The Medicare Plans (Yes, Plans)

What you need to know about Parts A, B, C and D

from: AARP, January 1, 2011

When making your Medicare selections, you have what sometimes seems like a dizzying array of choices.

Different types of Medicare plans help pay for your inpatient hospital care, doctor visits, outpatient services, home health care, prescription drugs, some care in a skilled nursing facility and much more, depending on the plan or plans you choose.

Understanding Medicare

— Image Source/Corbis

1. Getting Started
2. Your Eligibility
3. Enrollment Deadlines
4. Medicare Parts A, B, C and D
5. Medigap Insurance
6. What Medicare Will Cost You
7. Your Medicare Checklist

But as complicated as all that sounds, there’s a single key choice at the core of all your decision-making: Will you go with the Original Medicare plan, which is run by the federal government and consists of Parts A and B, or a Medicare Advantage plan (also called Part C) that is offered by a private insurer and approved by Medicare?

Medicare Part A — Your Hospital Coverage
When you apply to Medicare, you are automatically enrolled in the Part A plan. Part A is your hospital insurance plan. It covers nursing care and hospital stays, although not doctors’ fees. Part A also covers some home health services, skilled nursing care after a hospital stay and hospice care.

You likely won’t have to pay a monthly premium for Medicare Part A, thanks in part to all the payroll taxes you paid while you were employed. You must, however, pay a yearly deductible before Medicare will cover any hospitalization costs. For 2011, the Part A deductible is $1,132.

The Costs of Part A and B

As a fee-for-service health plan, Original Medicare enables you to see any doctor or hospital that accepts Medicare.

Medicare will pay a share, usually 80 percent, of the "Medicare-approved amount," which is the cost Medicare determines is "reasonable" for the care you received, given where you live.

If you live in a city, it’s worth remembering that doctors in urban areas tend to charge more for their services, and since the "Medicare-approved amount" isn't always raised accordingly, you could end up with higher than expected expenses.

To better predict your out-of-pocket costs, be sure to ask both Medicare and your doctor’s billing department about fees and coverage.

Part A pays about 80 percent of your Medicare-approved, inpatient costs for the first 60 days you are hospitalized. If you have a longer hospital stay, you will have to pay a larger share of the costs. (That’s where it helps to have supplemental insurance.)

If you are a U.S. citizen or permanent resident and have not worked long enough to qualify for Medicare, and can't qualify through a spouse, you may be able to buy Part A coverage.

Medicare Part B — Your Medical Coverage
Part B pays for a portion of your doctor visits, some home health care, medical equipment, outpatient procedures, rehabilitation therapy, laboratory tests, X-rays, mental health services, ambulance services and blood.

Part B is optional, and you may want to opt out of Part B if you still have health insurance through an employer, union, your spouse, etc. Part B requires that you pay a monthly premium to Medicare (the standard rate for 2011 is $115.40), and there is a small deductible ($162 in 2011) that must be reached before Part B begins paying for services. People with higher incomes — above $85,000 annually for an individual or $170,000 for a couple — pay higher rates.

Traveling Abroad

Medicare generally won’t cover your health care costs while you’re traveling outside the U.S. (Read the fine print in the "Important Information" section of your U.S. passport sometime. It’s actually mentioned there.) That’s why some people with Medicare decide to buy a Medigap or other supplemental policy.

A warning about delayed enrollment: If you opt out of Part B when you initially enroll in Medicare but later decide that you want the coverage, you may have to pay a higher premium.

It's important to weigh carefully the health care resources you’ll have — not just in the next year or so, but also several years down the road. Individuals who will have strong retiree benefits from, say, a union or public service career may choose to opt out of Part B, while those who are still working but don’t expect to receive retiree health benefits often opt to switch over to Part B before leaving the work force.

When Doctors Won't Take Medicare

Not all doctors will accept Medicare’s payment for services. Those doctors who "opt out" can charge you whatever they want for their services, although only if you sign a contract with them in which the medical office spells out those conditions before services are provided. When deciding whether to see a doctor who opts out of Medicare, bear in mind that Medicare won’t pay for any portion of the bill you get from that doctor.