Medicare Part A: Hospital Insurance

Part A of Medicare covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. If you have paid Social Security taxes for at least 40 quarters (10 years) this coverage is free.

Medicare Part B: Medical Insurance

Part B of Medicare covers doctor office visits and outpatient care. This includes outpatient services received at a doctor’s office, hospital, clinic, or other health facility to examine, diagnose and treat your health conditions. Most people pay a monthly premium to Medicare for their Part B coverage. If you are going to be new to Medicare in 2018 the standard Part B premium is $134.

Medicare Part C: Medicare Advantage

Part C of Medicare allows private health insurance companies to provide Medicare benefits. These Medicare health insurance plans, such as HMOs and PPOs, are called Medicare Advantage Plans. They have a network of doctors and hospitals you need to go to for your medical care. If you want to consult a doctor who is not in the network, you’d have to pay some or all the cost yourself and when you travel you are out of network.  When faced with a serious or chronic health condition you could find out there are large financial gaps in your coverage. Depending on the plan, you could be responsible for as much as $6,700 in out-of-pocket costs in a calendar year for Medicare-covered services. Most Advantage Plans include prescription drug coverage.

Medicare Part D: Prescription Drug Coverage

Part D of Medicare provides outpatient prescription drug coverage. Part D prescription drug coverage is not provided by Medicare but only through insurance companies that have contracts with the government to sell this coverage. If you decide not to join a Medicare Prescription Drug Plan when you’re first eligible, and you don’t have “creditable” prescription drug coverage you will have to pay a late enrollment penalty. It’s a permanent penalty that never goes away and only gets bigger the longer you are without coverage.

Each Medicare Prescription Drug Plan has its own list of covered drugs which is called a “formulary”.  Medicare drug plans place drugs that are in their formulary into five different “tiers”. The lower the tier the less you pay for the medication. Most of the common generic medications fall under Tier 1 or Tier 2 while most brand name drugs fall under Tiers 3 and 4.