How Does Original Medicare Work?

A post came through my Facebook news feed about Medicare and I started reading some of the comments and I was surprised as quite a few people really didn’t understand how Original Medicare works.

Let’s take a look at how it works.

Medicare Part A

Medicare Part A pays for your stay at the hospital if you are admitted as an inpatient. There is (in 2017) a $1,316 deductible that must be met for the hospital benefit period.

What’s a Hospital Benefit Period?

A benefit period begins the day you’re admitted as an inpatient in a hospital or Skilled Nursing Facility (SNF). The benefit period ends when you haven’t received any inpatient hospital care (or skilled care in a SNF) for 60 days in a row.

If you are out of the hospital or SNF for 60 days and on day 61 you are admitted to either the hospital or SNF a new benefit period begins; and, yes, you would be required to pay the $1,316 deductible again.

Note: Generally, there is no premium for Medicare Part A if you have worked and paid Medicare taxes for 40 quarters or 10 years.

Medicare Part B

Medicare Part B covers doctor visits, outpatient procedures, durable medical equipment, home health care, Physical therapy/occupational therapy/speech-language pathology services, etc. It is an 80/20 plan, meaning Medicare pays 80 percent of their allowed charge and you are responsible for 20 percent.

Now the keyword phase here is Medicare Allowed Charge. Any doctor, hospital, supplier, etc., who accepts Medicare assignment must accept the Medicare Allowed Charge and cannot balance bill you the difference. You are only responsible for the 20 percent of Medicare’s allowed charge.

I know sometimes this gets confusing. For instance, a doctor sends his invoice to Medicare. The amount of the invoice to Medicare from the doctor is $300. Medicare comes back and states the allowed charge is $150. Medicare sends payment to the doctor for $120 (80% of $150). You are responsible for $30.

If the provider demands that you pay the difference, you need to report the provider to Medicare. Once a provider accepts Medicare assignment, they MUST accept the allowed charge.

Medicare Part B has an annual deductible of $183.

Medicare Part B does have a monthly premium and it is based on your income level. For the majority of people reaching age 65 in 2017, the premium is $134 per month.

2017 Medicare Part B Premiums

Supplement Plans

Since there is no cap on out-of-pocket expenses many people who opt for Original Medicare generally get a Medicare supplement plan (also called Medigap Plan) to pay for the hospital deductible, the Medicare Part B deductible and your 20 percent cost share.

If you are new to Medicare in 2017 and still confused or if you have questions regarding your benefits, contact your State Health Insurance Assistance Program (SHIP). Visit SHIP for more information.

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