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Writer's pictureDr. Emily Henderson, RPh
Oct 13, 202210 min read

Medicare: An Overview

Who uses Medicare?

A large part of the population covered by Medicare are those who are 65 years of age or older. However, if you are younger than that with a disability or ESRD (end-stage renal disease) you may also qualify. Medicare.gov has a handy tool available here to estimate eligibility as well as potential monthly premiums.


If you are over 65 and receiving benefits from the Social Security Administration (SSA) or Railroad Retirement Board (RRB), you will automatically be enrolled with coverage starting the first day of the month you turned 65. If benefits are not being received, you should contact SSA or RRB, as relevant, to request coverage. Initial enrollment may begin 7 months before the date you turn 65 and continue for 3 months after that date; following this, there are specific enrollment periods allotted for purchasing Part A coverage (if applicable) or applying for Part B. These are mentioned below for 2023. An exception to this is when you are covered under a group plan at time of eligibility due to current employment; then you may apply while you are covered or 8 months following either the day of job termination or the coverage ends, whichever comes first. The definition of group coverage does not apply to plans such as COBRA coverage, individually purchased plans from the marketplace, VA coverage, or retiree benefits. If your group coverage and Medicare are both active, your group coverage should be billed as primary and Medicare secondary if the employer has 20+ employees. In other instances, such as Medicaid coverage, Tricare coverage (without active deployment), or retiree benefits, Medicare is billed as primary.


If you are under this age limit but disabled, you will be automatically enrolled after receiving your SSA disability benefits or RRB benefits for 24 months. An exclusion to this is those having ALS, in which your coverage begins the month your disability benefits begin. If you have group coverage via current employment with the company having 100+ employees, that group coverage must be billed as primary.


If you have ESRD, you must submit for coverage by contacting the SSA. If you also have group coverage, that will be billed as primary for the first 30 months of treatment before Medicare is then used for primary coverage. Additionally, those in Puerto Rico do not automatically receive Part B, meaning you must request that coverage. Lastly, you are no longer eligible to contribute to an HSA account either one month before turning 65 or six months before applying if doing so more than six months after that birthday; failure to stop contributions may result in tax penalties. An option that may be comparable is starting a Medicare Medical Savings Account (MSA).


To obtain information about your eligibility or to sign up for A or B coverage, contact Social Security at 1-800-772-1213; TTY users can call 1-800-325-0778. If you worked for a railroad or receive RRB benefits, call the RRB at 1-877-772-5772; TTY users can call 1-312-751-4701.

 
Medicare Part A

The simple way of looking at Part A's use is considering it the hospital coverage. If there is an acute situation that results in a stay at the hospital, as well as care such as via Medicare-certified hospice or a brief inpatient stay at a skilled nursing facility, Part A is billed. Some home health instances fall under here as well, while others are Part B. Part A does not involve a premium (provided you or a spouse paid Medicare taxes while working) and will generally provide retroactive coverage of 6 months from the start date. If there is an inpatient stay (e.g. at rehab, a hospital) you are not responsible for a coinsurance or deductible for the first 60 days; after this, between days 61-90 you will have a coinsurance amount. If you continue staying past day 90, they refer to those days as lifetime reserve days and will require coinsurance payment for up to 60 days following; if those days are exhausted, they then hold you responsible for all costs. Coverage for care at a skilled nursing facility requires a three-day inpatient hospital stay. While at the skilled nursing facility, there is no charge for the first 10 days, but days 10-100 have a coinsurance, with day 101 beginning your responsibility for all costs. A caveat to this is that if it is a freestanding psychiatric hospital, there is a lifetime cap of 190 days. In the case of hospice, you are responsible for $5 of each outpatient drug as well as 5% of a Medicare-approved amount if there is an inpatient respite stay.

