Navigating the complexities of Medicare can be rather daunting; however, understanding Medicare’s different parts and how to use them effectively can significantly enhance your healthcare experience and your financial well-being. This Navigator will help provide a comprehensive guide to the different parts of Medicare and valuable tips on how to maximize Medicare benefits.

Medicare is a Federal health insurance program for people aged 65 and older, as well as for individuals with disabilities and people with end-stage renal disease.¹ This plan provides 80%/20% insurance coverage for Parts A (hospital insurance) and B (medical insurance). When planning for obtaining Medicare coverage, a Medicare Supplement plan is worth consideration. This is a private plan that covers the 20% portion of costs for which Medicare participants are responsible and may include additional drug coverage. Medicare Supplement plans can be purchased on the open market from various private insurance providers.

Medicare Part A

(Hospital Insurance)

 What It Covers:

• Inpatient Hospital Care: Covers the cost of staying in a hospital overnight, including semi-private rooms, meals, general nursing, and medications.
• Skilled Nursing Facility Care: Pays for temporary care in a skilled nursing facility for rehabilitation after a hospital stay.
• Hospice Care: Covers end-of-life care, focusing on comfort and quality of life.
• Home Health Care: Limited home health services for those who are homebound.

Cost:

• Premium: Typically, Medicare premiums are free if you or your spouse paid Medicare taxes while working. If you don’t get premium-free Part A, your premium could reach up to $505 monthly.
• Deductibles and Coinsurance: There are deductibles for each benefit period and coinsurance for extended hospital stays and skilled nursing care. The costs as of 2024 for beneficiaries are as follows:
  • Hospital Stay: $1,632 deductible per benefit period, $0 for the first 60 days of each benefit period, $408 per day for days 61-90 of each benefit period and $816 per “lifetime reserve day” after day 90 of each benefit period (up to a maximum of 60 days over your lifetime)
  • Skilled Nursing Facility Stay: $0 for the first 20 days of each benefit period, $204 per day for days 21-100 of each benefit period, and 100% of all costs for each day after day 100 of the benefit period.
  • Hospice Care: $0 for covered hospice care services. However, a copayment of up to $5 is required for each prescription drug and other similar products for pain relief and symptom control while you’re at home. 5% of the Medicare-approved amount for inpatient respite care is not covered by Medicare.
  • Home Health Care: $0 for covered home health care services and 20% of the Medicare-approved amount for durable medical equipment (wheelchairs, walkers, hospital beds, and other equipment).

Tips to Maximize Benefits:

• Enrollment: If you and/or your spouse are covered by a creditable employer health plan, you do not need to enroll in Part A until you (or your spouse) retire. Once you (or your spouse) retire and are no longer covered by an employer health plan, you have 63 days to enroll in a prescription drug plan to avoid a penalty.²
• Understand Benefit Periods: Each benefit period begins the day when you are admitted to a hospital and ends when you have been out of the hospital or skilled nursing facility for 60 consecutive days. Multiple benefit periods can mean multiple deductibles.
• Plan for Hospitalization: If possible, coordinate elective procedures to avoid multiple benefit periods within a short time frame.
• Utilize Home Health Care: If eligible, take advantage of home health services to reduce hospital stays and save on out-of-pocket costs.

It’s worth noting that if you file for Social Security, you will automatically be enrolled in Medicare Part A, regardless of whether you’re covered by an employer plan.

Medicare Part B

(Medical Insurance)

What It Covers:

• Doctor’s Visits: Services from doctors and other healthcare providers.
• Outpatient Care: Hospital outpatient services, mental health care, and more.
• Preventive Services: Screenings, vaccines, and annual wellness visits.
• Durable Medical Equipment: Items such as wheelchairs, walkers, and hospital beds.

Cost:

• Premium: Varies based on income; deducted from Social Security benefits received. If your modified adjusted gross income reported on your IRS tax return from two years ago is above a certain threshold, you’ll be required to pay the standard Part B premium and an income-related monthly adjustment amount (IRMAA). The table below reflects the premium costs for 2024 (based off 2022 income).

• Annual Deductible: A small annual deductible applies. In 2024, this amount is $240.
• Coinsurance: Generally, 20% of the Medicare-approved amount for services.
• Clinical Laboratory Services: $0 for covered clinical laboratory services.
• Home Health Care: Same as Part A.
• Inpatient Hospital Care: 20% of the Medicare-approved amount for most doctor services while you are a hospital inpatient.
• Outpatient Mental Health Care: $0 for your annual depression screening. 20% of the Medicare-approved amount for visits to your doctor or other health care provider to diagnose or treat your condition. Note: if you get your services in a hospital outpatient clinic or hospital outpatient department, you may have to pay an additional amount to the hospital.
• Partial Hospitalization Mental Health Care: After you meet the Part B deductible, 20% of the Medicare-approved amount for each service you get from a doctor or certain other qualified mental health professional, as well as coinsurance for each day of partial hospitalization services you get in a hospital outpatient setting or community mental health center
• Outpatient Hospital Care: Usually 20% of the Medicare-approved amount for doctor and other health care providers’ services. You’ll also pay a copayment to the hospital for each service you get in a hospital outpatient setting (except for certain preventive services). In most cases, your copayment won’t be more than the Part A hospital stay deductible amount. The additional copayment means you pay more for an outpatient service you get in a hospital than you’d pay if you got the same service in a doctor’s office.

