The Medicare system is made up of many different parts and plans. Once you are approved for Medicare, you must decide which parts and plans you want to be enrolled in. To begin with, Medicare offers four different 'parts' you can be enrolled in, known as Part A, B, C and Part D.
Part A (hospital insurance) and Part B (medical insurance) combine to make up what is called 'traditional Medicare'. And Part D is specifically health insurance for prescription drugs and can be purchased as an add-on once you are enrolled in Part A. Finally, Part C is known as Medicare Advantage and is an alternative to traditional Medicare, which typically includes prescription drug coverage.
Medicare also has many options in addition to enrolling in Part A, B and D, known as Medicare supplemental plans, or Medigap. And you could even possibly qualify for the Low Income Subsidy Medicare Program (LIS) or 'Extra Help' if you make under a certain income to hep pay for prescription drugs.
All of these programs together aim to provide seniors age 65 or older, or those with qualifying disabilities health insurance that covers a vast majority of their healthcare costs. But make no mistake, even the best Medicare coverage will not cover 100% of all costs in every situation, and every person could require a different level of coverage, and that level of coverage can and likely will change throughout one's life.
This guide aims to help you choose the best Medicare combination of parts and plans to fit your healthcare needs by detailing every option below.
Part A: Hospital Insurance
Medicare Part A covers impatient hospital care, including lab tests and surgeries, as well as home health care costs, skilled nursing facility stays, mental health facility stays and hospice care. The Medicare & You handbook details a complete listing of everything Medicare Part A covers.
Part A is premium-free (no monthly cost) for those approved for Medicare. If you are not approved, Part A premiums cost between $252-$458/month depending on your lifetime work history of paying Social Security and Medicare taxes. *Premiums will be up to 10% higher if you apply late.
You need to be enrolled in Part A before you can enroll in any other part or plan of Medicare. All costs listed below are based on 2020 numbers and are subject to change slightly yearly.
Hospital/Mental Health Inpatient Stay - Deductibles & Copays
- $1408 one-time deductible per benefit period
- $0 or hospital stays 0-60 days
- $352/day copay for days 61-90
- $704/day copay for days 91 and beyond of a single "spell of illness"
*For mental health inpatient stays, you will also be responsible for 20% of all Medicare-approved mental health services doctors or other providers give while in the facility
*Any single hospital or mental health inpatient stay over 90 days is considered a 'lifetime reserve day' and you get a maximum of 60 lifetime reserve days over your lifetime. After that you have to pay the full amount of hospital stay costs for any single hospital stay that goes beyond 90 days.
Home Health Care Costs
- $0 for home health care services deemed medically necessary, which can include part-time skilled nursing care, physical therapy, speech pathology and occupational therapy
- 20% of durable medical equipment (DME) that's ordered by a doctor, like wheelchairs, walkers, or in-home hospital beds (Medicare covers 80%)
*Part A does not cover 24/7 home care, meals or other services not related to your in-home treatment. You must be deemed home-bound and be assisted by a Medicare-certified home health agency to be covered.
Skilled Nursing Facility (SNF) Stay Costs
- $1408 one-time deductible per benefit period
- $0 or hospital stays 1-20 days for each benefit period
- $176/day copay for days 21-100
- All costs for days 101 and beyond for a single SNF stay
*SNF stays occur after a medically necessary hospital stay of 3 nights in a row
Hospice Care Costs
- $0 for hospice care
- Up to $5 copay for each prescription drug or product prescribed for relief related to hospice. If the drug isn't covered in Part A (rare) then ask your hospice care worker if the drug is covered under Part D insurance.
- You also may be required to pay up to 5% of the costs associated for respite care (expenses for family members or friends looking after patients on hospice while in a nursing home or hospital setting).
Part B: Medical Insurance
Medicare Part B covers medically necessary services and supplies to treat your health conditions like outpatient care, clinical research, ambulance services, durable medical equipment and some home health care costs in conjunction with Part A. Part B also covers preventative care like flu shots, early stage detection and screenings. The Medicare & You handbook details a complete listing of everything Medicare Part B covers.
