Knowing the basics of how Medicare works can help you understand some of the expenses you’ll face.
Medicare is the government health care program for people 65 and over, and its coverage plays an important role in containing medical costs as you age. Medicare benefits do not cover all costs.
You’ll have to make decisions about how you will handle certain coverage gaps as you get closer to 65. Understanding the basics of Medicare can help you understand the costs you will face.
What is Medicare?
Medicare is a federal program that provides health insurance for Americans 65 years and older. It also covers people younger with disabilities. Medicare is different from Medicaid which provides health and other services for eligible low-income individuals of all ages.
Who qualifies for Medicare?
Medicare is available to anyone who has been a U.S citizen for at least six years and is over 65. Some disabled persons under 65 are also covered by Medicare. Social Security disability insurance recipients are usually eligible for Medicare after a waiting period of two years. However, those with end-stage kidney disease (permanent renal failure) and those with Lou Gehrig’s (amyotrophic lateral sclerosis) are automatically enrolled upon signing up.
How can I sign up for Medicare?
If you’re receiving Social Security benefits when you turn 65, you will be enrolled automatically in Medicare Part A, which covers hospital costs, and Part B, which covers doctor visits. You will need to enroll if you want Medicare Part D prescription drugs coverage. This is not automatic.
If you are not eligible for Social Security benefits, you can sign up via the Social Security Administration website. To avoid permanent penalties, you should sign up within the seven-month period around your 65th Birthday. This includes the three months prior to your birthday, the three months following your birthday, and the three after your 65th birthday.
You would need to sign up for Medicare Supplemental Insurance (Medigap) during the six-month Medigap enrollment window. This begins the month that you turn 65 and you are enrolled in Medicare Part B. If you sign up within that time period, the private insurers that offer Medigap plans must take you. If they don’t, it is unlikely that they will sell you a Medigap policy.
If you miss your initial window, or want to switch plans later, there are several annual Medicare open enrollment periods.
Is Medicare free?
If you have paid Medicare taxes for more than 10 years, premiums for Medicare Part A are not required. Medicare taxes are a part of the payroll taxes that are deducted from the paychecks of most workers. Check your Social Security Statement to see if you are eligible. It is accessible through the Social Security Website.
Eligible people must pay monthly premiums of up to $471 for Part A. Monthly premiums are required for Medicare’s other parts, which include prescription drugs and doctor visits.
What is Medicare Part A?
Medicare Part A covers inpatient care in a hospital or skilled nursing facility, although not custodial or long-term care. Part A can also be used to pay for hospice care or home health care. Medicare Part A includes a deductible ($1,484 by 2021) as well as coinsurance. This means that patients will pay a portion. For the first 60 days, there is no coinsurance. However, patients pay an average of $371 per day for the 61st to the 90th day of hospitalization. After that, they will be charged more.
What is Medicare Part B?
Medicare Part B covers doctor visits and other medically necessary services and supplies. This includes preventive services and health care to prevent illness. It also covers ambulance services, durable medical equipment and mental health coverage.
Medicare Part B requires that you pay a monthly premium of $148.50. Higher premiums are charged for married couples and singles with an adjusted gross income of more than $88,000. Medicare Part B includes a $203 deductible. You will typically be responsible for 20% of the Medicare-approved cost for supplies and services.
What is the Medicare Part B penalty
If you do not sign up for Medicare Part B when you are 65, and you later decide that you need it for some reason, you will likely be subject to a 10% penalty for each 12 month period you delay. This penalty will be paid for life since most people don’t drop Medicare Part B.
The penalty can be avoided if you were covered by health insurance through your employer or spouse when you became eligible. After the coverage ends, you must sign up within 8 months.
What is Original Medicare?
Original Medicare is Medicare Part A and Medicare Part A, which are administered by the federal government. The government covers a portion of the costs and people can see any doctor who accepts Medicare assignments.
What is Medicare Advantage?
Medicare Advantage, also known as Medicare Part C, is a type of health plan offered by private insurance companies that provides the benefits of Parts A and Part B and often Part D (prescription drug coverage) as well. These plans can include additional coverage such as vision and hearing, as well as dental care.
Medicare Advantage plans do not have an annual cap on out-of pocket costs, unlike Original Medicare. Medicare Advantage plans are usually HMOs or PPOs, and are only available in certain areas.
What is Medicare Part D?
Medicare Part D helps cover the cost of prescription drugs. Private insurers offer plans and charge a monthly premium of about $33 per month. Higher income beneficiaries are charged more. Like Part B, there is usually a late penalty premium if a beneficiary with higher income doesn’t sign up when they are eligible.
What is not covered by Medicare
Long-term care (also known as custodial or long-term care) is the biggest expense that may not be covered. Medicaid, the federal program for the poor pays for custodial care, but it is usually only for those with low income and little savings.
The following are some other common expenses that Medicare does not cover:
- Exams for fitting hearing aids
- Eye exams and prescriptions for eyeglasses.
- Most dental care.
- International medical care
- Cosmetic surgery.
- Massage therapy.
What is Medigap?
Medigap, or Medicare Supplement Insurance, is an additional health insurance policy you can buy from a private insurer to help pay some of the costs not covered by Medicare Part A and Part B, including deductibles, coinsurance and health care if you travel outside the U.S. Medigap plans don’t cover long-term care, prescription drugs, dental, vision, hearing aids or private nursing care.
In most states, there are 10 types available for Medigap. To purchase a Medigap plan, you must have Medicare Part A or Part B. Medigap policies are not compatible with Medicare Advantage. You can purchase either one.