44 million Americans are enrolled in the Medicare program — and this number is expected to rise to 79 million by 2030.1 Despite its widespread use, however, Medicare is misunderstood by many. Here, we share the basics that anyone who’s eligible for the program (or about to become eligible) should know.
Who’s eligible for Medicare?
You become eligible for Medicare when you turn 65 — and if you’re already receiving Social Security benefits at that time, you’ll be automatically enrolled. There are some special circumstances that allow you to qualify for Medicare before age 65:
- If you experience a severe illness, injury, or disability that has granted you Social Security benefits for 24 months (note that the 24 months don’t have to be consecutive).
- If you have Lou Gehrig’s disease. In this case, you’ll qualify for Medicare the month you become eligible for Social Security benefits — you won’t have to wait 24 months as you would with an illness, injury, or disability.
- If you have kidney failure (also known as end-stage renal disease) and you or your spouse have paid Social Security taxes for a certain amount of time. The amount of time required varies by age.
What are the different types of Medicare and what do they cover?
- Medicare Part A helps pay for inpatient hospital care, home health, and hospice care. When you think Medicare Part A, think “hospital stay or in-home help.”
- Medicare Part B helps cover general doctor’s appointments, outpatient services (meaning you check in and check out from the hospital on the same day), and diagnostic tests. It also covers certain medical supplies and preventative services. When you think Medicare Part B, think “general doctor services.”
- Medicare Part C is offered by government-approved private insurance companies. It’s also known as Medicare Advantage. These plans may cover vision, hearing, dental, and other services that Medicare Parts A and B do not. They may also help cover coinsurance payments that are required even if you have Medicare Part A and B. Many people buy Advantage Plans to help reduce their out-of-pocket healthcare costs. When you think of Medicare Part C, think of “supplemental coverage.”
- Medicare Part D covers prescription drugs. This one is easier to remember: when you think of Medicare Part D, think “prescription drugs.” Be aware, however, that not all Medicare Part D policies cover all types of drugs — so if you require specific prescriptions, be sure that the Part D plan you buy covers what you need.
There’s also a situation with Medicare Part D known as the “donut hole.” Essentially what happens is that Medicare Part D will cover prescription drug costs up to a certain limit, and once that limit is hit, it won’t pay for any more prescriptions until the patient has covered a certain amount out of their own pocket. After the patient covers that amount, Medicare Part D will kick in again and cover most of the prescription drug costs. This gap can throw people for a loop if it’s not planned for. So, be sure you understand your costs and what you’ll owe if you find yourself in the “donut hole.”
If I’m covered by Medicare, should I have additional health insurance?
Medicare doesn’t cover everything, so you may want to buy supplemental health insurance. This is known as a Medigap plan, which is regulated and standardized by the government.
A Medigap plan serves a similar function that a Medicare Part C plan does — it helps cover costs that Medicare Part A and B don’t. For this reason, you can’t have both a Medicare Part C plan AND a Medigap plan. And it’s illegal for anyone to try to sell you a Medigap plan if you already have a Medicare Part C plan.
If you buy a Medigap plan, you’ll have to meet a deductible before Medicare pays anything. And you’ll also owe a co-payment when you visit a physician or are admitted to the hospital. But what you owe will still be less than if you don’t have a supplemental plan.
In most states, 10 standard Medigap policies are available. They each offer certain basic core benefits, such as coinsurance payments for hospital pays and skilled nursing facility visits. Some of the more expensive ones cover items such as long-term care, dental care, vision care, and hearing aids.
You can cancel any Medigap plan you purchase within a certain amount of time after you buy it. Your policy also must be guaranteed to be renewable, and cannot duplicate existing coverage, including Medicare. More information about Medigap is available here.
Another way to supplement Medicare is to keep employer-sponsored healthcare insurance in effect, if possible. If this situation is do-able, one plan will pay your healthcare costs first, and the other plan will cover some or all of the remaining costs. To make sure claims are properly paid, let your health provider know when you have health insurance in addition to Medicare.
How much does Medicare cost?
Most people don’t pay anything for Part A. However, if you haven’t paid Medicare taxes for at least 30 quarters, the standard monthly premium is $413 in 2017. If you’ve paid Medicare taxes between 30-39 quarters, the standard monthly premium is $227 in 2017. If you or your spouse paid Medicare taxes for 40 or more quarters, you won’t pay anything for part A. 2
Note that Part A coinsurance payments for hospital stays vary depending on how long you’re in the hospital and your “benefit period.” This period is based on when your last hospital stay was. Your deductible is $1,316 in 2017 for each benefit period. For specific details, visit https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html
The standard Part B monthly premium is $134 in 2017. It could be higher, depending on your income. But it could also be lower if you’re already receiving Social Security benefits, depending on the amount you have coming in each month. Your deductible is $183 per year in 2017. After you’ve met your deductible, you’ll generally pay 20% of the Medicare-approved amount for most services.3
Costs for Part C/Medicare Advantage, Part D, and Medigap all vary depending on the type of plan you purchase. You’ll need to shop around based on your needs and budget.
How do I enroll in Medicare?
You’ll automatically be enrolled in Medicare Part A and B when you turn 65 if you’re receiving Social Security benefits. If you’re automatically enrolled in Part B, you’ll have a certain amount of time to decline coverage after your enrollment date since it does involve a monthly cost.
If you postpone Social Security past your 65th birthday (and therefore aren’t automatically enrolled in Medicare), you can still enroll in Medicare during a seven-month window known as the initial enrollment period. This window starts three months before your 65th birthday, includes the month of your 65th birthday, and ends three months after your 65th birthday. Call the Social Security Administration (SSA) at (800) 772-1213 before your initial enrollment period starts to discuss your options. Or, visit your local Social Security office.
If you don’t join Medicare Part B during the initial enrollment period, you can do so later during the annual general enrollment period from January 1 to March 31 each year. However, you may have to pay a higher premium going forward if you go this route, so be sure you’re making an informed choice to delay.
As the saying goes, knowledge is power — and this is especially true when it comes to understanding your Medicare-related options. Get to know the system, shop around, and ultimately make decisions that can help support both your physical and financial health.