You’ve probably heard about the different “parts” of Medicare. When it was originally created, there were just two parts: Part A and Part B. This is known as Original Medicare. As Medicare expanded, other types of coverage were added:

• Part A: Covers inpatient care. If you stay overnight somewhere, it probably falls into this bucket. So, if you are admitted to the hospital, a skilled nursing facility, or hospice, it’s covered by Part A.
• Part B: Covers outpatient care. If you aren’t staying overnight to get care, you’re talking about Part B. It covers things like doctor’s appointments, lab tests, rehab therapy, screenings (like mammograms), colonoscopies, and medical equipment.
• Part C: Known as Medicare Advantage plans. Offered by health plans, these all-in-one plans include your Part A and B benefits, as well as and add some extras such as vision, hearing, and dental. Many of these plans also cover prescription drug coverage (Part D).
• Part D: Covers prescription drugs. If you have coverage under Original Medicare (Parts A and B only), you’ll need to purchase a separate Part D plan to get drug coverage.

When looking at Medicare plans, you may have come across a few terms about gaps in coverage. We’ll break these down for you.

• Out-of-pocket maximum. Original Medicare, Parts A and B, do not have a cap on what you pay per year, which means if you require extensive medical services you could end up paying a lot. However, Medicare Advantage plans have an out-of-pocket maximum. That means once you spend a certain amount of money on health care each year, your plan pays 100 percent of the cost of covered services.
• The Part D Coverage Gap (donut hole). The donut hole refers to the coverage gap in your prescription drug coverage. This amount is set by the federal government each year. The coverage gap is sometimes called the donut hole because after you have spent $3,750 (in 2018) in drug costs you enter “the hole” where your health plan doesn’t help pay for your drugs and you have to pay for them out of your pocket.

One of the best ways to save money when it comes to Medicare is to make sure that you understand and meet the deadlines for signing up and making changes to your medical coverage. Signing up late can add expensive fees.

• Initial enrollment: Three months before you turn 65 is when you are first eligible for Medicare. From that point, you have seven months to sign up. Pay attention to your deadline to sign up for Part B. Here’s a chart:
• Special enrollment: If you are still working and covered by an employer’s group health plan when you turn 65, you may be able to enroll in Parts A and B beyond the initial seven-month signup window, such as when you retire.
• Annual Enrollment Period (AEP): Each year you get a chance to make changes to your plan from mid-October until early December.

Click here to learn more about these terms and Medicare FAQ’s.