Medicare Guide

Coverages and Costs

The Medicare program consists of several components, including Parts A, B, C, D, and Medigap. The following segment discusses what each component covers and their associated costs.

Part A Coverage: Part A covers hospital room and board, nursing, equipment, and other specified expenses. When one is admitted to a hospital, this initiates a benefit period that lasts for 90 days. Once this period of time is exhausted, Part A ceases to provide benefits other than during a 60-day lifetime reserve. While the 90-day coverage is replenished each time the patient leaves the hospital for at least 60 days, the lifetime reserve is never replenished. Part A also provides coverage for skilled nursing, home health care, and hospice care.

Part A Costs: For those who meet the eligibility requirements discussed in the “Enrollment Eligibility & Considerations” section, there is no premium for Part A. Those who do not meet the eligibility requirements will owe a monthly premium of up to $506. Since most people do not pay this premium, eligible individuals should enroll in Part A at age 65. All enrollees will be responsible for the following expenses:

$1,600 deductible for a hospital stay of 1-60 days
$400 copay per day for days 61-90 of a hospital stay
$800 copay per day for days 91 and beyond of a hospital stay (up to 60 days over your lifetime)
All costs of the stay after it exceeds your 60 lifetime reserve days
Nothing for the first 20 days at a skilled nursing facility
Up to $200 coinsurance per day for days 21-100 at a skilled nursing facility
All costs for days over 100 at a skilled nursing facility
Nothing for home health care prescribed by a physician
Nothing for hospice care for terminal illness
20% of the cost of durable medical equipment

Part B Coverage: Part B covers outpatient physician and facility expenses. Examples would be doctor’s visits and certain home health care visits not covered by Part A.

Part B Costs: Part B monthly premiums are a function of one’s income and range from $164.90 for the lowest earners up to $560.50 for the highest earners. Income from two years prior is considered for the current year’s premiums. Please see the chart at the top of the following page, which outlines the Part B premiums at various levels of income and filing statuses for 2023. In addition to the premiums, there is an annual deductible of $226. Once the deductible is met, one is responsible for 20% of covered services.

If your yearly income in 2021 (for what you pay in 2023) was			You pay each month (in 2023)
File individual tax return	File joint tax return	File married & separate tax return	You pay each month (in 2023)
$97,000 or less	$194,000 or less	$97,000 or less	$164.90
above $97,000 up to $123,000	above $194,000 up to $246,000	Not applicable	$230.80
above $123,000 up to $153,000	above $246,000 up to $306,000	Not applicable	$329.70
above $153,000 up to $183,000	above $306,000 up to $366,000	Not applicable	$428.60
above $183,000 and less than $500,000	above $366,000 and less than $750,000	above $97,000 and less than $403,000	$527.50
$500,000 or above	$750,000 and above	$403,000 and above	$560.50

Part D Coverage: Part D covers prescription drugs and, unlike Parts A and B, which are administered by the government, is offered by independent insurers. A participant can work with a specialist to select a plan that is suitable for them based on the plan formulary–a list of drugs the plan covers.

Part D Costs: As with Part B, monthly premiums are dependent on income. Unlike Part B, where income is the only factor in determining premiums, the exact Part D premium will depend on a combination of income and the specific plan chosen. The national average for Part D plan premiums (not including any adjustments for income) is projected to be $31.50 per month in 2023. Additional costs such as deductibles, co-pays, and coinsurance will vary from plan to plan.

Medicare Supplement Insurance—Medigap Coverage:

Medigap policies are highly standardized plans that are used to protect against the exposures not covered by the other components of Medicare, such as the Part A out-of-pocket costs mentioned previously. While plans are issued by private insurance companies, they must have a uniform benefits package for each type of plan. For example, all policies issued under the Plan A type must offer the exact same benefits.

Medicare Supplement Insurance—Medigap Costs:

Medigap costs consist solely of monthly premiums that can range anywhere from under $50 to over $900 depending on the breadth of coverage and other plan terms. There is no adjustment based on one’s income. Please see the chart at the top of the following page, which contains a chart illustrating the various Medigap plan choices and their respective coverages.

Medigap Plan Options

	Plan A	Plan B	Plan C	Plan D	Plan F	Plan G	Plan K	Plan L	Plan M	Plan N
Medicare Part A Coinsurance & Hospital Costs up to 365 days	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%
Medicare Part B Coinsurance or Copayment	100%	100%	100%	100%	100%	100%	50%	75%	100%	100%
Blood (First 3 pints)	100%	100%	100%	100%	100%	100%	50%	75%	100%	100%
Part A Hospice Care Coinsurance or Copayment	100%	100%	100%	100%	100%	100%	50%	75%	100%	100%
Skilled Nursing Facility Coinsurance	N/A	N/A	100%	100%	100%	100%	50%	75%	100%	100%
Medicare Part A Deductible	N/A	100%	100%	100%	100%	100%	50%	75%	50%	100%
Medicare Part B Deductible	N/A	N/A	100%	N/A	100%	N/A	N/A	N/A	N/A	N/A
Medicare Part B Excess Charges	N/A	N/A	N/A	N/A	100%	100%	N/A	N/A	N/A	N/A
Foreign Travel Emergency	N/A	N/A	80%	80%	80%	80%	N/A	N/A	80%	80%
Out of Pocket Limit	N/A	N/A	N/A	N/A	N/A	N/A	$6,940	$3,470	N/A	N/A

Part C – Medicare Advantage Coverage:

Medicare Advantage is an alternative to the traditional combination of Parts A, B, D, and Medigap policies in which private insurers network with health care providers to provide coverage in a similar way to traditional health insurance arrangements. Plans are required to offer at least as much coverage as Parts A and B and may also offer prescription drug, dental, and vision insurance. One of the drawbacks of Medicare Advantage is that there is typically a very confined network of providers in the plan that could prove to be an issue if one requires the services of a very specific doctor or hospital.

