Medicare currently has four parts: Part A, Part B, Part C, and Part D. When you first sign up for Medicare, you will automatically be enrolled in Part A and have the option to also enroll in Part B. In addition, you now have the option to enroll in Part D (the prescription drug plan) unless you specifically choose to join a Medicare Advantage Plan (Part C) that includes Part D coverage. Furthermore, you have the option to purchase Medicare Supplement policies (Medigap) from private insurers to cover some or all of the deductibles and co-payments that Original Medicare does not cover.
Part A Benefits
Medicare Part A is also known as hospital insurance. When you first sign up for Medicare, you will automatically be enrolled in Part A. Even if you are still working and have healthcare coverage through your employer, Part A may still help pay some of the costs not covered by your group health plan.
Medicare Part A pays for inpatient hospital costs, skilled nursing facility care, hospice care, and some home health care. However, it does not pay for long-term or custodial care, and it does not pay for medical costs incurred outside the hospital (outpatient care).
Medicare Part A pays all covered hospital costs except for a deductible (which is $1340 for 2018) for the first 60 days in the hospital. For hospital stays that last 61-90 days the patient will have to pay a co-insurance amount of $335 per day. After 90 days of hospitalization in a given year, Medicare has 60 additional lifetime reserve days where the patient pays $670 per day for days 91-150 of a hospital stay. The patient pays all costs for each day in the hospital beyond 150 days. Hospital stays must be at least 3 days (72 hours) in duration.
Medicare Part A covers semi-private rooms, meals, general nursing and drugs as part of the inpatient treatment, as well as other hospital services and supplies. But Medicare will not cover a private room (unless medically necessary), nor will it cover private-duty nursing, a television, or telephone in your room (if there is a separate charge for these items), or personal care items such as razors or slipper socks. Doctor bills incurred while in the hospital are covered by Medicare Part B.
Medicare Part A also provides for inpatient care in a Religious Nonmedical Health Care Institution (which is a facility that provides non-medical, non-religious health care items and services to people who need hospital or skilled nursing facility care but for whom that care would not be in agreement with their religious beliefs).
Part A pays for nursing home or skilled nursing facility stays, but such stays must be related to a diagnosis that occurred during a hospital stay. To qualify for care in a skilled nursing facility, your doctor must certify that you need daily skilled care in things such as intravenous injections or physical therapy. Under the rules in effect for 2018, you pay nothing for the first 20 days in a skilled nursing facility for each benefit period, but you pay a coinsurance of $167.50 per day for days 21-100 of each benefit period, and you pay all costs for each day after day 100 in a benefit period.
Under current Medicare payment policy, in order for Medicare to cover the cost of skilled nursing facility services, the beneficiary must have had a previous inpatient hospital stay lasting for at least three days. It turns out that many beneficiaries have been admitted to the hospital for observation, rather than as inpatient status, and if they subsequently receive skilled nursing facility services, they are shocked to find that Medicare will not pay any of the cost of these services. Many patients are unaware of the difference between observation and inpatient status, and there is legislation pending in the House of Representatives to eliminate this inpatient requirement.
Medicare Part A will pay for certain home health services. Part A will cover the cost of the first 100 home health visits following a hospital stay. These visits are limited to medically-necessary part-time or intermittent skilled nursing care or physical therapy, speech-language pathology, or a continuing need for occupational therapy. The care must be ordered by a doctor and must be provided by a Medicare-certified home health agency. In order to qualify, you must be homebound, which means that leaving home requires a lot of effort.
Medicare Part A will also pay for hospice care for people with a terminal illness who are expected to live 6 months or less (as certified by a doctor). Coverage may include items and services needed for pain relief and symptom management, drugs, medical, nursing, social services, and other things not usually covered by Medicare, such as grief counseling. Hospice care is usually provided in the home or in a Medicare-approved hospice. You can stay in a Medicare-approved facility up to 5 days each time you get respite care.
Medicare Part A will also cover the cost of blood transfusions. In most cases, the hospital gets blood from a blood bank at no charge, and you won’t have to pay for it or replace it. However, if the hospital has to buy blood for you, you will have to pay for the first 3 pints you get in a calendar year or have the blood donated.
Medicare does not pay for long-term care. Long-term care includes non-medical care for people who have a chronic illness or a disability, and it provides support services such as assistance in the activities of daily living like dressing, going to the bathroom, or bathing. This type of long-term care is often called custodial care, and it is provided by people who are not considered as being medically skilled. Such care may be provided at home, in the community, in assisted living facilities, or in nursing homes. Long-term care can be very expensive, and many people are either forced to use their own resources to pay for this care, or they opt to purchase long-term care insurance policies. Medicaid can help people with limited income and resources to pay for nursing home care.
Although Medicare does not pay for long-term or custodial care, it will pay for medically necessary skilled nursing facility or home health care. However you must meet certain conditions for Medicare to pay for these types of care.
The deductibles, copays, coinsurance, and limitations on the coverage for long-term stays in a hospital or skilled nursing facility can add up to a lot of money. Unfortunately, Medicare Part A provides no annual maximum on the out-of-pocket medical expenses that are incurred by a patient, so a catastrophic illness could still wreck a senior’s finances. For this reason, many Medicare recipients purchase Medicare Advantage policies, which provide caps on the out-of-pocket medical expenses incurred by a patient in a given year. In addition, some Medicare Supplement insurance policies (known as Medigap) offer caps on these annual out-of-pocket expenses.
People on Medicare don’t have to pay a monthly premium for Part A coverage. If they or a spouse had 40 or more quarters of employment under which Medicare taxes were paid, there is no monthly premium. So there is really no good reason to delay enrolling in Medicare Part A, because it is free for most people.
However, if one does not have enough work experience to qualify for Social Security payments, or is not married to someone who does, they can still get Medicare Part A coverage, but they will have to pay a monthly premium. For someone who has 30-39 quarters of Medicare-covered employment, the monthly Part A premium is $422 for 2018. 99 percent of Medicare beneficiaries do not have to pay premiums for Part A.
If you are not eligible for premium-free Medicare Part A, and did not sign up for Part A during your Initial Enrollment Period, you will have to wait until the General Enrollment Period (January 1 through March 31 of each year) and may have to pay a late enrollment penalty of 10 percent of your monthly premium. You will have to pay this extra premium for twice the number of years you could have had Part A but did not join.
In most cases, if you are not eligible for free Part A and choose to buy it, you must also agree to take Part B, and pay both premiums. However, if you have limited income and resources, there are state programs which will help you to pay for Part A and/or Part B.
Can you disenroll from Medicare Part A at a later time? Why would you ever want to do this since Medicare Part A is free for most people? One possible situation under which you might be tempted to dis-enroll from Medicare Part A is if you return to employment and your employer offers a Health Savings Account, into which you can make pre-tax contributions. IRS regulations do not allow you to make such contributions if you are on Medicare Part A, so it might be advantageous for you to drop Medicare Part A so that you can take advantage of these tax savings. But if you do drop Medicare Part A, you will have to pay back all of the money you have received from Social Security, as well as any Medicare benefits that were paid on your behalf. So, unless the tax benefits you get exceed the benefits that you got from Social Security or from Medicare, it makes absolutely no sense for you to bail out of Medicare Part A.