Medicare Part B Explained

Medicare Part B medical insurance is that portion of Original Medicare that covers outpatient and physician services. Part B Medicare benefits cover you for doctor visits, lab tests, outpatient services including surgeries and even includes preventive services and Part B prescription drugs. It also covers durable medical equipment (DME) and home health care.

Key takeaways:

• Medicare Part B is your outpatient medical services portion of Medicare. Part B covers outpatient and physician services, preventive care, lab tests and prescription medication administered by a medical professional.

• Medicare Part B has an annual deductible and monthly premium. The Part B monthly premium starts at $164.60 for 2023. People with higher incomes may pay a higher monthly premium via an Income Related Monthly Adjustment Amount (IRMAA)

• Enroll in Medicare Part B through the Social Security Administration website or a local Social Security office. Medicare law is a subset of the Social security administration laws.

• Everyone must sign up for Medicare Part B when they turn 65 unless they continue working and have creditable health insurance coverage such as most employee healthcare plans. (see creditable coverage below)

• If you are not yet accepting Social Security Income benefits, I suggest you look into Medicare Easy Pay to automate your monthly Medicare premium. 

Original Medicare

Original Medicare (aka Traditional or Standard Medicare) is a federal government health insurance program for U.S citizens or permanent residents 65-years of age and older, as well as those under 65 permanently disabled and receiving Social Security disability benefits for at least 24-months. This is the insurance famous for the iconic red, white and blue card

Original Medicare insurance is divided into three parts; Part A, Part B and Part D. Medicare Part A covers inpatient care (hospital insurance) and hospice care. Part B covers outpatient and physician services. Medicare Part D is for prescription drug coverage.

Medicare Advantage Plans

Some Medicare beneficiaries choose to trade in their Original Medicare (aka Traditional Medicare) for a Medicare Advantage Plan. A Medicare Advantage Plan is also referred to as Medicare Part C. It is a health plan managed by private insurance companies and regulated by CMS (Medicare) that covers healthcare in all the same categories as covered by Original Medicare. It does not cover all the same benefits as Traditional Medicare and certainly not at the same cost to the consumer.

A Medicare Advantage plan replaces your Original Medicare. It does not supplement it, add to it or provide enhanced insurance coverage. It simply replaces it. Many Advantage plans include extra benefits, which serve to distract from higher cost and maximum out of pocket costs that come with these plans.

Please see our articles and videos on Medicare Advantage plans to better understand this option, who typically decides to enroll in an Advantage Plan, and their pros and cons.

You can only enroll in a Medicare Advantage plan during a valid enrollment period as set by Medicare. Unlike Original Medicare, the insurance company managing your Advantage Plan, has a network of doctors and hospitals you are to use and will determine what is or is not medically necessary.

Medicare Eligibility

There are two situations that can provide for Medicare Part B eligibility. The first is aging into Medicare, the second is becoming eligible through disability.

Aging Into Medicare

Most people become eligible for Medicare Part B by being eligible for premium-free Medicare Part A hospital insurance. To be eligible for premium-free Part A a person must be a U.S. citizen or legal permanent resident and have paid the Medicare payroll tax for at least 40-quarters during their lifetime.

If you paid the Medicare payroll tax for 40 quarters, you do not pay a premium for Medicare Part A later in life when you age into Medicare.

Aliens in the United States lawfully as a permanent resident must have resided in the United states for a minimum of five consecutive years prior to filing for Medicare benefits.

A person ages into Medicare as they turn 65-years of age. The earliest Medicare can start is the first day of the month they turn 65. If their birthday is the first of the month, Medicare can start the first of the previous month.

Medicare Initial Enrollment Period

The Medicare Initial Enrollment Period (IEP) is a seven-month window starting three months prior to earliest date Medicare can start. Our Medicare Initial Enrollment Calculator makes this easy for you to determine.

During your IEP you can sign up for Part A and delay Part B. Or sign up for Part A and enroll in Part B to start at the same time. Either way, you Medicare cannot start until the first day of the month you turn 65, or month before if your birthday is on the first day of a month.

Should you decide to not enroll in Part B or have a creditable alternative after your IEP, you may incur a late enrollment penalty. It is important to avoid late enrollment penalties because the penalty is a lifetime penalty, charged each year for the rest of your life.  

The Medicare Part B late enrollment penalty is 10% of the Part B premium each month for the rest of your life, for every 12-month period you neglected to enroll in Part B.

Medicare General Enrollment Period

If you miss your initial enrollment period, you can enroll in Medicare during the General Enrollment Period (GEP). The GEP is from January 01 through March 31. When you enroll in Part B during this period, your Medicare will start on the first day of the month following your application.

If you miss the General Enrollment Period, you will need to wait for the next General Enrollment Period to sign up for Medicare.

Medicare Special Enrollment Period

When a person chooses to have creditable coverage instead of Traditional Medicare insurance, they can delay Medicare coverage indefinitely, as long as they are actively working and have creditable medical insurance.  When they wish to enroll, they use a special enrollment period to start their Medicare. 

When you choose to stay with employer group health care, you can choose to enroll in Medicare at any time. Medicare coverage will start the first of the month following their application.

