Turning 65 can be an exciting time. You may be getting ready to retire soon if you haven’t already. You’ll be eligible for various tax breaks and discounts.
But, you also have to learn how to navigate a new type of health care: Medicare. Don’t let this word intimidate you. While this may seem overwhelming at first, there are a few key steps to understanding how your new health care coverage works.
Difference Between Types Of Coverage
The first important point to address is the difference between types of coverage. There are four different types of Medicare coverage: Part A, Part B, Part C and Part D says ClearMatchMedicare.
- Part A covers inpatient hospital visits.
- Part B covers outpatient medical visits, including visits to your doctor’s office.
- Part C is an alternate way to receive your insurance benefits, which will be addressed further below.
- Part D covers prescription drugs.
Most people choose to receive their benefits through Original Medicare. This is a free service offered through the federal government which provides Part A and Part B coverage. Using this service, you will be able to go to any doctor or hospital that accepts Medicare. The government pays for health care services that you receive. You may have coinsurance for some services you receive. You may also be responsible for a monthly premium for your plan.
Part D coverage is not included in the original coverage. If you need prescription drug coverage, you will need to choose and pay for a Part D private drug plan.
This is also known as Part C or a Managed Care Plan. These are private plans that contract with the federal government to provide Medicare benefits. Part C plans must provide at least the same level of benefits that the original plan offers. Some Part C plans also offer extra benefits that the original plan does not provide. Part C plans can also have different costs and restrictions applied, such as having higher premiums or copays than the original plan. Part C plans must include both a Part A and a Part B plan, and many include a Part D plan as well. They may also include coverage for more services, including vision and dental care. Lastly, Part C plans also have an annual out-of-pocket max, unlike the original plan.
Supplemental / Medigap Coverage
Supplemental or Medigap coverage is additional coverage that you can purchase to supplement your original plan. Medigap plans are not available if you have a Part C or Advantage plan. Different Medigap plans are available, depending on where you live and when you qualified for coverage. Medigap policies include A, B, C, D, F, G, K, L, M, and N. These plans help cover different costs of your other plans, including deductibles, coinsurance and copays. They may also offer extra coverage that Part A and Part B don’t supply, such as dental or vision coverage.
Different Phases of Part D Coverage
The costs of your prescription drugs can change throughout the year while you’re on a Part D plan. This is because there are 4 phases of a Part D plan, which can affect the cost of your medications.
- Deductible: During the deductible phase, you will be responsible for the full cost of your prescriptions. Once your deductible has been met, your Part D plan will begin covering the cost of your prescriptions. Deductibles can vary from plan to plan, and some plans may have a $0 deductible. No Part D plan can have a deductible higher than $445.
- Initial coverage: After you have met your deductible, your Part D plan will begin to pay some of the costs of your prescriptions. You may still have a copay or coinsurance that you will be responsible for. You will stay in the initial coverage phase until you accumulate a certain amount of money spent on prescription drugs. This amount can vary, but for most plans, this amount is $4,130. Note that the amount accumulated includes both your cost and what the plan contributes. For example, if you had a medication that had a total cost of $100, where your copay is $10 and the plan paid $90, then the full $100 would accumulate toward the $4,130 total.
- Gap: After your plan has accumulated the amount in the initial coverage phase (usually $4,130), your Part D coverage will enter a coverage gap phase. This is also known as the donut hole. The cost of prescription drugs during the gap phase is 25%. Using the example above of the $100 medication, instead of paying the $10 copay, you would now pay $25 (25% of $100.) Medigap plans can help pay this additional cost while you’re in the gap.
- Catastrophic: This is the last phase of Part D coverage. You will enter the catastrophic phase after you have spent a total out-of-pocket cost of $6,550 on prescription drugs. The amounts accumulated toward this number only include what you spend on prescriptions, not what the plan contributes. This includes medications you fill during your deductible and copays/coinsurance for medications. During the catastrophic phase, you will pay 5% of the total cost of your medications, or $3.70 for generics and $9.20 for brand-name medications, whichever is greater.
What Is Medicaid?
Medicare and Medicaid are two separate programs that offer health care and are funded by the federal government. Medicare is available if you are age 65+ or if you are under 65 and have a disability. Medicaid is available to those who have very low incomes. Some people qualify for both programs, and the two programs can work together to offer health care for a lower cost.