This thread is intended to discuss Medicare eligibility and coverage. I’m getting it started, but hopefully other people will add some additional comments and insights to the thread.
I’m going to go over my basic knowledge of the different parts of Medicare and provide links to CMS.gov (Center for Medicare and Medicaid Services) and Medicare.gov that explain the coverage more in-depth. I’m only doing this for informational purposes and cannot guarantee that I didn’t miss something.
There are 3 main parts of Medicare: Part A, Part B, & Part D. Parts A & B are called “Original Medicare,” and Part D includes coverage for drugs. Most people purchase either a supplement (Medigap) that wraps around “Original Medicare” or a Medicare Advantage Plan (aka Part C).
Medicare Supplement/Medigap vs Medicare Advantage
With both of these options, you usually are still required to pay a part B premium and may need to pay an additional premium. With a supplement/MediGap plan, you’re entitled to the same benefits under “Original Medicare,” and the supplement fills in some gaps that “Original Medicare” doesn’t cover. You are still getting coverage directly from the federal government for Parts A & B. The federal government holds all the risk. Benefits in supplemental/Medigap policies are standardized and identified by letter – see https://www.medicare.gov/supplements-other-insurance/how-to-compare-medigap-policies.
With a Medicare Advantage plan, the federal government pays premiums to an insurance company and shifts the risk to the insurance company. If your claims are higher than the premiums the federal government pays the insurance company, the insurance company takes a loss. If your claims are lower than the premiums then the insurance company makes a profit. Insurance companies manage their risk through negotiating lower rates on certain services (e.g. lab services, durable medical equipment) and may shift some risk to physicians through the use of capitation payments. Certain Part A services (e.g. hospice care) are still covered through “Original Medicare” rather than the Medicare Advantage plan.
The Medicare Advantage plan will have a different network of doctors (usually narrower and region-specific) and different coverage than “Original Medicare,” but is required to offer some level of coverage for the same services. Medicare Advantage plans have an out-of-pocket maximum whereas only certain Medigap plans have an out-of-pocket maximum. You may need referrals to see specialists under a Medicare Advantage plan, but you do not generally need one under Medigap plans. This booklet provides some additional comparisons between Medigap and Medicare Advantage plans: https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf.
In order to enroll in a Medicare Advantage plan, you must have Part A & Part B coverage. Most Medicare Advantage plans also include a Part D plan – for which you’ll pay a premium.
Below is some information on the three parts of Medicare. Note that the Part A & Part B coverage is based on enrollment in “Original Medicare.” Under a Medicare Advantage plan, the parts are bundled into one package. The eligibility information below still applies to Medicare Advantage plans, but the coverage will vary across Medicare Advantage plans.
This link provides detailed eligibility information: https://www.cms.gov/Medicare/Eligibility-and-Enrollment/OrigMedicarePartABEligEnrol/index, including eligibility information for people with end-stage renal disease, people entitled to social security disability benefits, and people who are not eligible for “premium free” part A.
- Eligibility & Premium: After turning 65, most people are eligible for “premium-free” Part A coverage. You or your spouse need to have at least 40 calendar quarters of work in any job where you paid the Medicare tax- this tax is essentially your “premium” paid in advance. If you are eligible for social security benefits, then you are generally eligible for “premium-free” Part A. Some people are automatically signed up for Medicare Part A when they file for social security. As long as you are eligible for Part A, there is no reason to not enroll and nearly everybody does. More details on eligibility are here:
- Coverage: Coverage under Part A includes inpatient hospital care, skilled nursing facility care, hospice, and home health care. These benefits are limited to a certain number of days and generally include a deductible and copayments/coinsurance. The link below outlines the cost-sharing for each of the benefits of Part A. A supplemental/Medigap plan may provide benefits above those listed in the link below.