Tips to Maximize Benefits:

• Schedule Preventive Services: Take full advantage of covered preventive services to catch health issues early and avoid costly treatments later.
• Use In-Network Providers: Ensure your healthcare providers accept Medicare assignments to avoid excess charges.
• Consider a Medigap Policy: A Medicare Supplement Insurance (Medigap) policy can help cover Part B coinsurance and deductibles, reducing out-of-pocket expenses.

Medicare Part C

(Medicare Advantage³)

What It Covers:

• All Part A and B Services: Provides all the benefits of Parts A and B.
• Additional Benefits: Often includes dental, vision, hearing, and wellness programs.
• Prescription Drug Coverage: Many plans include Part D coverage.

Cost:

• Premium and Cost Sharing: Varies by plan and provider, with many zero premium plans available.
• Out-of-Pocket Limits: Medicare Advantage plans have a cap on out-of-pocket expenses.

Tips to Maximize Benefits:

• Compare Plans: Evaluate Medicare Advantage plans during the Annual Enrollment Period to find one that best meets your healthcare needs and budget.
• Check Provider Networks: Ensure your preferred doctors and hospitals are in the plan’s network.
• Utilize Extra Benefits: Take advantage of additional benefits like dental, vision, and fitness programs to enhance your overall health and save money.

Medicare Part D

(Prescription Drug Coverage)

What It Covers:

• Prescription Drugs: Covers a range of medications, typically through a tiered formula.

Cost:

• Premium: Varies by plan. The chart on the following page shows your estimated drug plan monthly premium based on your income. If your income is above a certain limit, you will pay an income-related monthly adjustment amount in addition to your plan premium.

Cost:

• Deductibles and Copayments: Depends on the plan; currently includes a coverage gap known as the “donut hole.” However, the Centers for Medicare & Medicaid Services (CMS) is eliminating the coverage gap for 2025 and capping the maximum out-of-pocket at $2,000 per calendar year.

Tips to Maximize Benefits:

• Review Formularies: Choose a plan that covers your medications at the lowest possible cost.
• Use Preferred Pharmacies: Some plans offer lower costs at preferred pharmacies.
• Monitor the Donut Hole: Be aware of your prescription spending to prepare for the coverage gap and consider generic alternatives to manage costs.

Understanding the different parts of Medicare and strategically using them can help you maximize benefits while minimizing out-of-pocket expenses. Regularly review your healthcare needs and plan options during Medicare’s Annual Enrollment Period to ensure you have the best coverage for your situation. With informed decisions and proactive management, you can optimize your Medicare benefits for better health and financial stability.

Please visit the Medicare website to learn more about program benefits, costs, enrollment requirements, and other details. Given the potential changes to Medicare that may occur under the current Presidential administration, the relevance of the data provided in this Navigator is likely to change.

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¹ It is important to note that Medicare is on a fiscally unsustainable trajectory. Sudden and sizable cuts to Medicare’s program remain a real risk in the face of its precarious finances. Medicare’s rising costs represent the most important factor driving unsustainable Federal deficits. It seems inevitable that either 1) Medicare benefits will have to be slashed, and/or 2) material tax increases will have to be implemented at some unknowable point in the future.

Rather than attempting to address the alarming economic realities of the Medicare program, this Navigator is focused on how individuals can take advantage of the Medicare system as it is currently constructed.

² The penalty is calculated as 1% of the national average prescription drug plan monthly premium, multiplied by the number of months without coverage.

³ Medicare Advantage is a Medicare health plan offered by private companies that are approved by Medicare.

The purpose of the Navigator series is to provide our clients with expert advice on a broad range of financial planning topics relevant to their lives. In certain cases, in order to give our clients the best possible guidance, we may consult outside subject matter experts whom we trust to provide accurate and unbiased information.

For this issue of the Navigator, Craig Blume, Founder of Blume Healthcare Solutions, provided material assistance in our preparation of the content. Craig is an independent broker/agent who provides a wide range of insurance products with a focus on Medicare and health coverage. Craig strives to be a one-stop source for benefits and services to his clients, including dental, vision, ACA Marketplace, fixed and indexed annuities, life insurance, end-of-life products and services, and Social Security analysis. Craig is licensed in IN, IL, OH, SC, and VA, and holds the Certified Senior Advisor (CSA), Registered Social Security Analyst (RSSA), and American Disability Medicare Advocate (ADMA) designations.

Please note that Craig Blume is related to a Pekin Hardy employee. There is no formal or informal referral arrangement between Pekin Hardy and Blume Healthcare Solutions.

This article is prepared by Pekin Hardy Strauss, Inc. (“Pekin Hardy”, dba Pekin Hardy Strauss Wealth Management) for informational purposes only and is not intended as an offer or solicitation for business. The information and data in this article does not constitute legal, tax, accounting, investment or other professional advice. The views expressed are those of the author(s) as of the date of publication of this report, and are subject to change at any time due to changes in market or economic conditions. Pekin Hardy cannot assure that the strategies discussed herein will outperform any other strategy in the future, there are no assurances that any predicted results will actually occur.