Medicare A, B, C and D: What is the Difference Between the Medicare Plans?

Medicare is the US health insurance program available to people age 65 or older, people under age 65 with qualifying disabilities, and people of any age with End-Stage Renal Disease (ESRD). It is operated by the Centers for Medicare & Medicaid Services (CMS).

Enrollment in this program is not automatic; there are eligibility criteria, enrollment periods and penalties you will pay if you choose to enroll after the qualifying enrollment dates. This is a complicated process and it would benefit you to learn more about the program and how to properly enroll. Absolutely nothing should be assumed when applying for Medicare as deferring benefits beyond the initial enrollment period (as defined by Medicare) could incur penalties that will last the life of your Medicare policy.

Medicare is divided into “Parts” – Part A, B, C and D. Each part provides coverage for different aspects of health care and each has mutually exclusive rules. It is important to pay attention to each part and its rules when applying for Medicare benefits.

Below is a brief description of Medicare Part A, B, C and D. You will find more information regarding Medicare in the links provided at the end of this Hub.

Most people who are age 65 or over, or otherwise medically qualify for Medicare, will receive these benefits without a premium (at no out-of-pocket cost) because they already paid Medicare taxes while they were working. For persons who do not qualify for premium-free Medicare A, it will cost up to $450 per month, out of pocket.

Medicare A will cover (excluding any co-pays or deductibles):

1. Inpatient hospitalization and the care received during the hospital admission. “Hospital Admission” is an important term and it is necessary for you to know what it means in Medicare terms.
2. Inpatient rehabilitation facilities and long-term care hospitals (LTACs)
3. Inpatient care in a skilled nursing facility (SNF) – this is for skilled care, such as for nursing or therapist services, not for custodial or “nursing home” care
4. Inpatient care at a Religious Non-Medical Health Care (RNHCI) facility – where non-medical health care is provided, meeting the established religious laws or guidelines that do not allow for medical treatment
5. Home health services, and
6. Hospice services
7. Blood

Medicare A will NOT pay for other items, including your home medications, ambulance transport, outpatient clinic visits, or any non-admission (as per Medicare guidelines) hospital stays, such as Emergency Room visits, or hospital stays considered “Observation Admissions”.

Medicare B complements Medicare A, covering medically necessary services that do not take place in the inpatient setting, in other words a hospital or other qualifying facility.

You will pay a premium for Medicare B, even if you have paid Medicare taxes during your working years. The standard premium is $115.40, but can be higher, based on income. Premium rates increase at adjusted incomes of $85,000 for individuals, $170,000 for couples.

Medicare B has an annual deductible of the first $162 in Part B-covered services and items rendered. Like Medicare A, there may be co-pays for some of the items and services covered by Medicare B.

Medicare B covers medically necessary care (excluding any co-pays or deductibles) such as:

1. Doctor and clinic visits

2. Hospital outpatient visits, including those emergency room visit and outpatient observation hospitals stays mentioned above that do not qualify as “inpatient admissions”

3. Preventative services, including but not limited to annual wellness exams, flu and pneumococcal shots, smoking cessation counseling, Prostate cancer screening, diabetes screening

4. Clinical lab work

5. Blood

6. Home health services (as does Medicare A)

7. Durable Medical Equipment, such as walkers, home oxygen, bedside commodes

8. Physician services while you are admitted as a hospital (inpatient)

9. Outpatient physical, occupational and speech therapy

10. Ambulance transport, IF you qualify.

Medicare A and B are the “meat and potatoes” services and are sometimes referred to as “Original Medicare”. Most US citizens over age 65 and those who otherwise qualify receive Medicare A at no cost, because they have already paid for it in their working years. Most also purchase the Medicare B component at the base premium of $115.40.

Together, Medicare A and B cover the cost of medical visits, hospitalizations and associated services such as lab work, home health, home medical equipment, inpatient and outpatient rehabilitation services, and necessary ambulance transport. If you do not have both A and B, however, there will be serious gaps in the coverage you receive.

For instance, if you do not qualify for “free” Medicare A and you elect not to purchase it, you will not have coverage for inpatient hospitalization, skilled nursing admission, and inpatient rehabilitation services, unless you have other private insurance in place to cover these services.

