Sometimes it feels like you need a PhD or a secret decoder ring to unravel all the complexities of the Medicare system. Just when you think you’re ready for retirement, it’s like a full time job trying to figure out your next stage health care.
When you are approaching the Medicare-eligible age of 65, you’ll get a thick handbook in the mail along with countless supplement offers from insurance companies, all full of unfamiliar terms and confusing jargon. Many soon-to-be-retired people have spent their working life going along with their employer-based health plans, not really digging into the nitty-gritty details, so suddenly having to take charge of these important life decisions can be intimidating. Maybe you plan to work past 65 and don’t know if you even need Medicare, but are unsure if you will unwittingly miss the window or be penalized for late enrollment. Do they make it this complicated on purpose?
You’re not alone if you feel clueless about Medicare and its various options. So let’s weed through the information-overwhelm and break it down to the basics of you need to understand about Medicare. Consider this your decoder ring, if you will.
What is Medicare?
Medicare is a federal health insurance program for people age 65 and older, plus others who have certain disabilities. Its coverage helps you contain medical costs as you age, but be aware that Medicare benefits don’t pay for everything. Note that Medicare is different from Medicaid, which offers health and other services to eligible low-income people regardless of age.
Who can get Medicare?
Anyone who is 65 years old in America is eligible for Medicare. You will get a Medicare card in the mail three months prior to your 65th birthday (unless you opt to delay). This includes permanent residents who have resided in the country for at least five consecutive years. Anyone who has qualified for two years of Social Security disability is also eligible, but if you’re aging into the program at 65, it doesn’t matter if you are already taking Social Security benefits or not.
How Original Medicare Benefits Work
Original Medicare consists of Part A and Part B. These aren’t two separate plans, but two parts of the same plan and you have to enroll through the Social Security Administration. The benefits are the same for everyone across the United States.
Part A is the Hospital Coverage. It helps pays for room and board in a hospital or a skilled nursing facility. Medicare Part A is free for most, if you or your spouse have worked at least 10 years in the US. If you haven’t contributed for at least 10 years, you will pay a monthly premium of $458. Don’t enroll late or this premium will be higher.
Part B is the Outpatient Coverage. It helps pay for doctor visits, lab-work, diagnostic tests, medical equipment, surgeries and more. The cost of Medicare Part B depends on your income over the past two years. Rates start at $144.60 per month.
If you are collecting Social Security Benefits at age 65, you are automatically enrolled in Parts A and B. Part B premiums will be deducted from your monthly Social Security income benefits. If you have delayed enrollment into your Social Security income benefits, then they will invoice you for Part B on a quarterly basis.
What DOESN’T Original Medicare Cover?
Sorry, not everything is included with Medicare, so you’ll need to be prepared for additional expenses. Common services and benefits not apart of Original Medicare include things like:
- Prescription drugs
- Routine dental
- Routine eye care
- Routine hearing exams and hearing aids
- Most care while traveling outside the US
- Custodial care (help with dressing, bathing, eating etc…)
- Long-term care
What are the Choices for Additional Coverage?
Most seniors opt for additional coverage to supplement what Original Medicare doesn’t provide. Many private companies offer Medicare Part D, which helps pay for prescription medications. This is a pharmacy card which allows you to purchase prescriptions at a lower price than retail. Even if you’re not taking many prescription drugs yet, it is important to have this for future medication needs you might have down the road, otherwise you’ll have to pay for those out of pocket.
Note, you will be eligible for Parts A, B and D on the first day of the month you turn 65 in (Part D being optional but advisable).
You may have noticed we skipped over Part C in this list. Part C is a Medicare Advantage Plan offered by private companies that combine all the coverage of Original Medicare plus other benefits, all in one single plan. Many of these Medicare Advantage Plans also include Part D prescription drug coverage. Some include dental, hearing and vision care and even fitness programs. There are also Medigap Supplement plans that can help round out coverage and bridge the gaps. Specific details of these plans vary according to your geographic area, and have a wide variety of deductibles, copays and coinsurance. In 2020, these maximum allowed for out of pocket costs is capped at $6,700.
With Plans A, B, C and D, you can customize coverage according to your needs and situation. It’s designed to be flexible, rather than a one-size-fits-all system.
Other Important Basics to Know
- When you are turning 65, you will have a 7 month Initial Enrollment Period (IEP), starting three months before your birthday, the month of your birthday and three months after. Don’t be late or you may incur penalties.
- You can choose to see any qualified medical provider enrolled in Medicare that is accepting patients.
- If you’re eligible for Medicare, you can’t be refused coverage for Part A or Part B due to pre-existing conditions or medical history.
- Should your needs change through the years, you can switch your Medicare Advantage or Part D prescription coverage each year. October 15 to December 7 is the Medicare Annual Enrollment Period when you can make these changes. If you qualify, you can also make changes during a Special Enrollment Period (SEP).
- If you or your spouse will continue to work beyond age 65 and have an employer health plan, talk to your administrator to see how this might effect your benefits.
- For more information, call the Medicare Helpline at 1-800-MEDICARE.