Medicare is a federal health insurance program for individuals 65 and older, or younger individuals with certain health disabilities. Medicare is made up of 4 individual parts covering different aspects of a person’s medical coverage that come with varying costs. The individual parts can be combined to meet your healthcare needs. Most doctors take Medicare, but it is not a guarantee, so if you want to stay with your doctor and you’re nearing 65 it is a good idea to check with your doctor.
The Four Parts of Medicare:
Medicare Part A covers inpatient hospital care, skilled nursing care, hospice care, and home health care. If you or your spouse worked and paid taxes for at least 10 years, there is no cost. If you have already been receiving Social Security benefits for four months before turning 65, you will be automatically enrolled in Part A.
Medicare Part B covers 80% of medical costs not covered by Part A, both combine to make up the Original Medicare. Unlike Part A, you need to elect Part B when you turn 65. Part B covers doctor’s visits, lab tests, medical equipment, preventative services, and the standard monthly premium is $148.50. Individuals with higher incomes may pay a higher premium while some will pay less.
Medicare Part C, or Medicare Advantage, is an alternative to Original Medicare. It features many of the same benefits, but unlike Part A and B, many Medicare Advantage plans come with vision, dental, hearing, and prescription drug coverage. These Medicare plans are offered by private insurers that are approved by Medicare, and the costs are different depending on the plan insurer.
Medicare Part D is the most recent addition to Medicare, and it is optional to join. Part D offers prescription drug plans from private companies that have been approved by Medicare. The cost varies by state and insurer.
Enrolling in Medicare:
You are eligible to enroll in Medicare at the age of 65. The only way you are enrolled automatically is if you already receive Social Security or Railroad Retirement Board benefits. If you do not qualify for automatic enrollment you need to contact the Social Security Administration during your Initial Enrollment Period (IEP) to avoid penalties.
- If you have insurance through your employer after turning 65, your IEP is 8-months after that coverage ends.
- If you do not have insurance when you turn 65, your IEP will include the three months before your birthday month, your birthday month, and the three months after your birthday month for a total of seven months.
- There is a general enrollment period for Original Medicare (Part A and/or Part B) if you are not automatically enrolled in Medicare or missed your Initial Enrollment Period from January 1st – March 31st. For those that enroll during this period, coverage will begin on July 1st but may be associated with late enrollment fees.
Missing your enrollment period for Medicare can be very costly. Medicare Part A, B, and D have late enrollment penalties for premiums. Sometimes people forget to enroll, other times people delay thinking they will qualify for a Special Enrollment Period because they continued to work past 65.
If you miss your IEP the fees look as follows:
- Medicare Part A: if you have a premium the penalty is 10% charged for two times the number of years you waited. For example, if you waited two years you would pay the 10% penalty for four years.
- Medicare Part B: for Part B the penalty will occur for as long as you participate in the plan and will be 10% for every year you delayed. So, if you waited two years, you would pay a 20% penalty.
- Medicare Part D: the penalty is 1% of the average Part D premium for every month you delay enrollment, and the penalty continues for the total time that you are enrolled. If you waited 6 months after your IEP, you would pay an additional 6% above the average premium.
Medigap insurance is supplemental insurance purchased from private companies to fill “gaps” that are not covered by Medicare Part A and B. This is different from Medicare Part C because Medigap does not provide Parts A and B, it only supplements Medicare. The costs for Medigap insurance are completely out of pocket and can be used to cover the 20% in coinsurance and individual owes or items not covered by Medicare. If a Medigap policy is right for you, you will get the best price if you do it during your Medigap Open Enrollment Period, which begins when you enroll in Part B. The Medigap policies vary from state to state.
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