Original Medicare includes two parts: hospital insurance (Part A) and medical insurance (Part B).
Parts A and B of Medicare are considered the core of Medicare health insurance. These parts often referred to together as “Original Medicare”, are what most people enroll in when they turn 65. Because they are the most basic type of Medicare health plans, it’s important to understand exactly what they offer, how they are similar, and where they differ. We’ll go through all of the details here, so you can know what to expect when you enroll.
What Are the “Parts” of Medicare
If you’re new to Medicare, you may not be familiar with the parts of Medicare at all. Essentially, Medicare is divided into parts that cover different types of medical charges. There are four parts of Medicare, Part A, Part B, Part C, and Part D.
Part A covers inpatient care, Part B covers outpatient care, Part C offers a way to get Medicare benefits through private insurance companies, and Part D refers to prescription drug plans. Here, we’ll just be focusing on comparing Part A and Part B plans.
How Does Part A Work?
Part A is one of the fundamental types of Medicare plans and is also the easiest to get for most people. Basically, Part A covers inpatient care, whether in a hospital, skilled nursing facility, or other location. However, it can be a bit more complicated than this, so it’s important to understand the details.
What Does Medicare Part A Cover?
Medicare Part A covers health care in a variety of contexts. The important unifying feature is that it covers inpatient care. This is health care given to a patient who does not regularly leave the care location. This could be a hospital stay, skilled nursing facility care, long term nursing home care, hospice care, or home care.
There are a few important exceptions when it comes to Part A. For one, Medicare Part A will not cover your emergency room visit if it does not result in a hospital stay. This is because the emergency room is still considered an outpatient care location. However, if it does result in a hospital stay, then the emergency room visit will retroactively count as part of your hospital stay. Emergency room stays are counted as inpatient care when the physician who treats you expects you to stay for longer than two midnights. This is known as the “Two-Midnight Rule.”
It’s important to remember that Part A is used depending on where you receive your health care, not what type of care it is. Although Medicare doesn’t usually cover dental care, it will usually pay for your dental care if it needs to be done in a hospital.
You can find more details about Medicare Part A coverage here.
How Much Does Medicare Part A Cost?
Medicare Part A costs can be divided into a few sections. First, there is the Part A premium and the Part A deductible, which will be the same for most people. After that, you'll have to pay the Part A coinsurance and lifetime reserve day fees, which determine how much you pay for each day of inpatient care.
Part A Premiums and Deductible: What Is Premium-Free Part A?
The majority of Medicare beneficiaries don’t pay any premiums for Part A. If you or your spouse have paid the Medicare tax for 40 quarters or longer, you don’t pay any premiums at all each month.
If you’ve paid the tax for under 30 quarters, then the monthly premium comes to $506 per month. Those who paid the Medicare tax for 30-39 quarters pay $278 per month for Part A insurance. If you pay monthly premiums for Part A, you can have them automatically deducted from your Social Security benefits.
The Part A deductible is $1,600 for each benefit period. You will have to pay this cost for your Medical care out of pocket before Part A coverage kicks in.
Part A Coinsurance and Lifetime Reserve Days
For the first 60 days of your hospital stay per benefit period, you won’t pay anything at all after you’ve paid your deductible. For days 61-90, you’ll pay a coinsurance of $400 per day. It’s important to note that although this fee is called a coinsurance, it is a flat fee per day and therefore functions more like a copayment.
For day 91 and after, you will pay $800 per lifetime reserve day. Every Medicare beneficiary has 60 lifetime reserve days, and these do not reset at the start of each new benefit period. Instead, these simply run down. However, you’ll not use any of them until you reach day 91 of a hospital stay in a given benefit period, and the day count resets once you reach a new benefit period.
After you’ve run out of lifetime reserve days, you are responsible for 100 percent of costs.
What Do I Need to Know About Medicare Part B?
Medicare Part B covers your outpatient care. This covers the majority of your usual medical care, like doctors' visits and most basic procedures that aren’t done in hospitals.
What Exactly Does Part B Cover?
Technically speaking, Part B covers medically-necessary outpatient care. This means that it will cover a wide variety of procedures if they are ordered by your physician and are not done in a hospital or other inpatient facility. This can vary widely, from blood tests to EKG screenings to physical therapy. Part B will also cover medical equipment that you need to use at home. You can find a long list of procedures that Part B covers here, and can also always ask your doctor if something is covered.
Part B will also cover emergency room visits that don’t result in hospitalizations, as well as home-care in some instances. It’s important to note that although vision and dental care are performed in an outpatient setting, they are never covered by Part B.
How Much Does Part B Cost?
The standard Medicare Part B premium is $164.90 per month in 2023. Most people who collect Social Security benefits pay a lower premium. You may also have a higher monthly premium if you're what Medicare calls a "high earner". This applies to those with a modified adjusted gross income of $97,000 per year (filing singly) or $194,000 per year (married filing jointly).
Like Part A, your Part B premiums can be automatically deducted from your Social Security benefits.
Your Part B deductible for 2023 is $226. After meeting your annual deductible, you will pay a 20% co-insurance for all covered medical procedures. This 20 percent is waived for many preventive services and screenings, such as the Annual Wellness Visit, mammograms, and prostate exams. In addition, the Part B deductible does not apply.
What About Medicare Advantage?
Although this article is primarily focused on Parts A and B, it’s also useful to understand a bit about Medicare Advantage plans. These plans are also referred to as Part C. The reason that these plans uniquely relate to Parts A and B is that they offer the same coverage but in a different form.
Part C plans cover the exact same things as Original Medicare. In fact, they are mandated to do so by the Center for Medicare and Medicaid Services. However, these plans often cover additional things like dental, vision, and sometimes prescription drugs. Many plans also offer additional perks like gym memberships.
These plans do have downsides -- they will have a provider network, and be either a PPO or HMO plan because they’re offered by private companies. Part C plans can have varying premiums, deductibles, coinsurance payments, and coverage levels. These plans can also vary more and be more complex to understand. However, they are an alternative to Original Medicare that many people consider.
Where Do Medigap Plans Fit In?
Medigap plans, also known as Medicare Supplement plans, are another relevant type of plan to understand when you think about Original Medicare. These plans are also offered by private insurance companies. However, they are used to cover your out-of-pocket costs, not your medical care.
There are several Medigap plans that all offer the same coverage, but will come at different prices. These plans cover things like your Part A deductible and coinsurance, excess charges, and more. You can find a full description of the types of Medigap plans here.
These plans are very useful to many people, but can also be kind of confusing to evaluate. Because plans are offered by private companies, you’ll have to compare prices and see which plan works out best for you. It may be that for your situation, none of these plans end up saving you money. However, for many Medicare beneficiaries, Medigap plans offer a lot of help.
Medigap only applies to Original Medicare. This means that if you have a Medicare Advantage plan, it won’t be able to cover any of your deductible or other fees. In addition to this, Medigap plans don’t cover any fees associated with your prescription drug coverage.
Final Thoughts on Parts A and B
Part B and Part A are among the easiest parts of Medicare to understand. When compared to Medicare Advantage and Part D plans, these plans seem quite simple. Nevertheless, it’s important to make sure you understand all of your options going into these plans and to know which procedures are covered by which part. Because coverage varies, this can make a big practical difference.