Do you have questions about Medicare? You’re not alone. Medicare is complex, and takes time to fully comprehend. The official Medicare handbook is 120 pages long, if that’s any indication of how much information there is to cover. Thankfully it’s available online as a resource if you ever want to read it.
It can get confusing though when trying to wrap your head around all the situations it applies to, so let’s get started with some basics.
Medicare is a health insurance program managed by the federal government. The program was first created in 1965 for people aged 65 and above and later expanded in 1972 to cover people under 65 with permanent disabilities.
Medicare works similarly to other kinds of health insurance, but with some important distinctions. It does not completely cover healthcare costs, but it does help with medical services such as hospital and doctor visits, prescription drugs, home health and hospice care, and preventive services.
Any citizen or permanent resident who is age 65 or above is eligible for Medicare regardless of their medical history, income, or health status. If you or your spouse have paid payroll taxes for 10 or more years, you are eligible for “premium free” Medicare Part A, which eliminates the monthly payment.
People with permanent disabilities under the age of 65 are also eligible for Medicare if they qualify for Social Security Disability Insurance (SSDI). Also, people who have End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant) qualify. Younger widows and disabled adult children can also get coverage through Medicare.
There is a way to become automatically enrolled into Medicare, and that is if you already receive Social Security or Railroad Retirement benefits. In this case you should receive a red, white, and blue Medicare card in the mail 3 months prior to turning 65. If you do not receive your Medicare card during this time, contact Social Securitycontact Social Security as soon as possible.
Those who are automatically enrolled are signed up for “Traditional Medicare” - which includes Part A and Part B. We’ll go over what Traditional Medicare covers a little later.
For anyone who is not automatically enrolled into Medicare, you’ll need to sign up manually.
You may have to pay more as a penalty for not signing up for Medicare when you’re first eligible, so it’s important to take action as soon as possible.
You can sign up for Medicare through the Social Security Administration, or online to Medicare.gov. When you should sign up for Medicare depends on your eligibility.
It’s important to note that you can only enroll in Medicare during certain designated times of the year. To avoid paying penalties, you should sign up as soon as you become eligible during the “Initial Enrollment Period.” If you’re still receiving health insurance from an employer you should enroll in Part A when you turn 65 but you can then wait to sign up for Part B during a “Special Enrollment Period” after leaving the employer plan thus saving money since you don’t have to pay the Part B premium.
You only need to sign up for Medicare once, although you do have the option to make changes to your plan during the General Enrollment Period which occurs each year.
Unless you have a permanent disability, the Initial Enrollment Period for Medicare consists of a 7 month window of time: the 3 months before and after your 65th birth month. If you sign up during the first 3 months of the IEP, Medicare coverage will begin the first day of your birth month. If you sign up during the last 4 months of the IEP, your coverage may be delayed.
Please note: if you do not sign up for Medicare during the Initial Enrollment Period, you’ll have to wait until the General Enrollment Period, and you may face paying higher premiums.
There is an exception that applies if you or your spouse are still working and have group health coverage through an employer. If you have the option to continue getting healthcare through the group insurance plan, you should still sign up for Medicare Part A, which can be used as supplemental insurance.
If you choose to wait to enroll in Medicare Part B, you must sign up in the 8 months after the group coverage ends. This period of time is known as the “Special Enrollment Period.” Please note that the group insurance plan must have 20 people or more to quality for a Special Enrollment exception.
If you miss the Initial Enrollment and/or Special Enrollment periods, you’ll have to wait to sign up for Medicare during the General Enrollment period. This occurs once a year from January 1st to March 31st. Please note that if you sign up during this time your coverage will not begin until July 1st of that year, and you may face paying higher premiums for late enrollment.
Now that we’ve covered what Medicare is and when to sign up for it, let’s get deeper into what the insurance actually covers.
The first thing to emphasize is that signing up for Medicare is not as simple as it sounds. There are many different options, which can be best understood by breaking down the four different “parts” of Medicare. The two main components of Medicare are Part A and Part B, which are sometimes referred to as Original or Traditional Medicare.
Please note: each of the different “parts” has a separate enrollment process.
As it’s been noted, many people are automatically enrolled into Part A and Part B if they already receive Social Security or Railroad Retirement benefits. Here’s what Part A generally covers:
Part B relates to medical services or supplies that are needed for medical diagnosis, and preventative services for illnesses such as screenings for cancer, cardiovascular disease, depression, diabetes and other conditions.