 
Medicare Part B

Part B is a bit more comprehensive than Part A, but you can think of it like your general medical insurance - what you would use at your primary care physician visit. This is for outpatient care as opposed to Part B's inpatient use. It can help with durable medical equipment as well as oftentimes with preventative services; this may range from screenings to vaccines. Importantly, preventative services may be free of charge provided the physician documents and bills accordingly; this could include services like cardiac screenings via blood panels of lipids and the ilk, COVID-19 vaccines and testing, or pap and pelvic exams for cancer screening. Part B does require a premium; thus you may opt-out, but if you change your mind at a later date, know that there may be some processing delay so coverage will not begin immediately upon request in addition to possible late enrollment penalty fees (e.g. premium cost being increased by 10% for each of the 12 months you were eligible but did not sign up). This is deducted from your SSA or RRB benefits if applicable; otherwise, they may be paid via a variety of options such as online Easy Pay or a check via postal mail. Unfortunately, if your income is above a specified threshold as per your tax return from two years prior, you will likely have to pay an additional fee on the premium (IRMAA fees). If you have Medicaid, they will help you in registering for Part B coverage, and will be billed as secondary coverage with Medicare as primary. If you don't know your local Medicaid office's number, 1-800-MEDICARE can also be used as a reference for help looking that up. Part B also differs from Part A in that there may be a deductible; if so, you are responsible for all costs until that threshold is met. Following that, Medicare will begin to provide coverage with your responsibility generally being 20% of the payment.

 
Definitions

  • Advance Beneficiary Notice of Non-coverage (ABN): An advance notice from your healthcare provider advising that they don't believe Medicare will pay, a rationale as to why they think so, and an estimate of the costs of services.

  • Catastrophic coverage: Once $7400 has been paid OOP for prescription drug costs in one year, your responsible percentage drops to generally 5%

    • Out-of-Pocker (OOP) Threshold: This is the amount that will move you from the coverage gap to catastrophic coverage when met. It includes many of the costs that you have paid out-of-pocket up to that point, including such as towards your deductible and coinsurance. For brand-name drugs, payment towards this is based on the formulary drugs purchased by you and their total retail value. For generic drugs, only the amount you pay goes towards the limit. For 2023, the Part D amount is the referenced $7,400.

  • Coinsurance: This is the percentage that you are responsible for paying from your copay after your deductible has been met. It is currently 20%. For example, if you met your deductible and then had a $100 fee at your next visit, you would be responsible for paying $20.

  • Copay: This is a term for the specific patient responsibility, generally a set amount, after the deductible is met. In the case of medications, it may vary based on the drug, its tier, etc.

  • Coverage Gap (Donut hole): If the Part D initial coverage limit is met, there is a period in which the insurance provider will only pay a percentage of your drug costs. You are responsible for up to 25% of the total cost when picking up a prescription, including the cost of the medication and any dispensing fee, up until you meet the $7,400 OOP threshold to then leave the coverage gap.

    • Initial Coverage Limit: This amount determines movement from the initial coverage phase to the coverage gap in your Part D coverage. For 2023, the Part D limit is $4,660.

  • Deductible: An amount that is paid before Medicare begins paying whatsoever (Part A), though some Part D plans and medications are not subject to a deductible. The max allowed in 2023 will be up to $505. After meeting this, you will enter the initial coverage phase where the coinsurances/copay stipulations apply.

  • Inpatient: This is when you are formally admitted for care per physician orders (e.g. in a hospital). The facility can tell you if they have billed you as outpatient or inpatient if you are unsure.

  • Medicaid: A joint state-federal program to help costs for those with low income and resources; each state has different eligibility requirements.

  • Medicare Blue Button: This allows you to obtain your records (e.g. claims) for Parts A, B, and D electronically. Blue Button 2.0 helps increase the ease of accessibility of your Parts A, B, and D with authorized apps.

  • Premium: A monthly fee charged in exchange for coverage. For Part B, if you are receiving benefits, e.g. from SSA or RRB, it will be automatically deducted from your check. Otherwise, similar to most Part D plans, you will receive a bill for payment, with the Part B bills sent every three months. CMS estimates the average Part D premium for 2023 will be $31.50.

