If you're nearing retirement age or you're retired and simply haven't used your Medicare benefits yet, you may be confused about the different "parts" of Medicare and what each one covers. Medicare Part A is also known as Hospital Insurance, which obviously covers hospital stays but also includes skilled nursing facilities, hospice care, and more. Here are the details about what Medicare Part A covers and what it costs to have and to use it.
The "parts" of Medicare
Before we dive into a specific part of Medicare, the program has four parts altogether that all retirees and pre-retirees should be aware of:
- Part A -- Hospital Insurance
- Part B -- Medical Insurance (Note: Parts A and B are collectively known as "original Medicare.")
- Part C -- Medicare Advantage plans
- Part D -- Prescription Drug Coverage
For the remainder of this article, we'll take a deeper look at Part A, Medicare Hospital Insurance (HI for short).
What Medicare Part A covers
Generally speaking, Medicare Part A covers the following healthcare costs.
- Hospital care -- this includes hospital services such as semi-private rooms, meals, general nursing care, drugs, and other services. It does not cover a private room (unless it's deemed medically necessary), any charges for phone calls, or any personal care items.
- Skilled nursing facility care -- However, Medicare's skilled nursing care benefits are for limited amounts of time. I'll get into this in more detail below when I discuss deductibles.
- Nursing home care -- But only medically necessary care, not thing like assistance with daily living activities.
- Hospice care -- If you have a terminal illness with a life expectancy of six months or less and wish to accept palliative care, hospice care can be covered by Part A. However, once you choose hospice care, Medicare will no longer pay for any treatment intended to cure your illness.
- Home health services -- This includes intermittent skilled nursing care administered at home, physical therapy, speech-language pathology services, and certain other in-home services. It does not cover round-the-clock home care, meals delivered to your home, housekeeping services, or any personal care activities.
What Medicare Part A costs in 2017
First, the good news, and if you already have Medicare, you already know this. The vast majority of Medicare beneficiaries pay no monthly premiums for Part A. If you or your spouse paid Medicare taxes for at least 40 quarters of work (10 years), Part A is free. For those who must buy Part A, the monthly premium can be as much as $413.
Even if you don't have to pay a premium, Medicare Part A isn't completely free -- you may still have deductibles to pay when you take advantage of its benefits.
For inpatient hospital stays, there is a $1,316 deductible per benefit period. A "benefit period" starts on the day that you're admitted to a hospital or skilled nursing facility, and ends when you haven't gotten any impatient hospital or skilled nursing facility care for 60 consecutive days. If this amount of time has passed, if you're admitted to the hospital again, a new benefit period begins, and you'll have to pay the deductible again.
For stays beyond 60 days, you'll also pay coinsurance of $329 per day for days 61-90, and $658 for each "lifetime reserve day" for stays longer than 90 days, up to a maximum of 60 during your lifetime. Once you've exhausted all of your lifetime reserve days, you're responsible for all the costs associated with the hospital stay.
For stays in skilled nursing facilities, there is no charge for the first 20 days of a benefit period, but there is a $164.50 coinsurance payment per day beyond that, up to 100 days in a facility. Beyond 100 days, the beneficiary is responsible for all costs.
Beneficiaries who qualify pay nothing for home healthcare services or hospice care. There are, however, some incidental charges, such as 20% of the Medicare-approved amount for durable medical equipment, or a copayment of $5 or less for prescription drugs while on hospice care.
What to expect going forward
When you hear in the news about Medicare's long-term funding problems, Part A is what they're referring to. While the Hospital Insurance Trust Fund currently has nearly $200 billion in reserves and the program is expected to run a surplus through 2020, that's where the good news ends.
There are simply going to be too many people retiring compared to the number of workers paying into Medicare, and as a result, Medicare Part A is expected to completely run out of money in 2028.
There are really only two ways to fix the problem and keep Medicare in its current form: raise taxes or cut benefits. Or Republican leaders in Congress have a plan to privatize Medicare by 2024. When and if Congress will act remains to be seen, but in one way or another, it's safe to say that some major changes may be coming to Medicare in the not-too-distant future.