Medicare sounds pretty simple – until you need to enroll. There’s likely a lot more to it than you had thought. For one thing, Medicare isn’t a single plan: there are multiple parts, each providing different types of coverage, as well as different enrollment rules and late enrollment penalties. This guide will provide you with all the information you need for help understanding Medicare Parts A and B.
What Are Parts A and B in Medicare?
When people talk about Original Medicare or Traditional Medicare, they’re talking about Medicare Parts A and B. Together, these two parts of Medicare provide a government-run fee-for-service health insurance program. Medicare Part A provides hospital insurance, whereas Part B provides medical insurance.
There are also other parts of Medicare, but these are sold by private insurance companies.
- Medicare Part C (commonly known as Medicare Advantage) combines the coverage from Parts A and B into a single plan. Most Medicare Advantage plans also provide prescription drug coverage, called Medicare Advantage Prescription Drug plans.
- Medicare Part D provides prescription drug coverage.
- There are also Medicare Supplement Insurance Plans (also called Medigap plans), which work with Original Medicare, but not Medicare Advantage, to help with out-of-pocket costs.
Medicare Parts A and B: What Do They Cover?
Outside of Medicare, most health plans provide both hospital and medical coverage. For this reason, having these coverages divided into different plans may be confusing for people who are new to Medicare.
- Medicare Part A covers inpatient hospital care as well as skilled nursing facility, hospice, and home health care when deemed medically necessary under Medicare’s rules.
- Medicare Part B covers outpatient care, including many preventive services and doctor visits. It also provides coverage for durable medical equipment.
If you need to see your doctor for an annual checkup or for screenings for things like cancer and heart disease, you’ll use your Medicare Part B coverage. You’ll also use your Medicare Part B coverage if you need a wheelchair or walker.
If you require hospitalization or inpatient surgery, you’ll use your Medicare Part A coverage. You’ll also use your this coverage if you require temporary skilled nursing care after a hospital stay.
Qualifying for Medicare Parts A and B
Most people age into Medicare when they turn 65. You may be able to enroll in Medicare before you turn 65 if you have a disability, end-stage renal disease, or ALS.
Most people who qualify for Medicare also qualify for premium-free Medicare Part A. If you, your current spouse, or a former spouse paid Medicare taxes while working for at least 10 years, you will likely qualify for premium-free Medicare Part A. If you don’t meet these requirements, you can still enroll when you become eligible, but you will have to pay a premium. Either way, you will have to pay a premium for Medicare Part B as well as for any private Medicare plans you select, such as Medicare Part D or a Medigap plan.
How to File for Medicare Part B
You can sign up for Medicare during your Initial Enrollment Period, which starts three months before the month of your 65th birthday and lasts for seven months.
If you receive Social Security or Railroad Retirement Benefits for at least four months prior to turning 65, you will be automatically enrolled in Medicare Part A. Since most people receive Medicare Part A without a premium, this is often not a problem. However, some people may run into complications, depending on their specific circumstances. For example, if you are still contributing to an HSA, enrollment in Medicare will prohibit you from making any more contributions.
If you are not automatically enrolled in Medicare Part A and want to enroll, you need to complete an application with the Social Security Administration. You also need to make an application for Part B. Sign up online at https://www.ssa.gov/medicare/sign-up or call +1 800-772-1213 (TTY +1 800-325-0778) to complete your application over the phone.
What Is the Penalty for Canceling Medicare Part B?
There’s no penalty for canceling Medicare Part B, but there IS a late enrollment penalty. If you cancel Medicare Part B, you could find yourself paying the late enrollment penalty when you decide to sign up again – and it’s a lifetime expense.
The Medicare Part B late enrollment penalty is 10% for each year you delay enrollment without qualifying for a Special Enrollment Period. Therefore, if you enroll 24 months late, you’ll pay a 20% late enrollment penalty.
However, you’ll avoid the late enrollment penalty if you qualify for a Special Enrollment Period because you had qualifying job-based group health insurance. Once your group coverage ends, you will receive a Special Enrollment Period to sign up for Medicare. Before delaying coverage in Medicare, verify that your job-based coverage qualifies you for a Special Enrollment Period, and make sure you sign up on time when your coverage or job ends.
There are also late enrollment penalties for Medicare Parts A and D. These penalties greatly increase the cost of coverage.
Should You Enroll in Medigap or Medicare Advantage?
When you enroll in Medicare, you have some big choices to make.
Medicare Parts A and B do not provide prescription drug coverage. If you need prescription drug coverage, you need to enroll in a Medicare Part D plan or a Medicare Advantage Prescription Drug plan.
Medicare Advantage is a private alternative to Original Medicare. Many Medicare Advantage plans provide additional benefits that Original Medicare does not offer, including prescription drug coverage and hearing, dental, and vision benefits. Additionally, Medicare Advantage plans have a maximum out-of-pocket limit, something that Original Medicare does not offer. However, there are downsides. Notably, Medicare Advantage plans typically use a network of providers. If you see a provider outside of the network, you may pay more or not have coverage.
Medicare Supplement Insurance plans (Medigap) help with the costs of Original Medicare. You can enroll in a Medigap plan during the Medigap Open Enrollment Period, which lasts six months and begins the first month you have Medicare Part B and are at least 65 years old. The downside is your application may be subject to medical underwriting if you want to enroll in a plan or switch plans after this, potentially leading to higher costs or outright denial of coverage.
In summary, you have a few options. You can:
- Keep Original Medicare (Parts A and B) and select a Medicare Part D prescription drug plan. However, if you go this route, there is no cap to the out-of-pocket costs you may face in the form of copays or coinsurance.
- Keep Original Medicare, select a Medicare Part D plan, and enroll in a Medigap plan. This involves an additional premium, but it controls your out-of-pocket costs.
- Enroll in Medicare Advantage Prescription Drug plan. This plan provides all your Medicare coverage in one policy. However, you will probably have a network of doctors.
Do you need help navigating Medicare Parts A and B as well as your other Medicare enrollment options? An agent can help. Find an agent.