Essentially, the movement through the phases looks something like this:

Deductible (100% patient responsibility) -> Initial Coverage -> Coverage Gap -> Catastrophic Coverage

 

Medicare Part D

Part D is prescription drug coverage. Unlike A and B, you must select the Part D plan that you use; private companies provide the coverage based on government standards instead of being directly provided by the government. These plans cover prescription drugs based on their formularies, with certain drug classes being protected and thus available to all Part D members (e.g. HIV therapy, oncology medications). They also include services such as Medication Therapy Management. There are a few caveats with medications where they may fall under Part B, but they are drug and use-specific. For example, an injection received in the physician's office, certain chemotherapy drugs, or drugs used via durable medical equipment. The amount you are responsible for paying varies based on your plan, the tier the medication is, if it is on the plan formulary, if there is a required in-network pharmacy, or if you are e.g. in the coverage gap. Unfortunately, if your income is above a certain point (e.g. in 2022, the amount was set at $91,000) you may again be subject to additional IRMAA fees.


It is imperative to understand that failure to have Part D or another creditable prescription drug coverage after the initial enrollment period can result in numerous fees and penalties, some of which will apply for the lifetime of the Part D coverage. The late enrollment penalty is calculated by multiplying the number of months you were without coverage after becoming eligible by 1% of the "national base beneficiary premium." As an example, the 2022 base premium amount was $33.37, so if you went without coverage for three years after becoming eligible, you would have a penalty of $12 that applies to each month's premium for the duration of your coverage. (36 months x 1% = 36%; 36% of $33.37 is $12.01, which is rounded to the nearest $0.10) This penalty also applies if you are without Part D or other creditable coverage for 63 or more consecutive days.


 

Medicare Advantage (Part C)

Part C plans are essentially bundled options for Parts A, B, and D. Instead of having original A and B coverage and then selecting a Part D coverage separately, all three parts are covered by one carrier. There are a variety of types, ranging from the MSA mentioned before, which doesn't generally have a Part D in the bundle, to those that are common in commercial plans, such as an HMO or PPO. Some downsides to Part C plans are that they may have network exclusions or referral requirements for specialists, while traditional Parts A and B can be used anywhere Medicare is accepted. However, they also may have lower out-of-pocket costs as well as have the option to provide additional benefits; this could include vision, dental, hearing services, etc. Additionally, they generally have an annual limit as to what you pay out-of-pocket, so once that limit is hit you would no longer be responsible for any costs after that.

 
Medicare Supplement Plans (Medigap)

These plans are particularly helpful for covering remaining costs after your primary Medicare is processed. In the example of the coinsurance, a Medigap plan can help to pay towards the remaining 20% that you owed after the primary Medicare was billed. Parts A and B are mandatory for supplement plan eligibility, whereas Part C coverage cannot be active at the same time as Medigap. If someone offers you Medigap while having Part C, CMS requests you contact your state insurance office. Current Medigap plans also cannot offer prescription drug coverage policies. If you currently have Medigap and want to switch to Medicare Advantage, you will not be able to get the same policy back; there also may be limits to your ability to switch back to Medigap if you attempt to return after a 12-month trial of Medicare Advantage has been completed. These plans may fall under Parts A-D, F, G, K, L, M, or N; the type varies based on things such as coinsurance or deductible thresholds or the presence of annual OOP payment limits.

 
Information for 2023

Open enrollment for 2023 coverage is between October 15 - December 7, 2022. If you have Medicare Advantage, there is an additional period between January 1 - March 31, 2023, during which you may switch once to another Advantage plan or to original Medicare coverage. For counseling and assistance with your options, each state has a SHIP or State Health Insurance Assistance Program. Additionally, you may contact 1-800-MEDICARE (1-800-633-4227); TTY users can call 1-877-486-2048.


As a note, if a patient requires extended nursing-home level care, particularly in order to live safely in the community, there are programs such as PACE (Program of All-inclusive Care for the Elderly) that can help provide assistance for Medicare and Medicaid patients. With PACE, if Medicaid coverage is not applicable there will still generally be a monthly premium, but no deductibles or coinsurance.


Extra Help is also available to Medicaid members and Medicare members meeting a low-income threshold; this helps to cover prescription drug costs as well as will waive late enrollment fees. For 2023, a single person cannot have a yearly income of more than $20,385, and their resources (e.g. IRAs, stocks) cannot exceed $15,510. A married couple's annual income may not exceed $27,465 and no more than $30,950 of resources. There are a few other Medicare savings programs, but they are more specific e.g. some only apply to Part B or Part A costs, some are only for individuals with disabilities who are actively working, etc.


References




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