Here’s some of the many medical services covered under Medicare Part B:
One way to think about it is that Part A applies in Hospital and Nursing home situations, as opposed to the doctor related services that Part B covers.
Medicare Part D helps pay for prescription drugs. Please note, you will need to sign up separately for a Medicare Part D policy - and you may face a penalty for not signing up when you’re first eligible.
As an alternative to enrolling in Medicare Parts A, B, and D separately, you can also sign up for Part C which combines all the benefits into a single insurance plan.
Medicare Part C combines Parts A, B, and D into a single plan. Part C was created as an alternative to Traditional Medicare, and is also called “Medicare Advantage.” Medicare Advantage plans are offered through private insurance companies and can include more options for medical expenses. There are some Part C plans that do not include prescription drug coverage, in which case you would need to enroll in Part D separately.
Many Part C plans include all the benefits from Parts A and B, as well as additional benefits such as dental, vision, or gym memberships that are not included in Traditional Medicare.
Medicare Advantage plans operate similarly to commercial major medical insurance plans with deductibles and coinsurance. You’ll pay a monthly premium depending on the benefits included in your plan.
There are different types of Medicare Advantage plans including:
Prices for Medicare Advantage plans vary depending on the area you live in, as well as you type of plan you purchase. There are many Medicare Advantage plans that have $0 premium. This is possible because the federal government pays private insurance companies a set rate to provide coverage to those who enroll.
Now that we’ve gone over the different parts of Medicare, let’s get into what it’s going to cost you. It’s important to note that just like other types of health insurance, Medicare does not cover the total cost of the bill - it’s a shared expense. The medical services it covers would cost exponentially more without Medicare’s billing discounts so it’s definitely worth having as insurance.
In most cases you won’t have to pay a monthly premium for Part A coverage. What it ends up costing depends on several factors. 99% of Medicare beneficiaries are eligible for “premium-free” Part A . If you or your spouse paid Medicare taxes for 40 quarters or more, you qualify and the monthly payment will be eliminated.
If you paid less than 30 quarters of Medicare tax, the premium will cost up to $437 a month. If you paid Medicare taxes for 30-39 quarters the standard premium is $240.
Similar to other forms of insurance, you are also responsible for paying the deductible and coinsurance amounts before any of the actual benefits are applied. The difference with Medicare is that instead of paying a yearly deductible, you must meet the deductible for each separate “benefit period”, which is determined by the number of days you receive inpatient care in a hospital or skilled nursing facility (SNF). For example, Day 1 of your benefit period starts when you are first admitted as a patient.
In 2019 the deductible for each benefit period is $1,364. This means that you must first pay $1,364 of Part A qualified expenses before Medicare Part A benefits are applied. After meeting the deductible, you’ll pay a certain amount of coinsurance per day - which depends on how long you’ve been receiving treatment.
For the first 60 days of each benefit period, you do not have to pay any coinsurance. Then starting from the days 61-90, you must pay $341 of coinsurance for each day of the benefit period. After 90 days as an inpatient, you begin using your “lifetime reserve days”. During this time the coinsurance level increases to $682 for the next 60 days. If you require inpatient care after 150 days, you will be responsible for all remaining costs.
Please note: the benefit period ends when it’s been 60 days in a row without receiving any inpatient or SNF care. After that a new benefit period will begin the next time you are admitted to a hospital.
The standard Part B premium costs $135.50 per month in 2019, although it can be higher for people with higher incomes. Since this is a slight increase from 2018 where premiums were $134 per month, not everyone will have to pay the full amount (for example, you have a lower income level). This is due to a provision which prohibits Part B premiums to increase any greater than the increase in Social Security benefits.
There’s also a separate deductible amount which you’ll need to pay as an annual cost before any Medicare Part B benefits are applied. In 2019 the Part B deductible is $185 per year. This means you’ll need to pay $185 in doctor or other Part B related expenses before any Medicare benefits are applied. After meeting the deductible, the coinsurance level is typically 20%. This means that Medicare will pay for 80% for most doctor services, outpatient therapy, and durable medical equipment.
If you require regular medication, your prescription will not be covered under Traditional Medicare. While Part B does cover drugs which are administered in a clinical environment, neither Part A nor Part B covers medication which you take on a regular basis. To help cover these costs you’ll need to sign up for Medicare Part D, which vary in premiums but cost on average of $33.19 per month.
If you have Traditional Medicare, you’ll receive a statement in the mail every 3 months known as your “Medicare Summary Notice.” This will list all the situations where your benefits were applied, and how much of it was covered under Medicare.
