Medicare Part A:

What is covered by Medicare Part A?

• Medicare Part A is typically known as “Hospital Insurance”. However, this term is misleading because you don’t have to be hospitalized to receive Part A coverage. 
• Medicare Part A provides coverage for:
• Nursing care received in the hospital, nursing home or rehab center.
• A semi-private room in a hospital or nursing facility
• Services provided in the hospital or nursing facility; including lab tests, prescriptions drugs, medical appliances and supplies, and rehabilitation therapy.
• All services provided by a home health agency or hospice program

Do I have to pay a monthly premium?

• If you or your spouse earned at least 40 work credits (equivalent to about 10 years of full-time employment) during your lifetime and paid Medicare taxes (i.e. FICA), you will not be required to pay a monthly Medicare Part A premium. 
• If you or your spouse earned 30-39 work credits during your lifetime, you will be required to pay a monthly Part A premium of $259.
• If you earned less than 30 work credits, you have the option to purchase Part A coverage for $471 per month

Is there a penalty for not purchasing Medicare Part A?

Yes. If you do not qualify for “premium-free” Part A coverage, and choose not to purchase it when you’re first eligible (i.e. usually at age 65), you may be charged a 10% monthly “late” penalty if you decide to enroll at a later time. You will be required to pay the higher premium for twice the number of years you could have had Part A coverage – but did not sign up.

What “coinsurance” costs are associated with Medicare Part A?

• You pay a $1,484 deductible for each benefit period. After you pay this deductible, Medicare will pay 100% of your hospital cost for the first 60 days (i.e. equivalent to one benefit period). 
• If you remain hospitalized past 60 days, you will pay a $371 coinsurance for days 61-90.
• For days 91 and beyond, you are allowed draw on your 60 “Lifetime Reserve Days”. For each lifetime reserve day used, you will pay a $742 coinsurance. When these 60 lifetime reserve days are used up, they cannot be replaced.
• If continued hospitalization is required, all remaining costs will be the responsibility of the beneficiary.
• When you have been out of the hospital for at least 60 days, a new Benefit period begins, and the cycle repeats itself. There is no limit to the number of benefit periods a beneficiary can have.

Home Health Care:

• $0 cost for home health nursing services
• You will pay a 20% coinsurance of the Medicare-approved amount for Durable Medical Equipment (DME).

Hospice:

• $0 cost for hospice care
• You man need to pay a copayment of no more than $5 for each prescription drug and other similar products for pain relief and symptom control while you’re at home.
• You may need to pay 5% of the Medicare-approved amount for inpatient respite care.
• Medicare doesn’t cover room and board when you get hospice care in your home or another facility where you live (like a nursing home).

Skilled nursing facility stay:

• Days 1-20: $0 for each benefit period
• Days 21-100: $185.50 coinsurance per day for each benefit period
• Days 101 and beyond: Beneficiary is responsible for all costs.
  

What is covered by Medicare Part B?

You pay a 20% copayment for the Medicare-approved amount for most doctor services including:

• Most doctor services while you’re in the hospital), outpatient therapy and Durable Medical Equipment (DME). 
• Services received at a Hospital outpatient clinic or department
• “Partial” hospitalization (also called Hospital Observation Care) provided in a hospital outpatient setting or community mental health center.
• Outpatient hospital services.

Do I have to pay a monthly premium?

• Unless you qualify for one of the “Medicare Savings Programs” (see related blog article), you will be required to pay a monthly Part B premium (based on your income). For individuals making $88,000 or less ($176,000 or less if filing jointly), the Part B monthly premium is $148.50. The monthly premium will be higher for those making a higher income.
• If you qualify for one of the “Medicare Savings Programs”, you will not be required to pay a Part B premium.

What “coinsurance” costs are associated with Medicare Part B?

• You will pay a Part B deductible of $203 per year. After this deductible is met, you typically pay 20% of the Medicare-approved amount for:
• Most doctor services
• Outpatient therapy
• Durable Medical Equipment (DME)
• Clinical laboratory services: You pay $0 for Medicare-approved services.
• Outpatient Mental Health Services: 
• You usually pay 20% of the Medicare-approved amount for the doctor or other health care provider’s services.
• In addition to the amount you pay the doctor, you’ll also usually pay the hospital a copayment for each service you get in a hospital outpatient setting- except for certain preventative services that don’t have a copayment charge.

Is there a penalty for not purchasing Medicare Part B?