Part B premiums range from $144.60 - $491.60 per month depending on your Adjusted Gross Income (AGI) from two years ago prior to enrolling. Most people pay $144.60/month. Premium costs as of 2020 (based on 2018 AGI):
|Monthly Premium||Filed as Individual||Filed Jointly||Married, Filed Separately|
|$144.60 / month||$87,000 or less||$174,000 or less||$87,000 or less|
|$202.40 / month||$87,001 - $109,000||$174,001 - $218,000||Not applicable|
|$289.20 / month||$109,001 - $136,000||$218,001 - $272,000||Not applicable|
|$376.00 / month||$136,001 - $163,000||$272,001 - $326,000||Not applicable|
|$462.70 / month||$163,001 - $499,999||$326,001 - $749,999||$87,001 - $412,299|
|$491.60 / month||$500,000 or above||$750,000 or above||$413,000 or above|
Deductibles & Copays
Your deductible for Part B coverage is $198 per year (as of 2020) and after that you will typically pay 20% of Medicare-approved services, like doctor services, outpatient care and durable medical equipment like walkers, beds and wheelchairs.
You pay $0 for:
- Clinical lab services approved by Medicare
- Home health services approved by Medicare
- Doctor approved yearly depression screenings
You usually enroll in Part B at the same time as Part A; you cannot receive Part B without Part A. Together they make up what is known as traditional Medicare.
Since Part B costs money monthly you do have the option to opt-out of Part B and only get Part A. For those already receiving retirement like Social Security or RRB, or disability benefits for a certain period of time, you automatically qualify for Part A and B.
If you sign up for Part B after you're first eligible you will have to pay a late enrollment penalty for as long as you have Part B. The penalty will raise your monthly premium as high as 10% per 12-month period you delay enrolling in Part B when you were first eligible.
Part C: Medicare Advantage
Part C of Medicare is known as Medicare Advantage. This is an alternative option to traditional Medicare (Part A + B) and is provided by private health insurance companies that work in compliance with Medicare. Medicare Advantage plans are legally required to at minimum cover everything that Part A and Part B cover in traditional Medicare, all in one package.
Medicare Advantage plans not only include all Part A and Part B coverage but in some cases dental, vision also usually include prescription drug coverage, which you would otherwise get by enrolling in an optional Part D plan. You have to be enrolled in Part A and Part B before you can join a Medicare Advantage plan. Once enrolled, most can join a Medicare Advantage plan.
Since Medicare Advantage plans are provided by private companies, the premiums, deductibles, copays, drug costs and any other out-of-pocket expenses vary depending on the amount of coverage you need and type of network you join (HMO, PPO, etc). It's best to shop around and Medicare.gov makes it very easy for you: Find a Medicare Advantage plan.
The average Medicare Advantage premium nationwide in 2019 for example was $29/month. That's considerably lower than getting Plan A premium-free and paying $144.60/month at minimum for Part B. But there are trade-offs to consider.
Traditional Medicare vs Medicare Advantage
In many cases Medicare Advantage plans offer much cheaper premiums and more coverage than getting Part A, B and D separately, but the trade off is you have to work within HMO or PPO plans and networks or other specialty networks as not as many healthcare facilities accept the program. And some out-of-pocket costs might end up being considerably higher.
If you don't want to be restricted to certain doctors or healthcare workers within a given network or if you have serious medical conditions that will require lots of coverage, you will want to seriously weigh the math between both programs and consider traditional Medicare.
But if you don't mind working within a network or if your doctor or healthcare worker is already in an approved HMO or PPO network that you are comfortable with and you like the ease of bundling your Medicare all-in-one with much lower premiums, strongly consider Medicare Advantage.
The good news is you can always enroll in a Medicare Advantage program during any enrollment period, and change back to traditional Medicare if you change your mind or need a different level of coverage later on. Just be mindful of when enrollment periods begin and end.
Part D: Prescription Drug Coverage
Medicare Part D is an optional part of Medicare that covers prescription drug costs. You need to be enrolled in Part A first to be eligible to enroll in a Prescription Drug Plan (PDP) through Part D. If you are enrolled in a Medicare Advantage plan, most of those plans include a version of Part D within their plans already that goes by MA-PD (Medicare Advantage Prescription Drugs).
