This Medicare overview is designed to fill in the gaps about eligibility, costs, coverage, penalties and more.
Maybe all you know about Medicare is that you can “get it” when you turn 65.
When it’s gets close to your birthday, you’re all of a sudden bombarded with mail and phone solicitations or you’re constantly seeing commercials about Medicare benefits “at no cost to you”.
Hopefully, this Medicare overview will help you get started.
So What Is Medicare?
Medicare is a government-run health insurance program for retired people, and for those with certain medical conditions.
It is administered by the Centers for Medicare and Medicaid Studies, or CMS and covers inpatient and outpatient care.
Private companies offer additional benefits like vision, dental and prescription drugs.
Medicare has four parts and each comes with its own deadlines and penalties. Pay close attention and do not miss these deadlines, as the costs can really add up.
Note: Any pricing mentioned in this article is current for the year 2021.
Who is Covered by Medicare?
You may be eligible for Medicare benefits if you are:
- Over the age of 65.
- Permanently disabled.
- Suffering from End-Stage Renal Disease.
What does Medicare Cover?
The four parts of Medicare cover specific services, with different premiums and deductibles, copays and coinsurance amounts.
Just in case you thought Medicare was totally free, like I did.
Here’s the breakdown:
- Part A: Hospital Insurance
- Part B: Medical Insurance
- Part C: Medicare Advantage
- Part D: Prescription Drug Plan
Original Medicare Overview
Parts A and B together are what is typically referred to as Original Medicare. Even though it is a medical insurance program, Original Medicare does not cover vision, dental, hearing, and prescription drugs.
Parts C and D were late additions to Medicare that can provide these services.
Medicare Part A – Hospital Insurance
What it covers:
- Inpatient hospital stays and medical treatment
- Skilled nursing facility stays
- Hospice care at home
- Home health services
Premiums: Most people do not have to pay a premium for Medicare Part A. You need to have paid Federal Insurance Contributions Act (FICA) taxes for at least 40 quarters (10 years).
Otherwise, in 2021, it’s $259 per month (prorated with at least 30 quarters) or $471 per month (less than 30 quarters).
You may qualify to reduce or eliminate the premium depending on your spouse’s tax payments.
Deductible: $1,484 deductible every benefit period
Copays and Coinsurance: The co-pay is $0 per day of hospitalization for the first 60 days (per benefit period) and goes up after that.
Deadlines and Penalties: Your initial enrollment period (IEP) is the 7-month period around your 65th birthday – 3 months prior, your birth month, and the 3 months after.
If you do not take advantage and enroll during this time, you can be charged a late enrollment penalty.
If you are already receiving social security benefits, you will be enrolled automatically; otherwise, you must sign up for Medicare.
Medicare Part B – Outpatient and Routine medical services
What it covers:
- Doctor visits
- Laboratory and blood tests
- X-rays
- Emergency ambulance transportation
- Various preventive tests and screenings
- Diabetic testing supplies
- Medical equipment
Premiums: The standard premium for Plan B is $148.50, per person. So, if you’re married, you and your spouse each pay the premium.
And the amount could actually be higher, as it is based on income, culled from tax returns from the 2 years prior to sign-up.
Once you are no longer working – and your income is reduced – make sure to appeal to qualify for a lowered premium.
Deductible: $203
Copays and Coinsurance: around 20%
Deadlines and Penalties: Part B premiums will go up by 10% for every 12-month period that you are eligible for Medicare and do not sign up.
You may wait to enroll if you have a group health plan through your place of employment, but you still need to sign up for Medicare within eight months of the time your coverage ends, or you will face a penalty.
An Overview of Medicare Parts C and D
Medicare Part C – Medicare Advantage
Part C is called Medicare Advantage. It includes private Medicare-approved plans for people currently enrolled in Medicare Part A and Part B. Premiums for these plans can vary depending on which one you choose.
Medicare Advantage plans are very similar to the HMO and PPO choices offered by employers, with network and out-of-network providers.
You should note that Medicare Advantage plans often have specific networks, and you may only receive coverage if you see doctors within the network.
You must remain enrolled in Original Medicare (Parts A and B) – do not unenroll.
A private company takes over the administration of your plan, which could include prescription drug coverage (Part D).
What it covers:
- Vision services
- Dental services
- Hearing screenings
- Prescription drugs (possibly)
- Limited out of pocket maximum amounts
Premiums: Varies
Deductible: Varies
Copays and Coinsurance: Varies
Deadlines and Penalties: You may switch or drop your Medicare Advantage Plan during the open enrollment period, which is between January 1 to March 31 every year. Keep in mind that you can only change your plan once per year.
Medicare Part D – Prescription Drugs
Prescription drug pricing varies depending on the plan you choose and your income.
Sign up through a private insurance company. Some Medicare Advantage (Part C) plans include Part D at no extra cost.
If you don’t take any medication or you only take inexpensive generics, you might want to choose a cheap Part D plan (less than $20) to start, then switch if you need to during open enrollment period.
Premiums: $0 if included in Part C; varies by plan and income
Deductible: Varies
Copays and Coinsurance: Varies
Deadlines and Penalties: Part D is optional and you can sign up at any time. But you will pay a penalty if you opt in after you are first eligible UNLESS you have a creditable (the same or better) prescription medication plan elsewhere.
Supplemental Medicare Overview
Medigap
Private supplemental insurance for Medicare is known as Medigap. You can purchase Medigap (through an agent) as soon as you turn 65 and are enrolled in Original Medicare.
You generally have one (1) chance to qualify for Medigap with no questions asked.
This is during your first six months of eligibility. After that, you may be questioned about your health and you could be turned down.
The purpose of a Medigap plan is to help cover the copayments, coinsurance and deductibles the come with Original Medicare. You will pay a premium for the Medigap plan you choose, in addition to continuing to pay your Plan B premium.
The variety of Medigap policies and plans is extensive and beyond the scope of this article, but know that they do not include Medicare Part D – you’re on your own for that.
Click here to get an idea of what a Medigap policy will cost you. Plug in your zip code, put your age as 65 and you’ll see the number of plans offered in your state and what they cover.
Beware of Medicare Scams
Anytime you are dealing with sensitive personal information, you need to be very careful.
It is always okay to refuse to give information over the phone and call Medicare directly yourself to be sure of who you are speaking with.
It is a good idea to record all of your appointments and procedures to cross-check dates to prevent any fraud.
Make sure that you do not give out personal information such as your social security number or Medicare number to anyone you are unsure of.
For More Medicare Information
In a word, Medicare is tricky. This Medicare overview was intended to break down the most important absolute basics.
You’ll notice the use of “generally”, “typically” and “often” quite a bit in this article.
That’s because, when it comes to Medicare, there are so many variables and special situations. You need a comprehensive guide to make sense of it all.
Thankfully, Danielle Roberts, co-founder of BoomerBenefits.com, has published that great guide, called 10 Costly Medicare Mistakes You Can’t Afford to Make.
I can’t recommend this book enough and I urge you to read it. Whether you work with an agency, or decide to navigate the Medicare waters alone, I’m sure this book will be an eye-opener.
And if you’ve already signed up for Medicare, read it anyway. You may learn of some mistakes you have made – and possibly get the chance to correct them before it’s too late.
BoomerBenefits.com is my go-to source for all things Medicare. The site is chock-full of information. In addition, they regularly post videos on their YouTube channel and they offer regular Medicare 101 webinars.
See also Official U.S. Government Site for Medicare.
Have you made any Medicare mistakes that you’re willing to discuss? Comment below!