My goal today: give an overview of Medicare for the 65+ crowd in 550 words or less.
Ready?
What is Medicare?
Medicare is a federal entitlement program. The government guarantees that eligible individuals will receive benefits.
There are several triggers for eligibility, but this column will focus on only age eligibility. Under that criterion, you must be 65 years old, have worked at least 40 quarters of covered employment, and be either a US citizen or a holder of a green card for at least five years.
The Four Parts and Two Choices of Medicare
There are four parts to Medicare: A, B, C, and D.
- Parts A and B are considered original Medicare.
- Part C is the Medicare Advantage Program.
- Part D is drug coverage.
When you first sign up for Medicare, you have two choices:
- The first choice is to sign up for Original Medicare, which is Parts A and B, join a separate Medicare drug plan known as Part D, and then purchase a Medicare supplemental policy that pays for additional coverage and helps with out-of-pocket costs.
- The second choice is to sign up with a private company for Part C, which is Medicare Advantage.
Now for the explanations.
- Part A primarily provides for hospital and very limited nursing home benefits.
- Part B provides coverage for physicians, tests, shots or vaccines, medical equipment, outpatient care, and home health care.
- Part C is Medicare Advantage.
- Part D is coverage for drugs.
Original Medicare vs. Medicare Advantage
Let’s compare and contrast your choice between Original Medicare and Medicare Advantage.
Original Medicare
Under original Medicare, you can use any doctor or hospital that takes Medicare anywhere in the U.S. In most cases, you do not need a referral to see a specialist. Under Medicare Advantage, you can only use doctors and other providers who are in the plan’s network and service area for non-emergency care, and you may need a referral to see a specialist.
Under Original Medicare, for Part B-covered services you pay a monthly premium. You also pay a coinsurance of 20% of the Medicare-approved amount after you meet your deductible. If you purchase a supplemental policy, then it will help pay the coinsurance amount.
Medicare Advantage
Under Medicare Advantage, you pay the Part B monthly premium, but you also may have to pay the plan’s premium. Out-of-pocket costs vary, but you are not allowed to purchase supplemental insurance to cover them. You will have a yearly limit for what you pay for covered Part A and Part B services, but there will be different limits for in-network and out-of-network services.
Differences in Coverage
There are also differences in coverage. Original Medicare covers most medically necessary services without prior authorization. Medicare Advantage must also cover all medically necessary services, but the plan can use its criteria to determine medical necessity. You usually need to get prior authorization.
Most Medicare Advantage plans include Part D coverage and forbid you from joining a separate Medicare Drug Plan. For Part D coverage in Original Medicare, you will need to purchase a separate Medicare Drug Plan of your choice. Starting in 2025, the Inflation Reduction Act caps out-of-pocket prescription drug costs for Medicare Part D beneficiaries at $2,000 annually.
Start Planning for Medicare With Hammerle Finley
You need to pay attention when you reach 65. Timing is critical for benefits and to avoid a penalty for not signing up when you are first eligible.
My professional preference, shared by most attorneys who practice in this area, is Original Medicare with Part D and supplemental insurance, but I recommend hiring a Medicare broker who can shop coverage and explain your options to you.
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
