Retirement brings many changes in life, and one of the most important changes involves the way to take up Medicare for health insurance coverage. Most retirees find their way through Medicare quite confusing. With the different parts of Medicare, enrollment periods, and options for coverage, sometimes it even makes one feel like he or she is navigating through some kind of maze. It is, however, important to understand the basics concerning Medicare in your retirement years to make certain you have the right health cover.
The aim of this article is to try to make Medicare less baffling for retirees by providing a general overview of this federal health insurance program. We’ll explore what Medicare is, who’s eligible, what it covers, and how to enroll. Then we will take a closer look at the different parts of Medicare, supplementary coverage options, and key things to know in order to get the most from your Medicare benefits.
Whether you are nearing retirement or have already begun your Medicare coverage, this resource will help you better understand the basics of the program and make more informed decisions about your health care coverage. Now let’s journey through the world of Medicare and unravel some of those complexities.
What is Medicare?
Prior to going deep into details, the first thing that ought to be answered is: what exactly is Medicare?
Definition and Purpose
Medicare is a federal insurance program specifically designed for people aged 65 and above. It also covers certain younger people with specific disabilities or conditions, such as ESRD.
The program aspires to provide affordable health care to older Americans who otherwise might find it difficult to get private health insurance or may not afford it.
Brief History
Medicare was established in 1965 as part of the “Great Society” agenda of President Lyndon B. Johnson. Its creation was rooted in the realization that aging Americans could not afford the cost of health insurance. Since it became a law, Medicare has evolved and expanded to serve its purpose-a health care delivery system for older Americans and all disabled individuals-better.
Who Administers Medicare?
Medicare is administered through the Centers for Medicare & Medicaid Services-also called CMS-a federal agency within the Department of Health and Human Services.
Medicare Eligibility
Understanding who is eligible for Medicare is a good first step toward understanding the basics of the program.
Age-Based Eligibility
The majority of people become eligible for Medicare upon age 65. You are eligible if you:
- Are age 65 or older
- You are a U.S. citizen or permanent legal resident who has been residing in the U.S. for at least five consecutive years
Disability-Based Eligibility
You may be able to get Medicare before age 65 if you have:
You have been on Social Security Disability Insurance (SSDI) for 24 months you have Amyotrophic Lateral Sclerosis (ALS, also known as Lou Gehrig’s disease) you have End-Stage Renal Disease (ESRD)
Eligibility vs. Automatic Enrollment
Just because you’re eligible doesn’t mean you’re automatically enrolled, by the way. We will get into enrollment later in this article.
The Different Parts of Medicare
Medicare comprises various parts, each serving different coverage needs. There are very significant things you should know about these parts, which will help you make an informed decision about your cover.
Medicare Part A
Part A is usually described as hospital insurance. It covers the following:
Inpatient hospital stays
Care in a skilled nursing facility
Hospice care
Some home health care
Most people do not pay a premium for Part A because either they or their spouse paid Medicare taxes for a long enough period, which is usually a decade, or 40 quarters.
Medicare Part B
Part B is medical insurance. It covers:
- Outpatient care
- Preventive services
- Medical supplies
- Some doctor’s services
Part B has a monthly premium. If you’re getting Social Security, Railroad Retirement, or Office of Personnel Management retirement benefits, your Part B premium will be deducted from one of these benefit payments. Otherwise, you’ll get a bill.
Medicare Part C (Medicare Advantage)
Part C, also known as Medicare Advantage, is an alternative way to receive your Medicare coverage. These plans are offered by Medicare-approved private insurance companies. They often include:
Part A and Part B coverage
Often Part D-covering prescription drugs
Sometimes additional benefits, such as dental, vision, or hearing coverage
Medicare Part D
Part D covers prescription drugs. These plans are offered by insurance companies contracted with Medicare. If you want Part D coverage, you can buy it as part of:
- A PDP if you have Original Medicare
- A Medicare Advantage plan that covers drugs
Original Medicare vs. Medicare Advantage
When you become Medicare eligible, you can choose one of two primary avenues to get your Medicare coverage: Original Medicare or Medicare Advantage.
Original Medicare
This is the traditional fee-for-service program provided directly by the federal government. It includes:
Part A: Hospital Insurance
Part B: Medical Insurance
With Original Medicare, you can:
See any doctor or hospital in the United States that takes Medicare
Add a separate Part D plan for drug coverage
Purchase supplemental coverage called Medigap to help lower your out-of-pocket costs
Medicare Advantage
Medicare Advantage is an “all in one” alternative to Original Medicare. Medicare Advantage plans are offered by private companies that have been approved by Medicare. These plans include:
Part A and Part B coverage
In most cases, Part D drug coverage
And often additional benefits not covered by Original Medicare
With Medicare Advantage:
- You may have lower out-of-pocket costs than with Original Medicare
- You may need to use doctors in the plan’s network
- You can’t buy separate Medigap coverage
Medicare Enrollment Periods
Knowing when to enroll in Medicare is key in avoiding late enrollment penalties and gaps in coverage.
Initial Enrollment Period (IEP)
This is a 7-month period which involves:
- The 3 months before the month you turn 65
- The month you turn 65
- The 3 months after the month you turn 65
For most people, this is the best time to sign up for Medicare.
General Enrollment Period (GEP)
If you miss your IEP, you can sign up during the GEP. This runs from January 1 to March 31 each year. Coverage starts July 1.