Part C – Medicare Advantage Costs:

In addition to remitting the usual Part B premium, Medicare Advantage enrollees will owe a combination of premiums, co-pays, deductibles, and coinsurance as dictated by the plan. While premiums for these plans are typically less than most Part D and Medigap premiums (the average is $17.60), the out-of-pocket costs from Part C deductibles, co-pays, and coinsurance will often outweigh these savings and make traditional Medicare more cost-effective for an individual who requires significant medical care. To combat this, many plans do contain a cap on the maximum out-of-pocket expenses that will be assessed to the policyholder in a given year.

Enrollment Eligibility and Considerations

To be eligible for Medicare, you must be either:

At least 65 and entitled to Social Security or certain federal employee pension benefits
Under 65 but collecting Social Security disability benefits for 24 months, have permanent kidney failure, or have amyotrophic lateral sclerosis (ALS).

Those meeting these requirements will not owe premiums for Part A. Those over 65 not meeting the foregoing requirements can still enroll in Medicare but will have to pay premiums for Part A.

The process of enrolling depends on one’s status with respect to claiming Social Security:

If one is already collecting Social Security by the time they reach 65, they will automatically be enrolled into Parts A and B (residents of Puerto Rico and foreign countries will not receive Part B automatically) and will receive their card three months before their 65th birthday. While there is generally no cost to be enrolled in Part A, those who do not wish to participate in Part B can opt out of it. Parts C, D, and Medigap, must be actively applied for through a licensed insurance agent or broker.
Those who have yet to claim Social Security will not be enrolled automatically into any part and should enroll in Parts A and B three months before their 65th birthday through the Social Security Administration either online at www.socialsecurity.gov/medicareonly, over the phone at 1-800-772-1213, or in person at a branch location near you.

Those needing to actively apply to any component other than Medigap can do so during a seven-month period starting three months before the month containing one’s 65th birthday and ending three months after. If one misses this initial enrollment period, they will have the opportunity to apply during general enrollment in the first three months of the calendar year. However, there will be a 10% penalty applied to all subsequent Part B premiums for every year a person delays enrolling. There is an exemption from this penalty for those who maintain group health coverage through their own or their spouse’s employer that has more than 20 full-time employees. Those individuals can enroll in Part B without penalty during the eight-month period following their (or their spouse’s) departure from the company. Note that COBRA and retiree health benefits do not count as current employer coverage. Part D also has a late enrollment penalty amounting to 1% for each month if you do not join a Medicare drug plan when you first get Medicare or go 63 days or more without creditable drug coverage. Also note that if you do not qualify for premium-free Part A, and you do not purchase Part A when you are first eligible for Medicare, your monthly premium may go up 10% and you’ll have to pay the penalty for twice the number of years you did not sign up.

Enrollment in Part C, otherwise known as Medicare Advantage, and Medigap, can only be undertaken once enrolled in Part B. While Medicare Advantage issues policies on a guaranteed-issue basis without respect to one’s pre-existing health conditions (with the exception of end-stage renal failure), Medigap only offers this to those enrolling during the six months following Part B enrollment, with the exception of certain specified circumstances. Thus, Medigap insurers can either deny coverage or charge higher premiums for the unhealthy who enroll too late.

The Part B penalty and the Medigap underwriting are two examples of potential traps embedded in the Medicare enrollment process and highlight the importance of planning in advance of the various enrollment periods.

Planning for Medicare

The most important Medicare planning decision one needs to make is with respect to the type and extensiveness of the coverage to select. Should one choose Traditional Medicare with Parts A, B, D, and Medigap or Medicare Advantage? Within these alternatives, should one select a more expensive plan with broader coverage or a less expensive one with narrower protection? The answer will depend on one’s health circumstances, capacity/tolerance for risk, and financial resources.

As mentioned earlier, Medicare Advantage with its lighter premiums would be a great option for someone not expecting to require extensive health services, but a poor choice for someone who will likely need to depend on this coverage for serious and/or chronic health issues. The same analysis would apply to the Medigap options with lower premiums and less coverage. If one has a pre-existing health condition, they can explore which plans would cover the services they are most likely to require.

In addition to finding the option that provides the greatest coverage for the smallest outlay, it is also important to consider the impact of unforeseen health problems. If an individual has limited assets and selects Medicare Advantage because they believe they will remain relatively healthy, and then subsequently encounters severe medical problems, how will they pay for the associated expenses? As mentioned earlier, Medigap can deny coverage outside of the initial enrollment period based on pre-existing conditions, so switching from Medicare Advantage may not be possible. Even if an individual doesn’t encounter any issues, how will they feel knowing that they have this exposure? It is important to not only consider the expected outcome of a strategy, but also the effects of an unexpected one.

We hope that this page has provided you with some useful insights into the Medicare program. Because there are many other facets of your financial health to consider, this is just one piece to a sound financial plan. Here, at Condor, we offer different investment and financial planning services; we do the heavy lifting so that you can focus on what matters the most to you. We would be happy to connect you with a trusted Medicare Specialist that can help you enroll in the plan that is right for you. If you have any questions about how we can help, please do not hesitate to reach out to us.

Condor Capital Wealth Management

Founded in 1988, Condor Capital Wealth Management is an employee-owned, SEC-registered investment advisor based in Martinsville, N.J., employing 25 professional and support staff. Since Condor is a fee-only investment management firm, its fees are based on portfolio size, not sales commissions or number of trades.

For more information, please visit call us at 732-356-7323 or email us at info@condorcapital.com.