Understanding Your Medicare Coverage Options

Before you have to enroll in it, Medicare can seem pretty straightforward.

There are only four parts to it, after all. How difficult could it be to choose between them?

As it turns out, deciding which Medicare plan or plans to go with is a lot tougher than picking A, B, C, or D. That's especially true if you don't fully understand what they cover and how they differ from one another.

So what do the different Medicare types cover? And why might you enroll in this one but not that one? Keep reading for answers to both of those questions as well as many more.

Medicare Basics

First, here are the basics regarding what Medicare Parts A, B, C, and D cover and don't cover.

Medicare Part A

Some people call Medicare Part A "hospital insurance." Why? Because it covers you when you're admitted to a hospital. In that situation, it pays for (or helps pay for) things like your room, meals, medicine, and general nursing care.

Part A doesn't only cover inpatient hospital care, however. It also covers the costs of the items mentioned above when you're admitted to a skilled nursing facility (SNF). And it covers them if you qualify for hospice or home health care, too.

Medicare Part B

Medicare Part B often goes by another name, too: "medical insurance."

What is that supposed to mean? Well, Part B covers "medically necessary" care, for starters. It also covers many different kinds of preventive care.

If you're looking for specifics, this should help: Part B pays for (or, again, helps pay for) most doctor visits. It also pays for any lab tests, x-rays, or other forms of imaging--like CT scans, MRIs, or ultrasounds--your physician orders. And it pays for durable medical equipment and supplies like blood sugar monitors, sleep apnea devices, and wheelchairs, too.

That's not all, though. Medicare Part B covers outpatient hospital care and mental health care as well. It also covers some ambulance services and clinical research.

Medicare Part C

You might expect Part C to cover health and medical treatments and services Part A and Part B--often referred to as "Original Medicare"--ignore. In a way, that's true, but probably not in the way you're thinking.

Basically, Medicare Part C is an alternate name for a product that's perhaps better known as Medicare Advantage. Private insurance companies contract with Medicare to provide these plans to Americans.

Why might you choose Medicare Advantage over getting Parts A and B from the federal government? One reason is these private plans combine a number of Medicare components into a single package. Medicare Advantage policies always offer the base benefits of Parts A and B at a minimum. Many go beyond that and pay for prescription drugs and some other healthcare costs Original Medicare fails to cover as well.

Another aspect that attracts some Americans to Medicare Advantage: it can deliver Medicare coverage through a variety of plan types, including HMOs and PPOs.

Medicare Part D

One major medical cost neither Medicare Part A nor Part B covers is prescription drugs. Part D fills that gap.

Although you can get Medicare drug coverage by enrolling in a Medicare Advantage plan, that's not the only way to obtain it. Another option is to enroll in a Medicare Prescription Drug Plan.

Like Medicare Advantage plans, private insurance companies, not the federal government, provide Medicare Prescription Drug Plans to Americans. As a result, people who need or want Medicare drug coverage have a number of options to choose from when they go to buy it.

A potential pitfall related to all of that choice, however: you have to do your homework if you want a Medicare Prescription Drug Plan that covers the medicines you take.

Medicare Supplement Insurance

Private companies also sell something called Medicare Supplement Insurance, or MedSup. (Some call it Medigap, too.)

This product covers many of the healthcare costs Medicare Parts A, B, and D doesn't. In most cases, that means it helps people pay deductibles, copayments, and co-insurance.

MedSup also usually covers treatments and services Original Medicare doesn't. For example, it often covers medical care enrollees receive outside the U.S.

On the other hand, MedSup rarely covers dental or vision care, hearing aids, eyeglasses, or private-duty nursing.

How Much Do The Different Medicare Plans Cost?

Medicare Part A Costs

If you're like most Americans, you won't pay a premium for Medicare Part A. Those who do pay up to $413 each month.