Part D coverage doesn't offer standardized coverage like Part A and B. Medicare approves and regulates Part D providers but they are designed and administered by a number of different sponsor companies - healthcare companies, charities, unions and some integrated health delivery systems.
This means Part D plans can vary in coverage and cost, offering a different list of drugs covered between plans, and different tiers of discounts on certain drugs, that can change between generic vs brand name. Medicare.gov has a portal to shop and compare all Part D plans, and you can go ahead and sign up for one through that site as well.
All PDP/MA-PD plans are required to carry at least two drugs from at least 100 different categories, and all plans are required to carry 'substantially all' drugs in these categories:
- HIV and AIDS drugs
Given that Plan D plans aren't standardized, prescription drug plan premiums vary depending on the provider you go with. But regardless of your provider, if you make over a certain amount you will need to pay extra on top of that. For most people, they will just have to pay their plan's premium.
If you make over $87,000 a year of Adjusted Gross Income (AGI) on your federal taxes two years before you enroll, you will have to pay between $12.20/month - $76.40/month additional. Here are the premium costs as of 2020 (based on 2018 AGI):
|Monthly Premium||Filed as Individual||Filed Jointly||Married, Filed Separately|
|Your premium plan cost ||$87,000 or less||$174,000 or less||$87,000 or less|
|$12.20 + your premium plan cost ||$87,001 - $109,000||$174,001 - $218,000||Not applicable|
|$31.50 + your premium plan cost||$109,001 - $136,000||$218,001 - $272,000||Not applicable|
|$50.70 + your premium plan cost||$136,001 - $163,000||$272,001 - $326,000||Not applicable|
|$70.00 + your premium plan cost||$163,001 - $499,999||$326,001 - $749,999||$87,001 - $412,299|
|$76.40 + your premium plan cost||$500,000 or above||$750,000 or above||$413,000 or above|
The average premium paid in 2020 was $47.59/month. And the average base premium was $32.74/month. Note: Plan D also comes with a late enrollment penalty, if you don't enroll when initially able.
'Extra Help' or Low Income Subsidy Program (LIS)
'Extra Help' is a government program that helps some individuals with lower income pay for prescription drug costs. This program also goes by Low Income Subsidy Program or Medicare LIS.
To qualify you must meet these requirements:
- You have Medicare Part A and/or Part B
- You live in the U.S.
- Your combined savings, investments and real estate aren't worth more than $29,160 if you are married, or $14,6140 if you are single.
If you meet those requirements and are looking to lower your Part D prescription drug costs by as much as $5000/year, apply through this official Social Security page.
Medicare Supplement: Medigap
Medigap is Medicare supplemental health insurance you can purchase from a private healthcare company in addition to traditional Medicare. You cannot be enrolled in Medicare Advantage and get Medigap coverage at the same time; you must be enrolled in both Part A and Part B Medicare programs to enroll in a Medigap policy.
Medigap is meant to help with the out-of-pocket costs of traditional Medicare, to supplement or 'fill the gap' of traditional Medicare coverage. It can help with copayments, coinsurance and deductible costs. The way it works is Medicare pays for the healthcare expense first, then Medigap steps in and pays second.
The average Medigap policy premium was $125.93/month in 2018, but plan prices and coverage vary widely. Medigap has standardized plans ranging from plans A-N and they are tiered to allow for lower premiums with higher out-of-pocket costs to higher premiums with the best coverage. Medicare.gov has a portal to shop and compare all approved Medigap plans.
Note: As of 01/01/2020 --- You can no longer use Medigap to cover your Medicare Plan B deductibles.
How Medicare Is Covering Coronavirus Patients
To find out the latest on how exactly Medicare is covering Coronavirus patients, visit our COVID-19 Relief guide. Highlights of coverage include:
- No out-of-pocket costs for COVID-19 testing
- No out-of-pocket costs for telehealth services (virtual consultations w/ your physician)
- No out-of-pocket costs for any future FDA-approved COVID-19 vaccines