Developing a strategy for managing health care expenses is an important component in planning for long term care. As people grow older, it becomes increasingly worthwhile for some to understand Medicare and its potential to cover some health care needs. While navigating its regulations and conditions can be complex and sometimes downright confusing, there are a few key aspects, including its basic structure, that should be examined.
According to Politico, 44 million Americans are enrolled in the Medicare program, and that number is expected to rise to 79 million by 2030. It was first signed into law in 1965 to provide insurance for people 65 and older and it was expanded in 1972, allowing certain people under 65 with permanent disabilities and end-stage renal disease (ESRD) to receive coverage.
Medicare expenses are covered largely by payroll taxes that have been paid by workers and employers. One critical fact that people should be aware of is that Medicare does not cover all health care expenses or long term care. Insurance coverage, if already existing from your employer will also factor into your coverage.
Basic Structure of Medicare
Medicare is separated into four sectors:
- Part A: This plan is used to cover inpatient care including hospital stays, skilled nursing care, and some hospice care and home care following hospitalization.
- Part B: The Part B plan covers expenses such as doctor and health care provider visits (such as physicals and outpatient services), equipment, and some home health care.
- Part C: This is also known as Medicare Advantage and generally combines coverage included in Parts A and B, and sometimes Part D as well.
- Part D: This plan covers prescription drug costs.
Typically when you apply for Medicare, you may choose between what’s known as Original Medicare by buying Part A and B coverage and supplementing those with a Part D plan, or you can buy a Medicare Advantage Plan that merges Part A and Part B coverage and sometimes provides some prescription coverage as well. The Advantage plan is offered privately but contracted with Medicare.
Costs of Medicare
The costs of Medicare can vary greatly between individuals because there’s so many factors that can influence cost, including specific coverage needs and how much an individual has paid in. For example, if you have been paying Medicare taxes for at least 40 quarters, Part A will likely be available at no premium cost. If you’ve paid in for 30-39 quarters, the estimated premium for part A is $227. For people who have paid in less than 30 quarters, the premium is $413.
The federal government notes that people have the option to turn down Part B coverage because of the premium that’s required, but cautions that “if you decide to enroll in Part B later on, you may have to pay a late enrollment penalty for as long as you have Part B coverage. Your monthly premium will go up 10 percent for each 12-month period you were eligible for Part B, but didn’t sign up for it, unless you qualify for a special enrollment period.”
The standard premium for Part B is $137; this cost can rise with a higher income. Parts C and D vary by plan. There are also deductibles and coinsurance costs to take into consideration: for 2017, the deductible for Part A is $1,316 per benefit period, and coinsurance costs for Part A vary depending on the length of hospital or nursing facility stay.
Applying for Medicare
The attributes of Medicare go far beyond its four basic parts. There are many factors that will determine how much you will pay, how much coverage you will be provided, and the fundamental question of whether signing onto this program is right for you. In light of those varying factors, Medicare.gov provides an easy-to-use calculator that people of any age can use to identify eligibility as well as estimate premium costs. This can serve as a good starting point in creating a comprehensive plan for managing health care coverage.