What Medicare Covers

Medicare Parts A–D

Medicare is a Federal health insurance program that covers millions of Americans age 65 and older, people under the age of 65 with certain disabilities, and people with End-Stage Renal Disease (ESRD). The Centers for Medicare and Medicaid Services (CMS) is the federal agency that runs Medicare.

Medicare Part A: Hospital Insurance

  • Inpatient care in a Hospital
  • Inpatient care in a Skilled Nursing Facility (rehab not custodial or long term care)
  • Hospice care
  • Limited home health care

Medicare Part A is free for most people.

Medicare Part B: Medical Insurance

Part B of Medicare covers medically necessary outpatient services and treatments you receive at a doctor’s office, hospital, or clinic. Doctor office visits are covered under Medicare Part B, and so is Preventive Care. There is an annual deductible of $198 for Part B medical services. After you have met the deductible, Medicare only covers 80% of Part B medical expenses.

You pay a monthly premium to Medicare (the federal government) for your Part B coverage. The standard Part B premium for 2020 is $144.60, but you may pay more if your income is above a certain amount. If you want to apply for a Medicare Supplement or an Advantage Plan, you have to be enrolled in Part A and Part B of Medicare.

Medicare Part C: Medicare Advantage

Part C of Medicare refers to Medicare Advantage Plans (MA Plans). Private insurance companies approved by Medicare offer these plans. When you enroll in an MA Plan, you receive your health care from the insurance company, not Medicare. That means the Insurance company, not Medicare, has to authorize inpatient hospital care, diagnostic tests, and surgeries. The insurance company is in charge of your health care, not Medicare. Advantage Plans offer the same benefits as Original Medicare Part A and Part B, but they can apply different rules, costs, and restrictions than Medicare does. For example, they can require you to get a referral before seeing a specialist and only go to the doctors and hospitals that are in their network.

Medicare Advantage plans have provider networks for Doctors and Hospitals (HMO or PPO) in order to control their costs.  If you want to go to a Doctor or Hospital that is not in their network, you could be responsible for all costs unless it is an emergency. When you travel out of state, you may be out of network.  Medicare Advantage Plans must include a limit on your out-of-pocket expenses for Part A and Part B services. The maximum out-of-pocket cost for these plans in 2020 is $6,700. If you use out of network Doctors or Hospitals, your out of pocket cost may be higher.

Most Medicare Advantage plans include Part D prescription drug coverage. These plans can offer additional benefits that Medicare does not cover, such as dental, vision, and hearing.  The benefit levels for these extra benefits can vary among MA plans, and benefits for each plan are state-specific. It is crucial to understand how your medical expenses are covered before you decide to enroll in an MA plan. The devil is always in the details. If you are considering enrolling in a Medicare Advantage plan, base your decision on how well the policy covers your medical expenses and if you can see the doctors and hospitals of your choice. When you enroll in a Medicare Advantage Plan, you must continue to pay your Medicare Part B premium.

Medicare Part D: Prescription Drug Coverage

Part D of Medicare is the prescription drug benefit that covers Outpatient Prescription Drugs. Part D is offered by insurance companies that have contracts with the government to provide this coverage. You pay a monthly premium to an insurance company for your Part D plan. You will have an annual deductible to meet and have to pay a copay or a percentage of the drug’s cost. Each Medicare prescription drug plan has a list of covered drugs, called its formulary.  Medicare drug plans place medications in their formulary in Tiers 1-5. The lower the tier, the less you pay for the medicine. Brand name medications that are not available in generic can be expensive with a Medicare drug plan and could add substantially to your out-of-pocket costs when you go on Medicare. It is brand name medications, not generics that will cause you to go into the drug coverage gap (donut hole).

Unless you have creditable drug coverage, coverage as good or better than Medicare, you should enroll in a Part D prescription drug plan. If you have prescription drug coverage through your employer or a retiree health plan, you do not need to enroll in a Part D plan. There are 30 different prescription drug plans offered in Alabama for 2020, and it can be confusing and frustrating to know which plan is best for you. My advice is not to choose a Medicare drug plan because you heard it is a good plan or because it has a low premium. Base your decision on how well the drug plan covers your medications at the pharmacy you want to use.