Medicare is the nationwide insurance program for individuals who have qualifying disabilities and seniors. For many of the over 61,000 people who participate in Medicare and their loved ones, the benefit remains confusing. The program has several parts ranging from A to D, and each one covers a different type of care.
Medicare Part A versus Medicare Part B
Medicare Parts A and B cover a broad range of services. People often have trouble distinguishing the benefits of one part of the program from another, especially these two. An easy way to keep them straight is to think of A as hospital/inpatient insurance and B as medical insurance.
Part A of the Medicare benefit covers:
- Part or all of a hospital stay (fewer deductibles and co-pays)
- Short-term rehabilitation in a skilled nursing center
- Home health care services
- End-of-life hospice care
By contrast, Medicare Part B helps pay for physician office visits and other types of preventative care and screenings. For example, most people qualify for a diagnostic colonoscopy every ten years, along with annual prostate screenings, mammograms, and flu shots. It also might pay for durable medical equipment and other outpatient services.
Costs Associated with Medicare Parts A and B
While Medicare Part A is free for most people who worked at least ten years or had a spouse who did, there are other costs Medicare recipients incur. The first is a $1,600 annual deductible.
The following costs apply to hospital and mental health facility stays:
- There is no coinsurance for the first 60 days (once the deductible for the year is met).
- From day 61 through 90, a coinsurance rate of $400 per day will apply.
- After day 90, a Medicare recipient will incur an $800 per day coinsurance for a total of 60 “lifetime reserve” days. Once the 60 lifetime reserve days are exhausted, the patient is then responsible for all costs.
For a stay at a skilled nursing facility, the first 20 days do not require a Medicare co-pay. From day 21 to day 100, a coinsurance of $200 is required for each day. Beyond 100 days, the patient is then responsible for all costs.
Unlike Medicare Part A, Part B has a premium. In 2023, the monthly premium for Part B is $164.90. Most seniors pay this amount, but those with incomes of $97,000 or higher might pay more.
Medicare Part D Benefit
One last thing to be aware of is the Medicare Part D benefit. Older adults who don’t take any prescription medications often ask if and why they need to enroll in Medicare Part D. This part of the benefit covers prescriptions. While most beneficiaries aren’t required to sign up, you will have to pay a monthly penalty if you do enroll after the Initial Enrollment Period ends.
The penalty is currently 1% of the monthly premium ($32.74 in 2023) multiplied by the number of months you didn’t have creditable prescription coverage. This penalty is why financial planners often suggest people sign up for a Part D plan when they first enroll for Medicare.
Learn about Medicare Open Enrollment
Fall is the one time of year when Medicare recipients can make changes to their existing coverage. Open enrollment runs from October 15th through December 7th every year. If this is the first time you or a senior loved one is navigating this period, you might find this article to be of interest.