100.

Additionally, unlike other insurance plans, Original Medicare does not have out-of-pocket maximum spending limits. This means there is no yearly limit on what you pay.

What’s Not Covered by Medicare

There are many health care services that Original Medicare doesn’t cover at all. If you need certain services Medicare doesn't cover, you'll have to pay for them yourself unless:

• You have other insurance that covers them

• You have a medical health plan that covers them

Even if Medicare covers a service or item, you generally have to pay your deductible, coinsurance, and copayments.

How Can You Compare Plans?

The Centers for Medicare and Medicaid has a Medicare Plan Finder tool  that was extensively updated over the past two years. Use the tool to help compare plans and costs. It’s a good place to start if you are new to Medicare or if you’re thinking about switching plans during the open enrollment period.