SHJ Blog

The A, B, C, & D of Medicare

By January 15, 2024No Comments

Breaking Down The Basics

Whether your 65th birthday is on the horizon or decades away, understanding the different parts of Medicare is critical, as this government-sponsored program may play a role in your future health care decisions.

Parts A & B: Original Medicare. There are two components. In general, Part A covers inpatient hospital care, skilled nursing facility costs, hospice, lab tests, surgery, and some home health care services. One thing to keep in mind is that, while very few beneficiaries must pay Part A premiums out of pocket, annually adjusted standard deductibles still apply.1,2

Many pre-retirees are frequently warned that Medicare will only cover a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the one with these provisions. Under the current Part A rules, you would pay $0 for days 1-20 of care in a skilled nursing facility (SNF). During days 21-100, a $204 daily coinsurance payment may be required of you.1,2

Knowing the limitations of Part A, some people look for supplemental options when it comes to managing the costs of extended care.

Part B covers physicians’ fees, outpatient hospital care, certain home health services, durable medical equipment, and other offerings not covered by Medicare Part A.2

Part B does come with some costs, however, which are adjusted annually. The premiums vary, according to the Medicare recipient’s income level, but the standard monthly premium amount is $174.70, and the yearly deductible is $240 for 2024.2

Part C: Medicare Advantage and Medigap plans. Sometimes called “Medicare Part C,” Medicare Advantage (MA) plans are often viewed as an all-in-one alternative to Original Medicare, but you still want to be sure to enroll in Part A and B to avoid late penalties. MA plans are offered by private companies approved by the federal government. Although these plans come with standardized minimum coverage, the amount of additional protection offered can differ drastically from one person to the next. This is due to unique provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits. In other words, comparing prices and services offered by different vendors may be the best way to find a Medicare Advantage plan that works for you. 3

On the other hand, Medicare Supplement Insurance (Medigap) is extra insurance you can buy from a private insurance company to help pay your share of costs in Original Medicare. Generally, you must have Original Medicare – Part A and Part B – to buy a Medigap policy. If you have a Medicare Advantage Plan, you can’t buy a Medigap policy.3

Part D: Prescription drug plans. While Medicare Advantage plans often offer prescription drug coverage, insurers also sell federally standardized Medicare Part D plans as a standalone product to those with Medicare Part A and/or Part B. Every Part D plan has its own list (i.e., a “formulary”) of covered medications. Visit Medicare.gov to explore the formulary of approved drugs for your Part D plan as well as their prices, organized by tier.4

In fact, Medicare.gov is a great place to start all your research. Once there, you’ll find answers to your most common questions and more information on the different Medicare plans offered in your area.

Conclusion
At SHJ Wealth Advisors, we understand planning for retirement is a multifaceted endeavor. While many aspects of retirement planning revolve around savings and investments, there’s one crucial element that often doesn’t receive enough attention: having a well-thought-out Medicare plan. It not only provides access to essential healthcare services but also protects retirement savings from being eroded by unexpected medical expenses. Please reach out to Info@shjwealthadvisors.com if you would like to find a time to meet with one of our CFP® Professionals and thanks for reading!

1. CMS.gov, 2023
2. Medicare.gov, 2023
3. Medicare.gov, 2023
4. Medicare.gov, 2023

Disclosure:
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Leave a Reply