Medicare ABCD refers to the four Parts of Medicare. You may have questions about these four parts of Medicare including if you need to have them at all.
This overview will address Medicare Parts A, B, C and D. The questions answered will include:
- What are they and what do they cover?
- Do I need all four Parts?
- What do Medicare ABCD cost?
- How do they work together?
To be clear, this article is about the Parts of Medicare, not about Medicare supplement Plans A, B, C or D. Medicare supplement Plans are standardized plans that help pay some of your Medicare costs. Having supplements with the same letters as the four Parts of Medicare just adds to the confusion.
Medicare Part A
Medicare Part A is hospital insurance. It helps cover:
- Inpatient care while hospitalized
- Care while in a skilled nursing facility
- Hospice care
- Home health care (must be ordered by physician)
Most people eligible for Medicare have Part A and do not pay a premium. If you have worked a total of 40 quarters (10 years) and paid into Medicare through payroll deductions you are automatically eligible for Part A. If you do not meet these qualifications you may have to pay up to $413 per month for Part A coverage.
There are costs associated with using Part A if you are covered through original Medicare. If you have any of the 11 standardized Medigap policies (Medicare supplements) costs you incur while hospitalized are generally covered. Medicare supplement Plan F currently offers the most comprehensive coverage. If you are enrolled in a Medicare Advantage Plan you should refer to your plan’s Summary of Benefits to learn about any copays or coinsurance required if hospitalized.
Medicare Part A costs with original Medicare:
- Deductible – $1316
- Days 0-60: $0 coinsurance for each benefit period
- Days 61-90 $329 coinsurance for each benefit period
- Days 91 and beyond: $658 coinsurance for each Lifetime Reserve Day (60 total)
- Beyond Lifetime Reserve Days: You are responsible for all costs
Part A of Medicare ABCD can lead to a heavy financial burden if you are hospitalized unless you have a Medicare supplement. A Medicare Advantage Plan can also lessen your costs as they all include a Maximum Amount Out of Pocket (MOOP).
Medicare Part B
Medicare Part B is medical insurance. It helps cover:
- Services from doctors and other providers
- Outpatient care, i.e. labs, testing etc.
- Home health care (physician ordered)
- Durable medical equipment
- Several preventative services
Some people automatically get Part B and others have to enroll. If you are covered on an employer or union group plan you may not want to enroll in Part B until that coverage ends. Check with your human resources department for guidance on how to proceed.
The Part B premium for 2017 is $134 but you may pay more based on your income. The threshold for being required to pay a higher premium is above $85,000 (based on 2105 income) for an individual or above $170,000 if filing jointly.
Many people who are dual-eligible (both Medicare and Medicaid) pay nothing as their State Medicaid covers the cost.
There are costs associated with using your Part B coverage if you are insured through original Medicare only. If you Buy a Medicare Supplement or are enrolled in a Medicare Advantage Plan some of these costs can be averted or reduced.
Medicare Costs with Original Medicare
- Medicare premium varies (as discussed above)
- Medicare deductible is currently $183 for 2017
- You pay 20% for Medicare approved charges
Part B of Medicare ABCD is the Part that most people are familiar with because of the associated costs of monthly premiums, annual deductible and the unpredictable 20% of Medicare covered charges.
Medicare Part C
Medicare Part C refers to the Medicare Advantage program. A Medicare Advantage Plan:
- Includes all Part A and Part B benefits and services
- Usually includes Medicare Part D prescription drug coverage
- May include extra benefits such as dental, vision, hearing, gym membership, etc.
- Is administered by private insurance companies approved by Medicare
- Is good for one calendar year
Medicare Advantage Plans continue to gain in popularity. They are sometimes referred to as Medicare replacement plans. In order to enroll in a plan, you must:
- Be enrolled in both Medicare Parts A and B
- Live in the plan’s service area (typically a County)
- Not have end-stage-renal-disease (ESRD)
Although many Medicare Advantage Plans have $0 premiums (they’re not allowed to be called free) there are costs associated with using your plan. Medicare Advantage Plans often have deductibles, coinsurance and copays.
With a Medicare Advantage Plan you are usually getting your services through a provider network such as a PPO or a HMO. How and where you can receive service depends on the type of network you have. A HMO does not typically allow you to receive care out-of-network except for emergencies while a PPO is a bit more liberal. You will save the most money by using a provider in the PPO network but are not prohibited from going out of network for care.
Medicare Part C of Medicare ABCD generates the most confusion because plans are not standardized, can change from year to year and have limited times when you can enroll, drop or switch plans.
Medicare Part D
Medicare Part D is Medicare prescription drug coverage. Part D:
- Helps cover the cost of approved prescription drugs
- Is administered by private insurance companies approved by Medicare
- Plans are good for one year
- Includes steep late enrollment penalties
Medicare Part D is available as a stand-alone plan or is often included in Medicare Advantage Plan coverage. People on Medicare should enroll in a plan when first eligible to avoid late enrollment penalties even if prescription drug use is minimal.
Many people argue that enrolling in a plan when not using prescription drugs is a waste of money. These same people insure their homes even though they are not currently on fire! Part D Plans with the lowest premiums are under $20 per month which is a small price to pay if you need expensive drugs in the future.
Part D Plans vary widely and you should Compare Part D Plans to get the right coverage for the lowest price. Not all plans include coverage for the same drugs and it helps to compare plans to ensure you are getting the most value.
Even if you get Part D coverage through a $0 Medicare Advantage Plan there will still be some cost to use your plan. Your plan may or may not include a deductible up to $400 for 2017. A Part D plan typically has four or five tiers which you will be subject to a copay or coinsurance for each prescription filled. You may also incur higher costs if you enter the Part D donut hole.
Part D Plans are also subject to strict enrollment periods and guidelines. You should review your plan each year for changes as benefits and the drugs covered can change annually. Choosing the wrong Medicare drug plan can be a costly mistake.
Part D or Medicare ABCD is something you should have no matter how you get your Medicare coverage. The risk of not being covered could mean high out-of-pocket costs and the likelihood of paying a late enrollment penalty if you need coverage in the future.
Medicare Parts A, B, C, and D – what do you need?
Being enrolled in Medicare Part A is critical. Without it, you have no hospital insurance. You also need to be enrolled in Part A to join a Medicare Advantage Plan (Part C) or buy a Medicare supplement.
If you have other creditable coverage you can delay enrolling in Part B until that coverage ends. But if you want to enroll in a Medicare Advantage Plan or buy a supplement you will need both Parts A and B.
Medicare Part C is optional. You can insure with original Medicare only, with original Medicare and a supplement or with an Advantage Plan. You cannot be enrolled in an Advantage Plan and have a supplement at the same time.
To get Part D you must be enrolled in Part A and/or Part B. Coverage can be from a stand-alone plan or through a Medicare Advantage Plan.
If you need help choosing between a Medicare Advantage Plan or a Medicare supplement policy check out this Free 8 Part Video Mini-Course it has all the answers.