What Exactly Is Medicare?
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Although nationalized health insurance was initially proposed as far back as 1945 (by then president Harry Truman), it wasn’t until 20 years later that Lyndon B. Johnson would sign the Medicare and Medicaid Act into law. It was intended to address a challenge that’s only become more acute in modern times – providing affordable healthcare to a population that was living longer than it had at any point in history.
At the time, senior citizens were the demographic least likely to have health insurance, which was problematic considering they were also the demographic most likely to need medical care. Medicare was thus envisioned to ensure these citizens did not face financial ruin due to health issues in their twilight years, aiming to provide a safety net and guaranteeing access to vital medical care for those aged 65 and above.
A variety of modernization programs and acts have been implemented in the intervening decades. In 1997, the Medicare Plus Choice program allowed Medicare HMOs to offer Medicare Part C programs (later relabeled Medicare Advantage), and in 2003 the Medicare Part D prescription drug benefit was added via the Medicare Prescription Drug, Improvement, and Modernization Act.
Medicare Part A (Hospital Insurance)
Inpatient hospital stays
Skilled nursing facility care
Hospice care
Some home health care
Costs
Premiums: If you or your spouse has worked and paid Medicare taxes for at least 10 years (40 quarters in total), you should be eligible for free Medicare Part A coverage.
Deductible and Copays: Although there are typically no premiums for Part A, you will still have to pay a deductible and copay for extended stays in the above listed facilities. In 2023, the standard deductible for Medicare Part A is $1,600 per benefit period. The copayment amounts can also be steep for long-term hospital stays:
Days 1 – 60: $0 per day
Days 61 – 90: $400 per day
Days 91 – 150: $800 per day
After Day 150: All costs
The rates are slightly different for skilled nursing facilities:
Day 1 – 20: $0 per day
Day 21 – 100: $200 per day
Day 101 and Beyond: All costs
Medicare Part B
Outpatient care
Doctor's services
Preventative services
Some home health care
Costs
Premiums: Most people will pay a standard monthly premium for Part B. The premium can vary based on income.
Deductible and Copays: After meeting the deductible, you typically pay 20 percent of the Medicare-approved amount for services.
Medicare Part C (Medicare Advantage)
Medicare Advantage is sold through private insurance companies and offer Medicare Part A and B along with added coverage for things not available through traditional Medicare plans, like:
Drug
Vision
Hearing
Dental
Wellness
All Part C plans are still required to cover all the same things as A and B, so seniors and retirees can enroll with peace of mind knowing they’re only getting extras and aren’t losing any of the traditional Medicare protections.
Costs
Premiums: While some Medicare Advantage plans have premiums, there are also “$0 premium plans.” With these plans you still pay your Medicare Part B premium instead of a larger Part C premium.
Deductibles and copays: Even with a $0 premium plan you will still need to pay all necessary deductibles, copays and coinsurance for services covered under a Medicare Advantage Plan.
Medicare Part D
Prescription drugs
Costs
Premiums: Varies by plan.
Deductibles and copays: Also varies by plan. Medigap (Medicare Supplement Insurance)
While the “no premiums” model of Medicare Part A may seem like a great deal initially, many retirees experience understandable sticker shock when they realize how quickly the per day copays can add up for virtually any type of long-term care. Medigap is available through private insurers and can help pay for out-of-pocket costs that may be incurred by seniors relying on Medicare plans.
How Much Does Medicare Cost the Country?
There are slightly different ways the government, interest groups and think tanks calculate Medicare spending.
According to CMS.gov, Medicare accounted for 21 percent of national health expenditure ($900.8 billion) in 2021. Medicare’s 2022 price tag ($747 billion) was the second largest federal expenditure and represented 12 percent of federal spending.
Some estimates suggest the program will be responsible for 18 percent of federal spending and 3.9 percent of GDP by 2032 (other estimates have it as high as 5.1 percent of GDP by 2033)
Do You Have the Right Medicare Coverage?
The retirement planners and financial advisors at Fullerton Financial Planning are committed to offering comprehensive and holistic solutions to Arizona retirement savers. Our experts would be happy to explain your options and how your Medicare planning can be incorporated into a broader retirement plan. Call us at (623) 974-0300 to discuss your Medicare options today.