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Understand the Basics of Medicare

Medicare consists of four parts that cover specific services - Parts A, B, C and D. Read below to get more information on what each part provides.

Part A covers you when you’re a patient in a hospital or in a skilled nursing facility. This includes critical access hospitals, inpatient rehabilitation facilities and long-term care hospitals, but does not include custodial or long-term care. You’re eligible for Part A coverage if you or your spouse paid into Social Security for at least 10 years through your employment, and you are a citizen or permanent resident of the United States.

Part A coverage is free for most people since it is funded by Social Security payroll taxes. You are automatically enrolled beginning the first day of the month you turn 65.

However, Part A does leave a substantial deductible and co-payments for those on Original Medicare only. For instance, there is a $1,316 deductible for an inpatient hospital stay.* If you are hospitalized again after 60 days, you will have to pay another $1,316 deductible.

*Based upon 2017 Medicare benefits that may change January 1, 2018.

Part B is optional coverage that helps cover doctor services and outpatient care. It helps cover some preventive services to help maintain a person’s health and to keep certain illnesses from getting worse. Beneficiaries usually pay 20% of the Medicare-approved amount for covered services after the Part B deductible ($183 for 2017) has been met.

The monthly premium for Part B starts at $134 per month in 2017 for those enrolling in Part B for the first time.* This amount may change annually. Most people have this deducted right from their monthly Social Security check. Enrollment is your choice; you can sign up anytime during a 7-month period that begins three months before you turn 65.

*Based upon 2017 Medicare benefits that may change January 1, 2018.

Part C offers a way to get Medicare benefits through private companies approved by and under contract with Medicare known as a Medicare Advantage Plan. It includes Part A and Part B benefits, and usually other benefits Medicare doesn’t cover. Most plans also provide prescription drug coverage (Part D).

There is a monthly premium in addition to your Medicare Part B premium. The amount varies by health plan. Enrollment is your choice; you can sign up anytime during a 7-month period that begins 3 months before you turn 65. You can also enroll or make a change during the annual election period (AEP), which begins on October 15 and ends on December 7 each year.

You may disenroll from a Medicare Advantage Plan from January 1 through February 14 each year. During this period (called the “Medicare Advantage Disenrollment Period”), you could switch from your Medicare Advantage Plan to Original Medicare. If you choose to switch to Original Medicare during this period and your Medicare Advantage Plan included Part D, you can also enroll in a separate Medicare Prescription Drug Plan (Part D) at the same time.

With Medicare Advantage Plans please note the following:

  • Depending upon the insurance company – some of the plans require prior authorization to see specialists.
  • In many cases, the premiums or the costs of services (co-pays and deductibles) can be lower than they are in Original Medicare or Original Medicare with a Medicare supplement (Medigap) policy. Medicare health plans charge different premiums and have different costs of services, so it is important to check with the plan before you join.
  • The plans provide all of your Part A (hospital) and Part B (medical) coverage and must cover medically necessary services.
  • They often have networks, which means you may have to see doctors who belong to the plan or go to certain hospitals to get covered services.
  • They generally offer extra benefits and many include Prescription Drug Coverage (Part D).
  • In many cases, your costs for Prescription Drug Coverage can be lower than in the stand-alone Medicare Prescription Drug Plans (Part D).
  • Some of the plans coordinate your care, using networks and referrals, more than others. This can help manage your overall care and also result in savings to you.
  • You do not need to buy a Medicare supplement (Medigap) policy.

Medicare Advantage Plans include:

  • Health Maintenance Organization (HMO) Plans: They must cover all Medicare Part A and Part B health care. Some HMOs cover extra benefits, like extra days in the hospital. In most HMOs, you can only go to doctors, specialists, or hospitals on the plan’s list except in an emergency. Your costs may be lower than in Original Medicare.
  • Preferred Provider Organization (PPO) Plans: You pay less if you use doctors, hospitals, and providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost.
  • Private Fee-for-Service (PFFS) Plans: You may go to any Medicare-approved doctor or hospital that accepts the plan’s payment. The insurance plan, rather than the Medicare Program, decides how much it will pay and how much you pay for the services you use. You may pay more or less for Medicare covered benefits. You may have extra benefits that Original Medicare does not cover.
  • Medicare Medical Savings Account (MSA) Plans: There are two parts to these plans. The first part is a high-deductible Medicare Advantage MSA Health Plan. The health plan will not begin to pay covered costs until you have met the annual deductible, which varies by plan. The second part is a Medical Savings Account into which Medicare deposits money that you may use to pay health care costs.
  • Medicare Special Needs Plans: Provides all Medicare Part A and Medicare Part B health care and services to people who can benefit the most from things like special care for chronic illnesses, care management of multiple diseases, and focused care management. These plans may limit membership to people in certain institutions (like a nursing home), who are eligible for both Medicare and Medicaid, or with certain chronic or disabling conditions.

Part D is run by private companies approved by Medicare, which can either be Medicare Advantage Plans or separate Medicare Prescription Drug Plans. It is optional coverage that helps cover the cost of prescription drugs. Each plan can vary in cost and drugs covered.

There is a monthly premium in addition to your Medicare Part B and Part C premiums. Enrollment is your choice; you can sign up anytime during a 7 month period that begins 3 months before you turn 65. You can also enroll or make a change during annual election period (AEP), which begins on October 15 and ends on December 7 each year.

You may disenroll from a Medicare Advantage Plan from January 1 through February 14 each year. During this period (called the “Medicare Advantage Disenrollment Period”), you could switch from your Medicare Advantage Plan to Original Medicare. If you choose to switch to Original Medicare during this period, you can also enroll in a separate Medicare Prescription Drug Plan (Part D) at the same time.

Low Income Subsidy ("Extra Help")

If you qualify for the Low Income Subsidy (also called “Extra Help") with your Medicare prescription drug plan costs, your premium and costs at the pharmacy will be lower. When you join one of our plans, Medicare will tell us how much Extra Help you are getting. Then we will let you know the amount you will pay. See the monthly premiums for the current year below.

How to inquire about Low Income Subsidy

If you are not getting Extra Help, you can see if you qualify by calling Social Security at 1-800-772-1213 (TTY users should call 1-800-325-0778) or visit www.socialsecurity.gov.

2017 Monthly Premiums

The following chart outlines the premium amounts based on the various Low Income Subsidy levels.

  Conventional Plan
$72/month
Premier Plan
$110/month
Premier Plan Plus
$140/month
25% Low Income Subsidy (LIS)  N/A You pay $101.30* You pay $131.30*
50% Low Income Subsidy (LIS) N/A You pay $92.60* You pay $122.60*
75% Low Income Subsidy (LIS) N/A You pay $83.90* You pay $113.90*
100% Low Income Subsidy (LIS) N/A You pay $75.20* You pay $105.20*

* The premiums listed above include both medical service and prescription drug benefits. These premiums do not include any Medicare Part B premium you may have to pay.     

See also the Centers for Medicare and Medicaid Services (CMS) Best Available Evidence Policy.

In general, beneficiaries must use network pharmacies to access their prescription drug benefit, except in non-routine circumstances. Quantity limitations and restrictions may apply.



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Last modified: Nov. 14, 2016

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