What is Original Medicare?
Original Medicare insurance is intended to work as a cost-sharing program to help senior citizens obtain high-quality medical services at an affordable price. The program consisted of two parts, Medicare Part A and Medicare Part B. The program has since expanded, so those two parts are now referred to as Original Medicare.
The federal government remains in charge of the Original Medicare program. The Centers for Medicare & Medicaid Services (CMS) is responsible for establishing and enforcing the rules, including determining which insurance companies and medical providers are eligible to contribute plans and services. In addition, the rules can change annually, so Medicare beneficiaries must understand how the program works.
How Original Medicare Works
Original Medicare is a fee-for-service program. The following steps illustrate how medical expenses are paid when a beneficiary seeks medical care from qualified health care providers:
- The beneficiary selects a medical provider that accepts Medicare payments and receives medically necessary services.
- The beneficiary meets the annual Part B deductible ($226.00 in 2023).
- Most beneficiaries qualify for premium-free Part A, but some may need to meet that deductible.
- Once the deductible is covered, Medicare generally pays 80% of its share of medical bills directly to the health care provider; you pay the remaining 20%.
- Providers agree to specific fees when they enroll in the Medicare program, but any charges over approved Medicare limits are the beneficiary’s responsibility.
- Any remaining expenses are paid by the beneficiary, including coinsurance and copays.
There is no limit to the out-of-pocket costs that beneficiaries may pay in a single year unless they receive a guaranteed maximum by enrolling in a Medicare Advantage plan. A Medicare Supplement plan (Medigap) can also reduce the expenses paid out of pocket. Medicare Advantage and Medicare Supplement plans are optional and fall outside the Original Medicare program.
Beneficiaries who choose to enroll only in Medicare Part A and Part B can see any service provider in the United States that accepts Medicare as payment. Beneficiaries aren’t required to obtain referrals before seeing Medicare-approved specialists. Medicare covers most medically necessary services to diagnose and treat legitimate medical conditions.
Medicare Part A – Hospital Insurance
Medicare Part A is referred to as hospital insurance because it covers inpatient hospital care. More extensive services and long-term care in other facility types are also covered by this section of Original Medicare, including:
- Skilled nursing facility care
- Hospice care
- Lab testing
- Home health care
Some prescription medications and medical equipment are also covered by Medicare Part A as long as they’re given during an inpatient stay.
Medicare Part B – Medical Insurance
Part B is referred to as medical insurance because it covers most outpatient routine care, including:
- Preventive services (with limitations)
- Doctor visits – primary care and specialist
- Durable medical equipment
- Ambulance services
- Home health care
- Clinical research
- Mental health services (inpatient, outpatient, partial hospitalization)
While Part B doesn’t include prescription drug coverage, some medications are covered when given directly by a Medicare-approved service provider.
Medicare must consider all medications, medical devices, and services medically necessary to provide Medicare coverage. If a service provider believes Original Medicare won’t approve a service they recommend, they may ask the beneficiary to sign a notice acknowledging their financial responsibility if Medicare won’t pay.
What is Not Covered by Original Medicare?
Original Medicare isn’t an all-encompassing health insurance plan.
Ordinary out-of-pocket expenses that have to be paid by beneficiaries enrolled in Medicare Part A and Part B include:
- Part B deductible
- Part A deductible
- Part A and B coinsurance
- Part B monthly premium
- Part A monthly premium (some beneficiaries)
There are also some medical services that Original Medicare won’t cover, including but not limited to:
- Cosmetic surgery expenses
- Routine foot care
- Services delivered outside of the U.S.
- Hearing aids and required testing
- Eye exams
- Eyeglasses or contact lenses
- Dental care (exams, dentures, dental implants, etc.)
- Most prescription medications
Beneficiaries enrolled in Original Medicare can also enroll in Medicare Part D if they need prescription drug coverage. However, a Part D plan will likely come with another monthly premium. Still, it can also eliminate one of the most significant out-of-pocket expenses left by the Original Medicare health plan.
Some beneficiaries also opt to enroll in a Part C Medicare Advantage or Medicare supplement insurance plan. These plans may offer covered services that aren’t included in Original Medicare. In addition, Medicaid plans may also cover some services not included in Medicare Part A and B.
How Much Does Original Medicare Cost?
All Original Medicare costs fit into one of three categories:
- Annual or monthly premiums
- Annual deductibles
- Service-based expenses
There is a Part B premium that all beneficiaries enrolled in Original Medicare must pay every month even when they don’t receive services covered by Part B. Beneficiaries with higher incomes may pay more than the standard premium. Most beneficiaries receive premium-free Part A because they or their spouse paid at least ten years of Medicare taxes earlier in life. There is also a premium for a Part C prescription drug plan.
Additional premiums may apply if a beneficiary enrolls in a Medicare Advantage or Medigap plan. In addition, part B premiums are paid even if a beneficiary qualifies for the Medicare program early due to receiving disability benefits from Social Security.
All beneficiaries pay the annual Part B deductible before receiving benefits for any health care services that Part B covers. The amount of the deductible changes every year.
Other out-of-pocket costs for Original Medicare may include coinsurance, copayments for Parts A and B, and uncovered prescription drug bills. In addition, some beneficiaries may agree to pay overage charges if a medical provider charges more than the approved Medicare assignment payment for some type of health coverage. Enrolling in Medigap or a Part C plan can reduce coinsurance bills.
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