If you are turning 65 this year, you should begin learning and understanding the basics of Medicare. Medicare is federal health insurance for seniors 65 years and older and for others who qualify due to disability. Medicare has parts, plans, and enrollment periods. If you are beginning to think, “What does all of this mean,” then continue reading to understand the basics of Medicare fully.
Original Medicare coverage
As briefly mentioned above, Medicare comes from the U.S. government, and the coverage divides into two parts. Part A covers inpatient care, and Part B covers outpatient services.
Medicare Part A covers a semi-private hospital room, meals, and medications administered to you as an inpatient. Part A is primarily insurance for hospital services but also includes post-hospital services, such as hospice, skilled nursing, home health care, and social services.
As an inpatient, you must pay the Part A deductible before Medicare pays its share. In 2021, the Part A deductible is $1,484.
All outpatient services will fall under Medicare Part B. For example, doctor’s visits, durable medical equipment, some vaccines, mammograms, and colonoscopies are all covered under Part B. Medicare covers any service a doctor deems as medically necessary. So, if your doctor codes a service as medically necessary, Medicare will likely cover it.
Medicare will not cover all services in full. You must pay the Part B deductible first for outpatient services, which is $203 in 2021. After you have paid the deductible, Medicare will cover 80% of Medicare-approved services, and you will pay the remaining 20% coinsurance.
When to enroll in Medicare
The Medicare eligibility age is 65 years old unless you qualify earlier due to disability. If you turn 65, you must enroll in Medicare during your Initial Enrollment Period (IEP). Everyone’s IEP is different, as it is solely based on one’s 65th birthday.
The IEP begins three months before your 65th birthday and ends three months after your birth month. Here’s an example: If you were born on October 19, 1956, your IEP would begin on July 1, 2021, and end on January 31, 2022.
During those seven months, you will apply for Medicare Part A and Part B through Social Security. If you continue to work past age 65 for a large employer and have their insurance, you can delay all parts of Medicare until you retire.
If you fail to enroll in Medicare Part A or Part B during your IEP and you do not have creditable coverage, you will pay a lifelong late enrollment penalty.
Medicare alternative options
Since Medicare does not cover all medical services at 100%, many beneficiaries purchase either a Medigap or a Medicare Advantage plan for cost-sharing help. Medigap and Medicare Advantage plans are sold by private insurance carriers or Medicare broker agencies.
Medigap plans, also known as a Medicare Supplement, are highly favored due to working alongside Medicare. This means you can visit any doctor in the United States that accepts Medicare and use your Medigap plan. A doctor must take your Medigap plan, regardless of carrier or plan, if they accept Medicare as insurance.
There are ten Medigap plans on the market, with only two having limited availability. If you must see a specialist, you do not have to get a referral beforehand. Most Medigap plans cover the 20% coinsurance you typically pay for outpatient services, as well.
Medicare Advantage plans, also known as Part C, work very differently than Medigap plans. If you purchase a Medicare Advantage plan, Medicare hands you over to the company, and you will receive your Part A, Part B, and Part D (drug coverage) benefits from that carrier.
Medicare Advantage plans are very similar to company group coverage. For example, you will have a network of doctors or pharmacies to receive your care and prescriptions. The two most popular Medicare Advantage plans are HMO and PPO plans.
The Medicare Advantage carrier will set your cost-sharing expenses, and you must get a referral from your doctor before visiting a specialist. Medicare Advantage plans have more restrictions than Medigap plans, but many beneficiaries still enjoy their Medicare Advantage plans.
Prescription drug coverage
Medicare only covers inpatient and outpatient services. Therefore, you must purchase a Part D prescription plan unless you have creditable coverage for Part D, such as VA coverage. Part D is solely coverage for medications you obtain at the pharmacy.
You must enroll in a Part D plan during your Initial Enrollment Period. However, you will not apply for a Part D plan through Social Security as you do with Part A and Part B. Instead, you will purchase a plan from a private insurance carrier, as you do with a Medigap or Medicare Advantage plan.
If you have Original Medicare or Medicare and a Medigap plan, you will need to purchase a Part D plan to work alongside your care. However, most Medicare Advantage plans include a Part D plan, so you do not have to buy an additional Part D plan if you have one of these plans.
If you fail to enroll in a Part D plan, you will be charged a lifelong late enrollment penalty for Part D.
Medicare can be a complex journey to get started on alone. Once you start understanding the basics of Medicare and work with a reputable Medicare broker, the system will not seem as complicated as it had at the beginning.