Most Americans can begin Medicare benefits on the first day of the month of their 65th birthday. More people use Medicare for their primary insurance than any other plan in the United States. Yet, many who are about to start Medicare benefits don’t understand how it all works. That’s why we are here. We want to share some basic information you should know about Medicare before you start.
Medicare Has Four PARTS
Medicare is divided into four parts. Parts A, B, C, and D. Here is how they work:
- Medicare Part A is inpatient services insurance. Part A covers expenses such as inpatient hospital stays and care provided by skilled nursing facilities.
- Medicare Part B is outpatient services insurance. Part B covers physician visits and outpatient procedures.
Together, Medicare Parts A and B are often referred to as “original Medicare.”
- Medicare Part C is Medicare Advantage. These are plans offered through private insurance companies. Medicare Part A and Part B (and many times, Part D) are combined into Part C. Medicare Part C is a Medicare replacement plan. You are replacing your coverage under original Medicare and moving your care to a private HMO or PPO that makes your healthcare decisions from now on.
- Medicare Part D is prescription drug coverage,. Part D coverage is often added to people with original Medicare. These plans are also offered through private insurance companies. As previously states, Part D coverage can be included a Medicare Advantage plan.
Do you need to sign up for Medicare at 65?
If you have already started receiving benefits from Social Security, there is nothing for you to do to enroll in Medicare. You will be automatically enrolled. You can look for your Medicare card and information packet in the mail 8-10 weeks before your benefits begin. Your Medicare coverage will begin on the first day of the month of your 65th birthday.
If you have not started receiving Social Security benefits, you will need to apply for Medicare. You apply for Medicare through the Social Security Administration. You can visit their website or give them a call at 1-800-772-1213. You also have the option to visit your local Social Security office.
You have an Initial Enrollment Period (IEP) that lasts for seven months. It starts three months before the month of your 65th birthday, includes your birth month, and then continues for three months following your birth month.
You may qualify for an exception to the need to enroll at your 65th birthday. If you are covered under an employer health plan, and your employer has 20 or more employees, you can postpone your Part B enrollment, if you so desire. This scenario qualifies as group coverage. It means when you retire or otherwise lose group coverage, you will get a Special Enrollment Period (SEP) and will not be subject to a Late Enrollment Penalty with Medicare.
Even so, it is usually a good idea to enroll in Part A when you turn 65. If you have worked more than 40 quarters (equivalent to 10 years) in the U.S., Part A is free. This is different from Part B which does have a monthly premium. It could be wise to postpone enrollment in Part B if you qualify for group coverage through an employer.
How much is Medicare coverage?
As previously mentioned, Part A is free for most people. Medicare Part B is not free. The standard Medicare Part B premium is $134 per month in 2017. Medicare beneficiaries who pay their premiums through Social Security deduction usually pay slightly less. This is because of rules concerning how cost-of-living increases may apply each year.
Retirees meeting the threshold that classifies them as high-income earners will pay higher premiums. The threshold is based on how much income was earned 24 months ago. This means 2015 income was taken into account for 2017 Medicare Part B premiums. Single taxpayers with adjusted gross income greater than $85,000 and married couples with combined incomes over $170,000 pay Part B premiums of $187.50 to $428.60 per month in 2017. This is dependent on the actual income level. This website has helpful information on the costs of Part A and Part B, including charts breaking down who will pay what for Medicare based on income.
What original Medicare covers
Here are what Medicare Part A and Part B cover:
Medicare Part A (Hospital Insurance)
- Helps cover inpatient care in hospitals
- Helps cover skilled nursing facility, hospice, and home health care
- Helps cover ambulance services
Medicare Part B (Medical Insurance)
- Helps cover doctors’ and other health care providers’ services
- Helps cover outpatient care, durable medical equipment, and home health care
- Helps cover some preventive services to help maintain your health and to keep certain illnesses from getting worse
There are a few medical expenses that Medicare doesn’t cover. These include:
- Long-term care
- Cosmetic dental care such as cleanings, extractions, root canals, etc.
- Vision care
- Hearing aids
Even with all that Medicare covers, there are a lot of gaps in the coverage. These costs will have to be paid by you. You have the option of acquiring an insurance policy to cover these gaps.
In 2017, Part A of Medicare has a $1,316 deductible for inpatient hospital stays. That deductible covers a 60-day benefit period, regardless of how long you stay admitted or how many times you come in and out of the hospital during that period.
If your stay extends beyond the 60-day period, you will start having to pay $329 per day coinsurance for the next 30 days of confined care in a hospital.
A skilled nursing facility confinement is covered under Part A as well. The first 20 days of skilled care are covered by Medicare. After that, you are responsible for a $164.50 daily co-payment for days 21-100. After that, Medicare pays nothing.
Part B has one annual deductible. In 2017, that deductible is $183. Unlike the Part A deductible which could be paid multiple times in a year, the Part B deductible only comes due once per year. After you meet this annual deductible, Medicare will typically cover 80% of your care. You are responsible for the other 20%, and there is no cap.
Your Options For Protecting Yourself From Unexpected Medical Expenses
All of the gaps in coverage that mentioned in the previous section can be covered for you. A Medicare Supplement Plan, or Medigap plan, can cover some or all of the gaps in Medicare coverage.
There are 10 different Medigap plans available for you to choose from. The Medigap plans carry a letter designation ranging from Plan A to Plan N. You can find more detailed information on each of the plans at the Medicare.gov website. That is official website for the federal Medicare program.
Plan F is the most comprehensive plan – covering every Part A and Part B deductible and co-pay that you are responsible for. But although it offers the most coverage, it is not the best value. Check out this short YouTube video to see why the Plan G is actually a better value for almost identical coverage to the Plan F:
If you are new to Medicare, it is important to know these facts. By learning these facts, you can know how and when to enroll in Medicare, what your expected costs will be, what Medicare does and does not cover, and how to protect yourself from unexpected medical expenses.