Special Enrollment Periods (SEPs)
These are periods outside the regular enrollment periods when you can enroll in or change your Medicare coverage due to specific life events such as:
- You lose other health coverage
- You move out of your plan’s service area
- You qualify for Extra Help with Medicare drug costs
Annual Enrollment Period AEP
From October 15th through December 7th every year, you can:
- Join, switch, or drop a Medicare Advantage plan
Join, switch, or drop a Medicare drug plan
Medicare Advantage Open Enrollment Period
If you’re in a Medicare Advantage plan, from January 1 to March 31 every year, you can:
Switch to a different Medicare Advantage plan
Drop your Medicare Advantage plan and go back to Original Medicare
Medicare Costs
Understanding how much you pay for Medicare helps you budget for health care in retirement.
Part A Costs
Most people pay no premium for Part A. However, there are other expenses below.
- Deductible: $1,484 per benefit period – in 2021
- Coinsurance: varies depending on the length of stay in the hospital
Costs in Part B
- Standard Premium: $148.50 monthly in 2021, but may be high based on income
- Deductible: $203 in 2021
- Coinsurance: usually 20% of Medicare-approved amount for most services
Costs in Part C-Medicare Advantage
Costs vary by plan but may also include:
Monthly premium (in addition to Part B premium)
Deductibles, copayments, and coinsurance
Out-of-pocket maximum
Part D Costs
Costs vary by plan but may also include:
Monthly premium
Annual deductible
Copayments or coinsurance
Coverage gap (“donut hole”) costs
What Medicare Doesn’t Cover
Medicare generally doesn’t cover many services. Among them are:
Long-term care (custodial care)
Most dental care
Eye exams related to prescribing glasses Dentures Cosmetic surgery Acupuncture Hearing aids and exams for fitting them Routine foot care Knowing what is not covered will help you plan for additional insurance needs or budget out-of-pocket expenses. ## Supplemental Coverage: Medigap
Medigap, also known as Medicare Supplement Insurance, is extra coverage that you can purchase from private companies to pay for some of the out-of-pocket costs that Original Medicare doesn’t cover.
What Medigap Covers
Medigap policies can help pay for:
- Deductibles
- Coinsurance
- Copayments
How to Enroll in Medigap
The best time to buy a Medigap policy is during your 6-month Medigap Open Enrollment Period. This period begins the month you’re 65 or older and enrolled in Part B.
Standardized Medigap Plans
Medigap policies are standardized and labeled as letters (A through N). Each standardized policy must provide the same basic benefits, regardless of insurance company selling it.
Prescription Drug Coverage: Part D
Medicare Part D provides prescription drug coverage. Here’s what you need to know:
How to Get Part D Coverage
You get Part D coverage through:
- A stand-alone Prescription Drug Plan if you have Original Medicare
- A Medicare Advantage plan that covers drugs
Part D Costs
Costs may include:
- Monthly premium
- Annual deductible
- Copayments or coinsurance
- Costs in the coverage gap (“donut hole”)
The Coverage Gap (“Donut Hole”)
This is a temporary limit on what the drug plan will cover. In 2021, once you and your plan have spent $4,130 on covered drugs, you’re in the coverage gap.
Formularies
Each Part D plan has a list of covered drugs called a formulary. It pays to check that your medications are covered prior to selecting a plan.
Extra Help for Medicare Costs
There are programs to help pay for Medicare for people with limited income and resources:
Medicare Savings Programs
These state programs may pay Part A and Part B premiums, deductibles, coinsurance, and copayments.
Extra Help for Part D
This program helps pay Part D premiums, deductibles, and copayments.
Medicaid
Some people qualify for both Medicare and Medicaid. This is sometimes called “dual eligibility,” a situation in which you are entitled to more complete coverage.
Getting the Most from Your Medicare Coverage
Following are some suggestions to get the most out of your Medicare benefits:
Take Advantage of Preventive Services
Medicare covers many preventive services without requiring you to pay, including but not limited to:
Annual wellness visits
All kinds of cancer screenings
Flu shots, including all vaccinations
Annual Review Your Coverage
Your health needs and plan offerings can also change from one year to another. Take advantage of the Annual Enrollment Period to review and make changes to your coverage as needed.
Keep Good Records
Keep a record of your medical bills and prescription costs. Also, keep any letters or emails you have with Medicare or your plan providers.
Use Medicare’s Online Tools
Make sure you sign up for an account on Medicare.gov, where you’ll be able to access information that’s personalized and relevant to you, along with tools to help you manage your coverage.
Conclusion
It may be challenging to navigate Medicare, but the fundamentals will be able to give you a better understanding of how to make choices about your health coverage in retirement. Keep in mind that Medicare has different parts-A, B, C, and D-each responsible for different parts of your needs. You have a choice in how you receive your coverage, such as through Original Medicare or Medicare Advantage. You can supplement your Medicare coverage with Medigap policies or standalone prescription drug plans.
Key points to remember:
- Knowing your enrollment periods can help you avoid any penalties and gaps in coverage.
- Be familiar with the costs for each part of Medicare.
- Know what is not covered by Medicare; you may need to buy additional coverage.
- Check your coverage every year to make sure it continues to be right for you.
- Take advantage of the preventive services and other benefits to get the most out of Medicare.
Don’t be afraid to ask for help as you approach retirement or try to navigate your existing Medicare coverage. One resource, the State Health Insurance Assistance Program, offers free, unbiased counseling to individuals seeking to understand their Medicare options.
This is all about finding the best Medicare coverage that will suit both your health and financial needs. Knowing some basics about Medicare puts you on your way to health and financial security in retirement. The right coverage will be there to help you enjoy retirement with peace of mind about your healthcare.