• In most cases, if you don’t sign up for Part B when you’re first eligible, you’ll have to pay a late enrollment penalty. This penalty will apply for as long as you have Part B coverage. 
• Be sure to ask your employer if your healthcare insurance plan is “credible” by Medicare standards. If it is not, you will be subject to a “late-enrollment” penalty. Your employer is required by law to provide this information to you.
• For each full 12-month period that you could have had Part B, but chose not to sign up for it, you’re monthly Part B premium will increase by 10% over the standard premium amount. For example, if your normal Part B premium is $148.50 per month, and you chose not to enroll in Part B until age 67 (24 months later). Your Part B monthly penalty will be $29.70 (for 2021), and your monthly Part B premium would be $178.20.
• This penalty can be avoided by proving that you had “credible” health insurance coverage (through your or your spouse’s employment) after turning 65. CMS requires that certain forms be completed to prove “credible” coverage. 

Medicare Part D:

What is covered by Medicare Part D?

Medicare Part D provides coverage for prescription drugs obtained from a retail or mail-order pharmacy.

Do I have to pay a monthly premium?

The monthly premium cost for a stand-alone Part D prescription drug plan will vary based on the company, degree of coverage and income level. If your income is $88.000 or less ($176,000 or less is filing your IRS tax return jointly), you will pay the typical plan cost. If your income is these levels, your Part D prescription drug coverage monthly premium will be higher. The cost of a “stand-alone” Part D prescription drug plan varies greatly depending on the degree of coverage it provides. However, a typical Part D plan usually cost $20 or less per month.

What “coinsurance” costs are associated with Medicare Part D?

• Medicare Part D prescription drug plans are typically divided into 5 or 6 tier levels:
• Tier 1: Preferred generic drugs (commonly used generic drugs)
• Typically cost $0 to $3 per 30-day prescription
• Tier 2: Non-preferred generic drugs 
• Typically cost $7 to $11 per 30-day prescription
• Tier 3: Preferred Brand drugs (lowest cost brand name drugs on the formulary)
• Typically cost $38 to $47 per 30-day prescription
• Tier 4: Non-Preferred Brand Name drugs (higher-priced brand name and generic drugs not in a “preferred” tier)
• For most plans, the cost is 45 to 50% of the retail cost of the drug
• Tier 5: Specialty drugs. These are the most expensive drugs on the formulary. They are typically used to treat complex conditions like cancer and multiple sclerosis. They can be generic or brand name.
• For most plans, the cost is 25 to 33% of the retail cost for the drug
• Tier 6: Select Care Drugs. These are generic drugs used to treat diabetes and high cholesterol.
• Drugs in this tier typically cost $0-$5 per month.

Not all medications are covered by every Part D drug plan. Before enrolling, it is prudent to find out if all your medications will be paid for by the plan.

Is there a penalty for not purchasing Medicare Part D?

• The Part D “late enrollment” penalty is an amount that is “permanently” added to your Medicare drug coverage (Part D) premium.
• You may owe a late enrollment penalty if at any time after your “Initial Enrollment Period” (IEP) is over, there’s a period of 63 or more days in a row when you didn’t have Medicare drug coverage or “Credible” prescription drug coverage.
• You will pay this Part D penalty for as long as you have Medicare drug coverage.
• The amount of the Part D penalty depends on how long you went without “credible” prescription drug coverage.  Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($33.06 for 2021) times the number of full, uncovered months you didn’t have Part D or credible coverage.
• Example: Mr. Jones is currently eligible for Medicare, and his Initial Enrollment Period (IEP) ended on May 31, 2017. She currently does not have prescription drug coverage. Mr. Jones waited until the Open Enrollment Period that ended December 7. 2019 to enroll in a Part D prescription drug plan- which became effective on January 1, 2020. Since Mr. Jones was without drug coverage from June 2017 to December 2019, his penalty is 31% (1% for each of the 31 months he did not have coverage) of $33.06 (the national base beneficiary premium for 2021), or $10.25 each month. Since the monthly penalty is always rounded to the nearest $0.10, he will pay $10.30 each month in addition to his plan’s monthly premium.

Here’s the math:

0.31 (31% penalty) x $33.06 (2021 based beneficiary premium) = $10.25

$10.25 rounded to the nearest $0.10 = $10.30

$10.30 = Mr. Jones’ monthly late enrollment penalty for 2021.

• Since Mr. Jones’ actual Part D premium is $20 per month, he will pay $30.30 per month ($20 + $10.30 = $30.30) for his plan.
• It is possible to avoid paying the Part D late enrollment penalty if you can prove that you did had “credible” Part D coverage during the contested time period. This will require the completion of a form provided by Medicare.