Medicare provides important healthcare coverage for millions of Americans, but enrolling in Medicare does not mean every medical bill will be paid in full. Understanding what Medicare covers, what you may have to pay yourself, and which services are generally excluded can help you prepare for healthcare expenses during retirement.
This is especially important for people approaching Medicare eligibility who may be accustomed to employer health insurance. Medicare has its own rules for premiums, deductibles, coinsurance, and covered services.
So, does Medicare pay for all healthcare costs? No. Original Medicare covers many essential healthcare services, but beneficiaries can still be responsible for significant costs. Understanding these Medicare coverage gaps is an important part of choosing coverage and planning your retirement budget.
What Does Original Medicare Cover?
Original Medicare consists of Medicare Part A and Part B.
Part A primarily covers inpatient hospital care. It can also cover certain skilled nursing facility care, hospice care, and some home healthcare services when Medicare’s eligibility requirements are met.
Part B generally covers medically necessary physician services, outpatient care, preventive services, durable medical equipment, and certain other medical services.
Together, Parts A and B provide broad healthcare coverage. However, Original Medicare does not function like a plan that pays 100 percent of every covered expense.
Beneficiaries may still have premiums, deductibles, coinsurance, and other costs.
What Expenses Does Medicare Not Cover?
One of the most important things to understand about Medicare is that not every healthcare service is covered.
Original Medicare generally does not cover routine dental care, most routine vision care, hearing aids, or routine hearing exams for fitting hearing aids. It also generally does not cover long term custodial care when that is the only care you need.
Routine physical examinations are another common source of confusion. Medicare covers certain preventive services, including the “Welcome to Medicare” preventive visit and yearly wellness visits, but these are not the same as a traditional comprehensive annual physical.
Coverage can depend on the specific service, medical necessity, and other Medicare requirements. Before scheduling an unfamiliar procedure or service, it is useful to confirm how Medicare treats it.
Understanding Original Medicare Out of Pocket Costs
Even when Medicare covers a healthcare service, that does not necessarily mean you will pay nothing.
Original Medicare out of pocket costs can include deductibles and coinsurance.
Part A has cost sharing associated with inpatient hospital care and certain other covered services. Part B generally requires beneficiaries to pay a deductible before Medicare begins paying its share for many covered services.
After the Part B deductible is met, Medicare typically pays 80 percent of the Medicare approved amount for many covered Part B services, leaving the beneficiary responsible for the remaining 20 percent.
That coinsurance can become important for someone who needs frequent outpatient treatment or other ongoing medical services.
Original Medicare Does Not Have a Yearly Out of Pocket Maximum
Another important consideration is that Original Medicare by itself does not have an annual limit on what a beneficiary may pay out of pocket for covered Part A and Part B services.
That is different from Medicare Advantage plans, which have annual limits on out of pocket spending for covered Part A and Part B services.
This distinction is one reason understanding Medicare healthcare expenses is so important when comparing coverage structures.
Some beneficiaries with Original Medicare purchase Medicare Supplement insurance, also called Medigap, to help cover certain costs that Original Medicare leaves behind. Others choose Medicare Advantage as an alternative way to receive their Medicare benefits.
The appropriate structure depends on the individual’s healthcare needs, budget, provider preferences, and other circumstances.
What About Prescription Medications?
Original Medicare does not generally provide comprehensive coverage for the prescriptions you pick up at a pharmacy.
Medicare Part D provides prescription drug coverage through private plans approved by Medicare. Part D may be purchased as a standalone prescription drug plan, or prescription coverage may be included with many Medicare Advantage plans.
Each drug plan has a formulary, which is a list of covered medications. Plans may also place prescriptions into different tiers with different cost sharing requirements.
Because formularies and plan costs can change, prescription coverage should be reviewed carefully when evaluating Medicare coverage gaps.
Dental, Vision, and Hearing Expenses
Dental, vision, and hearing services deserve particular attention because many people use these services regularly as they age.
Original Medicare generally does not cover routine dental services such as cleanings, fillings, dentures, and many other dental procedures. There are limited circumstances in which Medicare may cover certain dental services when they are closely connected to specific covered medical treatment.
Routine eye exams for eyeglasses or contact lenses are generally not covered by Original Medicare, although Medicare does cover certain medically necessary eye services and screenings when eligibility requirements are met.
Routine hearing exams and hearing aids are also generally excluded from Original Medicare.
Some Medicare Advantage plans offer additional dental, vision, or hearing benefits, but coverage, limits, provider requirements, and costs vary by plan.
Does Medicare Cover Long Term Care?
Long term care is another major area people sometimes assume Medicare will cover.
Medicare may cover qualifying skilled nursing facility care for a limited period when specific conditions are satisfied. That is different from ongoing custodial care.
Custodial care generally involves assistance with activities of daily living, such as bathing, dressing, eating, or using the bathroom when skilled medical care is not required.
Original Medicare generally does not pay for long term custodial care when that is the only care a person needs.
Understanding this distinction is particularly important when planning for future retirement healthcare expenses.
What Costs Should I Prepare for After Enrolling in Medicare?
Healthcare budgeting should consider more than a monthly premium.
Depending on your coverage, Medicare healthcare expenses can include:
- Medicare premiums
- Deductibles
- Copayments
- Coinsurance
- Prescription drug expenses
- Dental services
- Routine vision expenses
- Hearing aids and related services
- Services that Medicare does not cover
The exact amount will vary considerably from one beneficiary to another.
Someone who receives frequent medical treatment may have very different expenses from someone who rarely visits a physician. Prescription medications can also have a major effect on annual healthcare spending.
How Additional Coverage Can Help
Medicare beneficiaries have different ways to address some of the costs Original Medicare does not pay.
A Medicare Supplement policy can help cover certain Original Medicare cost sharing expenses, depending on the standardized Medigap plan selected.
Medicare Advantage offers another way to receive Medicare benefits through a private Medicare approved plan. These plans may use provider networks and different cost sharing structures, and many include prescription drug coverage and additional benefits.
There is no single coverage structure that is appropriate for everyone. Understanding what Medicare does not cover is the first step toward comparing your options based on your own healthcare priorities.
Prepare Before Healthcare Expenses Become a Surprise
Medicare provides substantial healthcare coverage, but it was never designed to eliminate every healthcare expense. Premiums, deductibles, coinsurance, prescriptions, and services outside Original Medicare can all become part of your retirement healthcare budget.
Understanding Medicare coverage gaps before enrolling allows you to evaluate your options more carefully. It can also help you avoid assuming a particular service will be covered simply because you have Medicare.
If you are preparing for Medicare or want a clearer picture of what your current coverage may leave you responsible for, Mindful Medicare Solutions can help you understand your options and evaluate coverage based on your individual needs. Contact us to get started.