Whether or not you have Medicare A, Medicare B is always “voluntary”, meaning that you can also choose to not enroll in Medicare B. It is important to keep in mind, however, that if you do not enroll in Medicare B at the time of your initial enrollment with Medicare A, you will likely be charged a penalty if you enroll in Medicare B at a later date. This penalty is equal to 10% for each 12 month period that you could have initially enrolled in Medicare B but chose not to. In other words, if you could have initially enrolled 2 years ago, you would pay the standard premium plus 20% - $115.40 + $11.54 +11.54= $138.48. If you are in a higher income bracket, you will pay even more, as discussed above. 

The temptation to decline Medicare B stems from the cost of the $115.40 monthly premium. Many people who have Medicare are retired and living on fixed incomes and that $115.40 can be more than a limited budget can bear. It is important to consider the future, if at all possible, because signing up at a later date will incur penalties, and cost you even more money out of pocket.

Please note that neither Medicare A nor B will pay for your home medications.

Medicare C plans, also known as Medicare Advantage Plans or Medicare replacement plans, are offered by some private companies to replace "Original Medicare" (A and B). They usually offer additional coverage, such as vision, dental and prescription coverage. It is easiest to think of them like an HMO or PPO. You will likely have to choose a physician from those listed as in-network and use agencies such as home health agencies and rehabilitation facilities approved by the insurance provider.

Medicare pays a fixed amount to the companies providing these Medicare C programs. In return, the Medicare C policies must provide all Medicare A and B services and they must follow Medicare rules. However, there is no standardization in Medicare C premiums, nor is there standardization in co pays or in the additional services they may provide.

If you choose to select a Medicare C (or Medicare replacement program), it would benefit you to compare a number of alternative policies, paying particular attention to the prescription plan (Are your medications covered? What are the co-pays? Do you need a referral to see a specialist?), in-network physicians, hospitalization and inpatient rehabilitation co pays, as each company will provide a different product.

Medicare D is voluntary coverage, and is arranged through private insurance companies approved by Medicare to provide this service to Medicare recipients. You can either purchase this coverage separately, or if you choose to enroll in a Medicare C plan, this will likely be included, although this is not guaranteed; each Medicare C program should be reviewed closely for its prescription benefits.

Medicare D is probably the top Medicare component that people are likely to decline. Given the limited income of many retired folks, paying the $115.40 for Medicare B seems costly enough. Paying more for prescription coverage may seem like “too much” especially if you aren’t taking medication at the time you make the decision.

Prescription coverage is very important, however, especially as you continue to age as you are likely to require more medications as time goes on. One infection requiring intravenous medications can cost tens of thousands of dollars for a full course. One dose of lovenox, a “blood thinner” medication given for deep vein thrombosis (DVT) and other medical problems can easily cost $75-$100 per dose out of pocket. Plavix, a typical medication given after a heart stent is placed can cost $100-$150 per month. There are patient assistance programs for these medications, but you will have to financially qualify and someone, generally your primary care physician, will have to be willing to follow up with these programs. Sadly, physicians are not always willing to do so. Of course, not all medications have patient assistance programs, meaning the only way you would get the medication you need is to pay full price, out of pocket.

There is no standardization in co-pay costs. Furthermore, each Medicare D provider creates its own Formulary list. A Formulary list is the list of medications that THAT specific plan will cover or not cover. There may be different levels of co-pays for different medications, some medications may need approval from the company before it will be covered by the plan (this is approval is known as a “prior authorization”). Even the length of time to approve a medication will vary. One company may approve a medication during a telephone review with the prescribing physician or his representative, another company may allow itself 48 hours and require paperwork to be completed, signed and faxed to their prior authorization department prior to making a determination.

You can delay enrollment in a Medicare Part D plan if you have other prescription drug coverage but, that coverage must be at least as good as Medicare prescription drug coverage. If it is not, you will pay a penalty if you enroll in a Medicare D program at a later date.

Like other Medicare late penalties, you will have to pay this penalty for as long as you have Medicare prescription drug coverage.