- Eligibility & Premium: After turning 65, most people are eligible for Part B coverage, but you need to pay a premium. Your premium will be higher if your income was over a certain amount two years prior (e.g. 2017 income for 2019 coverage) or if you delayed your enrollment in Part B. By delay, I mean you did not have coverage after age 65 and did not enroll in Part B. If you waited to retire until age 70 and enrolled in Part B at that time, then you would not need to pay a penalty as long as you were covered by an employer-sponsored health plan until that age. Most people need both Part A & Part B coverage. However, if you have coverage through a post-retirement health plan (or some similar plan), it may not make sense to pay the Part B premiums if Part B services are already covered by the post-retirement health plan.
See the Special Enrollment Period section in this link that describes when you can delay enrollment in Part B without being charged a penalty: https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b/part-a-part-b-sign-up-periods
- Coverage: Part B includes coverage for physician appointments, durable medical equipment (e.g. cgm and pumps), ambulance services, mental health benefits, and some prescription drugs (e.g. insulin for use in a pump). Similar to Part A, benefits are standardized. The link below outlines the cost-sharing for each of the benefits of Part B. A supplemental/Medigap plan may provide benefits above those listed in the link below.
Eligibility & Premium: After turning 65, most people are eligible for Part D coverage, but everyone has to pay a premium. Similar to Part B, your premium will be higher if you made more than a certain amount two years prior (e.g. 2017 income for 2019 coverage) or if you delayed your enrollment in Part D. Unlike Parts A & B, when you enroll in Part D you must pick a specific Part D plan offered by an insurance company (or pick a Medicare Advantage Plan that includes Part D). The insurance company always holds the risk.
Coverage: Part D is coverage for prescription drugs (e.g. insulin not for use in a pump) and is not standardized in the same way Parts A & B are. Plans have a lot of flexibility in determining which drugs are covered and in which tier a drug is placed. Plans must have a formulary that lists the covered drugs. “The formulary includes at least 2 drugs in the most commonly prescribed categories and classes. This helps make sure that people with different medical conditions can get the prescription drugs they need. All Medicare drug plans generally must cover at least 2 drugs per drug category, but plans can choose which drugs covered by Part D they will offer.”
Cost-sharing is plan-specific. No plan can have a Part D deductible over $435 in 2020. Once the deductible has been met, an enrollee pays either copayments or coinsurance for each drug, depending upon the plan structure. Most Part D plans have a coverage gap (aka Donut Hole). “Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Once you and your plan have spent $3,820 on covered drugs in 2019 ($4,020 in 2020), you’re in the coverage gap…Once you reach the coverage gap, you’ll pay no more than 25% of the plan’s cost for covered brand-name prescription drugs. ”
“Once you’ve spent $5,100 out-of-pocket in 2019 ($6,350 in 2020), you’re out of the coverage gap. Once you get out of the coverage gap (Medicare prescription drug coverage), you automatically get “catastrophic coverage.” It assures you only pay a small coinsurance amount or copayment for covered drugs for the rest of the year.”
Note that in order to get out of the coverage gap, your personal out-of-pocket expenses for Part D covered services must be over $6,350 (2020) whereas entering the coverage gap is based on the combined out-of-pocket expenses charged to both you and your plan.
Your personal out-of-pocket expenses include your deductible, copayments/coinsurance, and your costs within the coverage gap. Any discount on brand-name drugs in the coverage gap count toward your out-of-pocket expenses as well. Premiums do not count toward out-of-pocket expenses.
To summarize, you can think of your Part D cost-sharing as occurring in this order:
-Copayments/Coinsurance based on the plan’s formulary structure until you and your plan have paid $4,020 together
-25% of the plan’s negotiated cost for a drug until your personal out-of-pocket expenses over the full calendar year reach $6,350. For expenses in the coverage gap, the discounts the plan negotiated for your purchased drugs count toward your personal out of pocket expenses.
-Minimal cost sharing after you’ve paid $6,350.
Hopefully this helps people understand the general way the system works. Please add more information or ask questions It’d be great to hear about the enrollment experience from someone who has gone through that process. Please correct me if you notice errors.