If you have other forms of health insurance, Medicare works as either the primary or secondary payer. If you have Medicaid (known as a “dual eligible”), Medicare would pay first up to the limits of its coverage.
It’s important to note that Traditional Medicare does not cover all medical expenses, including:
Since there are a lot of situations that Traditional Medicare does not cover, many people also purchase supplemental insurance to help with their medical expenses. Depending on your situation, it may be cheaper to purchase a Medigap plan from a private insurance company as a way to cover other costs related to Medicare. With a Medigap plan, you pay monthly to cover Medicare costs such as the deductible and coinsurance amounts. It can also keep you covered when you travel outside the country.
The Centers for Medicare and Medicaid Services (CMS) has standardized a set of 10 different Medigap options for most states except for Massachusetts, Minnesota, and Wisconsin. Those states have waivers so their plans may vary from the standard set found everywhere else.
For states who don’t have a waiver, there are ten different Medigap plans which are sold through private insurance companies, and each one offers different benefits and premium levels. The prices of each plan will depend on which insurance company you go through, as well as your zip code and age, so unfortunately there’s not a set list of prices for consumers. The Medicare website does have a way for you to compare available plans in your area though, so be sure to use it.
All of the standard Medigap plans include a basic set of benefits. This means that all Medigap plans will cover Medicare Part A and B coinsurance amounts, blood, and additional hospital benefits not covered by Original Medicare.
Here’s a quick look at what the 10 standard Medigap plans available in most states cover. The differences relate to the premium prices and what benefits are included.
Please note: with this plan the deductible is higher, which makes the monthly payments lower.
Please note: Medigap plans only work with Traditional Medicare, and not all plans are available in all states. Beginning in 2020, all newly eligible Medicare beneficiaries will not be able to buy a Medigap plan that covers the Medicare Part B deductible which are Plans F and C. If you have Medicare Advantage, you cannot purchase a Medigap plan. Also you must sign up for a Medigap plan within 6 months of signing up for Part B, or else you risk paying a higher rate or going through an underwriting process when signing up later.
If you have limited resources to pay for Medicare costs, you may be eligible for financial assistance through the government. Here are some different Medicare Savings Programs available to help those who need it:
All of these programs except for the QDWI program can help pay for Medicare Part B premiums. To see if you qualify for one of these Medicare Savings Programs, contact your state’s Medicaid office.
For further assistance you can also contact the State Health Insurance Assistance Program in your area, it’s an excellent resource to help explore your Medicare options.
PACE (Programs of All-Inclusive Care for the Elderly) is a resource intended for frail individuals who qualify to help with situations which traditional Medicare does not cover. What you pay for PACE will depend on your financial situation. If you also have Medicaid you won’t have to pay a monthly premium, but there is a monthly payment otherwise. To qualify for PACE you must need a nursing home-level of care as certified by your state. Here’s some of what having a PACE can help cover:
Once you are enrolled in PACE, you will not need to have a Part D plan. There’s also no deductible or copayment for prescription drugs, services, or treatments approved by your health care team.
Each year there are changes made to Medicare programs which can impact you. In 2019 there was a slight increase in premium prices, as well as deductible levels. The good news is that there’s been an increase Social Security benefits by 2.8% in 2019. Also starting in 2019, the coverage gap known as the “donut hole” has been closed for brand-name drugs (although it won’t be until 2020 for generic drugs). Other 2019 changes include:
It’s important not to wait too long to sign up for Medicare. Don’t wait for the month before you turn 65 to start looking for your best option - you may end up rushing into a plan that is not in your best interests.
Take action with your Medicare options as soon as you become eligible. Some people choose to opt out of Part B, and this is a mistake. You may think you’re saving money by not paying the monthly premium when you’re first eligible, but it will end up costing more when you do sign up - and you’ll be stuck paying the penalty for the rest of your life.
The same situation applies for Part D. Even if you do not require prescription drugs when you’re first eligible, it’s worth signing up for a Part D plan when you’re first eligible to avoid paying any penalties for late enrollment.
Do some research to find the best Medicare plan for your specific needs. Select an agent who will be available to you for questions you have even after you sign up. Also, remember independent agents represent many insurance companies and therefore can offer you more choices -- whereas a company agent will only show the options from the company they represent.
Whether or not you become an expert on all things Medicare is not important. What is important is that regardless of your current age, sooner or later Medicare will become an integral part of your later years. The more informed you are about how it works, the better you’ll be able to take advantage of what Medicare has to offer.
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