How to Make Sense of the Different Parts of Medicare

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If you're nearing retirement age, you probably know the gist of what Medicare does. The federal social program provides health insurance coverage to those age 65 or older, as well as younger people with certain disabilities. But do you know the specifics of each part of Medicare?

According to the 2017 EBRI Retirement Confidence Survey, only 8 percent of retirees are very confident about the future of Medicare benefits. This may be due to a lack of information about the various parts of the program and what each one of them offers. (See also: 5 Common Medicare Myths, Debunked)

Let's break down each of the Medicare parts.

Medicare Part A (hospital insurance)

Part A covers inpatient hospital stays, care in a skilled nursing facility (following a hospital stay), hospice care, and some home health care. It covers hospital services, including semiprivate rooms, meals, general nursing, drugs as part of your inpatient treatment, and other hospital services and supplies.

Once you reach age 65, you usually don't pay a monthly premium for Part A coverage as long as you or your spouse paid Medicare taxes for at least 10 years. This is known as "premium-free Part A." Those under age 65 may also qualify for premium-free Part A if they have a disability or end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS).

For workers who paid fewer than 30 quarters of Medicare taxes, the standard Part A premium for 2018 is $422 per month. For those who paid 30 to 39 quarters of Medicare taxes, the standard Part A premium is $232 per month.

It's important to understand that Part A coverage is the bare minimum in terms of health coverage and that you should plan to supplement this coverage with the additional parts of Medicare. Generally, you're only responsible for one deductible (about $1,340) for each benefit period and no coinsurance for hospital stays under 60 days per benefit period.

Medicare Part B (medical insurance)

This is medical insurance that covers doctors' appointments and many other medical services and supplies not covered by Part A. In most cases, you'll automatically get Part A and Part B starting the first day of the month you turn 65. You'll get your red, white, and blue Medicare card in the mail three months before your 65th birthday (or your 25th month of getting disability benefits).

Part B helps pay for necessary services and supplies to treat your medical condition, as well as preventive services to detect or prevent illness at an early stage. Most preventive services have no cost as long as you get them from a health care provider accepting the amount that Medicare approves for payment. Part B includes payments for clinical research, ambulance services, durable medical equipment, and a second opinion before surgery.

For 2018, the standard premium for Part B is $134 (and may be higher depending on your income). If you collect Social Security benefits, your premium may be slightly reduced.

Since Medicare Part B requires a monthly premium even if you don't use it, you should consider delaying Part B if you're still receiving coverage through an employer group health insurance plan. Talk with your health plan administrator to learn more about how to delay Part B (and even Part A) without paying a penalty when enrolling later.

Medicare coverage depends on federal and state laws. Use this Medicare Coverage tool to find if Medicare Part A and Part B will cover your test, item, or service. Note that there are certain things that Part A and Part B (also known together as "Original Medicare") will not cover. For example, Original Medicare doesn't cover hearing aids and exams, eye exams, and most dental care. Part C and Part D can help you cover those gaps.

Medicare Part C (Medicare Advantage plans)

Americans enrolled in Medicare Part A and Part B are also eligible to sign up for health coverage plans, known as Medicare Advantage plans, with private health carriers approved by Medicare. The primary benefit of Part C is that you get a wider choice of medical providers and a more comprehensive prescription drug coverage. When you sign up for a Medicare Advantage plan, you must continue paying your Part B premium.

There are different types of Medicare Advantage plans:

• Health Maintenance Organization (HMO) plans: You generally must get your care and services from providers within the plan's network. Some HMO plans may allow you to get a referral from your primary care doctor for an out-of-network provider.

• Preferred Provider Organization (PPO) plans: You pay less as long as you use the doctors, hospitals, and health care providers within the plan's network and pay more when using those outside the network. Unlike an HMO, you're not required to choose a primary care doctor and you don't need a referral to see a specialist.

• Private Fee-for-Service (PFFS) plans: The main difference between a PFFS and other plans is that the insurance company, not Medicare, determines how much the provider receives and the beneficiary pays for a covered health service. PFFS plans offer flexibility but often at a higher cost.

• Special Needs Plans (SNPs) plans: An SNP is only available to individuals with specific diseases or characteristics, including cancer, dementia, diabetes mellitus, or end-stage liver diseases. Benefits are tailored to the specific needs of that condition.

• HMO Point of Service (HMOPOS) plans: An HMOPOS plan allows you to get some services out-of-network for a higher cost.

• Medical Savings Account (MSA) plans: Plans that combine a high deductible health plan with a bank account into which Medicare makes deposits to pay for health care services throughout the year.

To enroll in a Medicare Advantage plan:

• Use the Medicare Plan Finder to search for plans in your ZIP code (for personalized search, use your Medicare number).

• Enroll in your selected plan by mailing an enrollment form, calling the plan administrator, or calling 1-800-MEDICARE (1-800-633-4227).

When joining a Part C plan, you'll need your Medicare number and start date of Part A and/or Part B coverage.

Medicare Part D (prescription drug coverage)

To help Americans with the rising cost of prescription drugs, the Social Security Administration established Medicare Part D in 2003. Like Medicare Part C, Part D is provided by private health insurance companies approved by Medicare. To enroll in Part D, you must have signed up for Part A and/or Part B. Deductibles and covered medications vary per plan. You are first eligible to sign up for Part D coverage during your Initial Enrollment Period (IEP), which typically takes place during the same seven-month window as your IEP for Original Medicare (Parts A and B).

Medicare Part D is also available to those with Part C, though some Medicare Advantage plans may already provide prescription drug coverage. Medicare Advantage plans with drug coverage are sometimes referred to as "MA-PDs." HMO and PPO plans often include some prescription drug coverage, while PFFS and MSA plans often require additional drug coverage through Medicare Part D.

Make sure to check your eligibility for your drug coverage from other organizations, such as Department of Veterans Affairs, workplace union, or TRICARE before signing up for a Part C or Part D plan. You use the same process to enroll in a Part D plan as you would for Part C.

The bottom line: Keep informed

You have unique medical needs. That is why Medicare offers a wide range of options for medical coverage. As you get closer to retirement age, keep on top of the latest developments of Medicare and its different parts so you can minimize your medical expenses. To learn more, use this directory to find Medicare contacts using your state and organization or topic of interest.

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