From Medicare parts, plans, enrollment periods, and drug plans, Medicare can look like a never-ending maze. Medicare is federal health insurance for American citizens age 65 years and older and others who qualify due to disability.
Enrolling in Medicare can be overwhelming, considering there is a specific time to enroll, and if you miss your enrollment window, you can be charged a penalty. So, grab a pen and paper to make a note of these six important points of Medicare.
1. Part A vs. Part B
Medicare covers inpatient and outpatient services, and the government gives you this coverage through Medicare parts. Medicare Part A covers inpatient care, and Part B is outpatient coverage.
Think of Medicare Part A as your “room and board” while inside the hospital. For example, Medicare Part A covers a semi-private room, three meals, necessary lab services, medical supplies, and medications administered to you as an inpatient.
Medicare Part A covers post-hospital services, as well. Hospice, skilled nursing, home health care, counseling, social services, and physical therapy are services that fall under Part A. Medicare Part A will never cover long-term care, such as nursing home stays. Medicare only covers short-term care.
Medicare Part B covers a variety of medically necessary services at an outpatient facility. Doctor’s visits, ambulance rides, durable medical equipment, lab testing, and a few vaccinations are covered by Part B. Preventative services, such as mammograms and colonoscopies, fall under Part B, as well.
There are a few scenarios where Part B covers you inside the hospital. If you were to receive surgery, chemotherapy, dialysis, or visit the emergency room, Medicare Part B would provide coverage whenever deemed medically necessary by the doctor.
2. Enroll on time
The government does not tell you exactly when to enroll in Medicare, and that’s because the timeframe is different for every senior. If you are not actively working for a large employer and covered by their insurance, you must enroll in Medicare during your Initial Enrollment Period (IEP).
Your IEP starts three months before your 65th birthday and ends three months after your birthday month (totaling seven months). During those seven months, you will apply for Medicare Part A and Part B through Social Security.
Let’s say you turn 65 on December 6, 1956. Your IEP would begin on September 1, 2021, and end on March 31, 2022. If you were to fail to enroll in Medicare during those seven months, you would be charged a lifelong late enrollment penalty.
3. Medicare is not free
A mistaken belief there is with Medicare is it’s free for seniors. This misconception comes from paying Medicare taxes while in the workforce. The money you were paying did not necessarily fund all of Medicare, but it did fund your Part A premium.
If you have worked ten years (40 quarters) in the U.S. and paid payroll taxes, you will have a $0 premium for Medicare Part A. If you did not work ten years in the U.S., you can still get Part A but will pay a monthly premium. If you have between 30-39 quarters, you will pay $259 for Part A in 2021. If you have less than 30 quarters, your Part A premium in 2021 is $471.
Part A has a deductible of $1,484 you pay as an inpatient in 2021. Once you pay the Part A deductible, Medicare covers all medically necessary services in full up to 60 days.
You will pay the Part B premium no matter your work history. In 2021, the standard Part B premium is $148.50 per month. However, if you are in a high-income bracket, you will likely pay more monthly for Part B.
There is also a deductible for Part B, $203 in 2021. Once you have met the annual deductible, Part B covers 80% of all Medicare-approved services. You must pay the remaining 20% coinsurance unless you have a Medigap plan.
4. You can cover the Medicare gap
Medicare does not cover all medical services in full. Therefore, private insurance companies sell Medigap plans to help cover the Medicare gap, such as deductibles, copayments, and coinsurance.
A Medigap plan works together with Medicare. You can travel to any doctor in the United States and use your Medigap plan if they accept Medicare. If a service is approved by Medicare, Medicare will pay first, and Medigap pays second (once all deductibles are met).
For example, the only out-of-pocket costs you would have with a Medigap Plan G for Medicare-approved services is the Part B deductible. Other than the Part B deductible, you would not have any cost-sharing expenses for the remainder of the year.
5. Must enroll in Part D
As mentioned above, Medicare pays for inpatient and outpatient services, not prescription medications. Luckily, in 2006, private insurance carriers began to sell Medicare Part D plans. If you were to have original Medicare or Medicare and a Medigap plan, you would need to enroll in a Part D plan to have prescription drug coverage. If not, you will pay for your prescriptions in full at the pharmacy.
You will not buy a Part D plan through Social Security. You must contact a private insurance carrier or a Medicare broker, and purchase a Part D plan during your Initial Enrollment Period. If you fail to enroll in a Part D plan without creditable coverage, you will be charged a lifelong late enrollment penalty.
6. All-in-one Medicare plan
There are “all-in-one” Medicare plans sold by private insurance carriers, which are called Medicare Advantage plans. If you purchase one of these plans, you will receive your Part A, Part B, and Part D benefits through the carrier.
These private insurance plans typically have an HMO or PPO network of doctors. The Medicare Advantage plan will create your network of doctors and pharmacies where you can receive your care.
If you have an HMO plan, you will pay your bill in total if you go outside the network (emergencies excluded). PPO plans are more lenient, as you can go out-of-network for healthcare. However, you will pay more for your service than if you were to be in-network.
These carriers create the cost-sharing amounts on your plan, which is subject to change every year. The carrier will also generate the list of services it covers. Therefore, every Medicare Advantage on the market is different, and you must shop these plans thoroughly.
All Medicare information is critical to understand, and luckily there are many online resources and Medicare brokers that provide a substantial amount of Medicare guidance. If you make a note of these six important points of Medicare, you will get a head start on understanding the basics of Medicare and your options.