Important: We strongly advise that those who choose creditable coverage DO NOT enroll in Part B until they are ready to quite the creditable coverage and for Medicare to be their primary coverage. You have certain guarantee issue rights that expire six months after your Medicare Part B start date. If you have employer coverage and Part B you will not be able to take advantage of those guarantees.

Medicare Eligibility Based on Disability

Those who become eligible for monthly Social Security or Railroad retirement board benefits due to a disability are automatically entitled to and enrolled in Medicare after having received those benefits for 24-consecutive months.

There are also special rules for those with ALS or ESRD that allow for benefits to start prior to the 24-month waiting period.

Medicare Part B Premium

Everyone pays a Medicare Part B premium. If you are collecting Social Security benefits, the Part B premium is deducted for your Social Security income.

Medicare premiums are based on income. The base or standard Part B monthly premium starts at $164.60 for 2023. People with higher incomes may pay a higher monthly premium via an Income Related Monthly Adjustment Amount (IRMAA)

Part B Premiums and Medicare Advantage Plans

If you choose to trade in your Original Medicare for a Medicare Advantage Plan (aka Medicare Part C) you must still pay your Medicare Part B premium and any IRMAA charges that may be due. You cannot avoid the Part B premium by choosing an Advantage Plan.

What Does Medicare Part B Cover?

It is Medicare’s intent to cover all medically necessary services for diagnosis and treatment of medical diseases and conditions.

In addition, Medicare offers preventive care through Part B. Note that by definition, this excludes cosmetic surgery, corrective vision care and basic dental services.

Medicare Part B covers medically necessary outpatient services. Part B Medicare benefits cover you for doctor visits, lab tests, outpatient procedures including surgeries and even includes preventive services and Part B prescription drugs. It also covers durable medical equipment (DME) and home health care.

Medicare Part B Coverage

All outpatient care falls under Medicare Part B coverage. This includes outpatient care in a hospital or surgery. Just because you occupy hospital beds does not mean your medical services are covered under Part A. You must be admitted as an inpatient for covered services to fall under Medicare Part A.

Many surgeries and hospital stays can be outpatient services covered under Medicare Part B. Hospital stays “under observation” are the most common form of outpatient hospitalizations.

Medicare Part B Deductible

Medicare Part B coverage starts after the Medicare beneficiary pays a small annual deductible. The deductible is charged only once per calendar year. Currently, the deductible is under $250.

After the deductible is satisfied, Medicare Part B pays 80% for covered services, the beneficiary is responsible for 20% coinsurance. Durable Medical Equipment (DME) may have a different payment schedule.

Most preventive services are exempt from the deductible and coinsurance.

Medicare Part B Drugs

Both Medicare Part A and Medicare Part B include drug coverage. Medicare Part A pays for any medication administered while an inpatient in a medical facility. This is drug coverage in addition to your Part D Medicare drug plan.

Medicare Part B drug coverage includes drug coverage for most of the medications that are administered by a medical professional in a medical facility. There are some exceptions called “white bagging or brown bagging, of course.

Common Part B medications include most cancer drugs, anti-inflammatory infusions, Prolia if administered at doctors office and Humira.

Most prescription drugs not covered under Part A or Part B are typically covered under the Medicare drug plan program called Part D. A Part D Medicare drug plan must include drugs from every prescription drug category.

Medicare Supplemental Coverage

When you first enroll in Original Medicare Part B you have the option of adding Medicare Supplemental coverage without medical underwriting. Medicare supplement plans are standardized health care insurance plans managed by private insurance companies.

Why Add a Medicare Supplement?

While Original Medicare has no limit on potential out of pocket costs, adding Medicare supplement insurance not only limits your out of pocket costs, but can set a maximum limit on Medicare expenditures to just a few hundred dollars.

Standardized Benefits

The benefits of a Medicare supplement are standardized. The benefits are defined in Social Security law and identical from one insurance company to another. In other words, all Plan G’s are identical, all Plan N’s are identical and so.

The only difference is the premium. What you pay today and what you will pay tomorrow. Some insurance companies offer a lowball entry price with the intent of charging more later.

A Medicare supplement (aka Medigap plan) covers the copays, coinsurance and Part A deductible for anything Medicare covers. The supplement cannot cover a procedure or service not covered by Medicare. It simply pays the gap in coverage for Medicare approved services.

Medicare supplements do not have drug coverage, but they will supplement prescription drugs that fall under Part A or Part B.

Medicare Supplement Initial Enrollment Period

A Medigap plan has a different initial enrollment period than Medicare. The supplement initial enrollment period is the first 180-days (six-months) of Part B coverage. During that time frame, you can apply for any supplement available with guaranteed acceptance.

If you have other insurance, in addition to Medicare, you cannot add supplemental coverage.

Changing Supplement Plans

You can add a new supplement or change plans at any time, any day of the year. However, after your first six months you may be required to pass medical underwriting. It is possible your health history will be such that the insurance company refuses or denies your application based on your current or past medical condition.

Best Medicare Supplement for Me

We know your health care is an important decision. At Medigap Seminars our role is to help you find the right Medicare plan for your budget and your needs.

As you search for a Medicare Advisor near you, consider that our complimentary services are available in every state except Massachusetts’s. We are licensed Medicare Advisors, expert all states and all Medicare plans.