In addition, you pay the following when you receive inpatient care at a hospital or SNF:

• $1,316 deductible
• $329 coinsurance per day after your hospital or SNF stay lasts for more than 60 days (and until it hits 90 days)
• $658 coinsurance per day after your hospital or SNF stay lasts for more than 90 days
• All costs beyond these "lifetime reserve days"

You pay the costs above for each benefit period, by the way. A benefit period begins the day you're admitted to a hospital or SNF. It ends when you've gone 60 days in a row without receiving inpatient care.

Medicare Part B Costs

Most people who enroll in Medicare Part B pay a premium of $134 per month for it.

Do you receive Social Security benefits? If so, you'll pay less than that amount. And if your modified adjusted gross income is above a certain amount, you'll pay more than $134 monthly.

long with that, you also pay a yearly deductible of $183 to get Part B benefits. After you hit that amount, you pay 20 percent of the Medicare-approved amount for:

• most doctor visits and services
• outpatient therapy
• durable medical equipment

Medicare Part D, Medicare Advantage, and MedSup Costs

Medicare Part D costs vary by plan. The same is true of Medicare Advantage and MedSup plans.

If your goal for any of these forms of health insurance is to get the most bang for your buck, shop around. Take your time. Look at a lot of different plans. After that, compare them against each other before making your choice.

A Few Other Things You Need to Know Before You Pick a Medicare Plan

Passing on Medicare Part B or Part D when you first become eligible for it could cost you in the long run

You don't have to enroll in Medicare Part B or Part D as soon as you're eligible. In fact, many Americans decide to wait a while, or even pass on one or both of them entirely.

Why? One reason is they still have access to health insurance through an employer. Or they have COBRA, TRICARE (coverage for U.S. military personnel and their dependents), or retiree coverage. Or they have coverage through a spouse who is still working.

That makes sense, of course. Unfortunately, Americans in any of those situations who later choose to enroll in Medicare Part B or Part D usually end up paying for the delay. This is because most people who don't enroll when they first become eligible for these plans pay a penalty when they go to do so at a later date. Even worse, they pay this penalty for as long as they have Part B or Part D coverage.

Want to know more? Head to medicare.gov for information on the Medicare Part B late-enrollment penalty as well as the similar Part D penalty.

You can't enroll in both Original Medicare and Medicare Advantage

The best way to think about Medicare Advantage plans is they replace Original Medicare. When you enroll in a Medicare Advantage plan, at a minimum it provides you with all the same benefits you'd receive if you enrolled in Medicare Parts A and B.

People who choose Medicare Advantage over Original Medicare often do so for one or more of these reasons:

• They want all of their Medicare coverage "under one roof," so to speak.
• They like that Medicare Advantage plans usually go above and beyond Original Medicare and cover prescription drugs as well as other healthcare costs.
• They find out they'll save money by going with Medicare Advantage instead of Original Medicare.

You also can't have both a Medicare Advantage plan and Medicare Supplement Insurance

Not only can't you be enrolled in both at the same time, but it's actually illegal for someone to sell you Medigap or MedSup coverage if you already have a Medicare Advantage plan.

The only time this isn't illegal is when you're in the process of switching from a Medicare Advantage plan to Original Medicare.

And don't forget that the opposite is true when you're enrolled in Original Medicare and have a Medigap policy. If you decide to switch to a Medicare Advantage plan, drop your Medigap coverage before you do so.

Although you're allowed to switch from one Medicare plan type to another, you can't do so whenever you want

You can thank the many enrollment periods associated with Medicare for making these switches more complicated than they'd be otherwise.

For example, the only time you're allowed to switch from Original Medicare to a Medicare Advantage plan after your Initial Enrollment Period is during the annual Medicare Open Enrollment Period. The Medicare Open Enrollment Period usually begins on Oct. 15 and ends on Dec. 7 each year, but check out medicare.gov to be sure if this is something you want to do.

The Medicare Open Enrollment Period also is when you can switch between Medicare Advantage plans--such as one that covers drugs to one that doesn't--or switch between Medicare drug plans.

There's also an annual Medicare Advantage Disenrollment Period. The only thing you can do during this period is switch from Medicare Advantage to Original Medicare. It begins Jan. 1 and ends on Feb. 14.