As with most insurance plans, navigating Medicare can be a path fraught with confusion. There is the alphabet soup of plan choices. There is the overwhelming number of insurance companies who provide Medicare options. There is the issue of crucial rules, deadlines, and penalties. The list goes on.
But making your way through the maze of Medicare doesn’t have to be an exercise in frustration. With just a basic understanding of a few key factors of the program, you can set yourself up for success. After all, the decisions you make can have a significant impact on your coverage, out-of-pocket costs, and, ultimately, your overall financial health in retirement.
Here are five key Medicare facts every retiree should know.
1. Who qualifies – If you are a citizen or permanent resident of the U.S., and are age 65 or over, you are eligible for Medicare. Prior to reaching age 65, certain disabled individuals may also be eligible for Medicare if they meet specific program requirements.
2. The different Parts – Instead of being just one program, Medicare is comprised of four distinctive parts. Enter the alphabet soup mentioned earlier: Medicare has Parts A, B, C, and D.
Part A is designed to pay for hospital visits and stays, and for skilled nursing facility care after a hospital stay. Part B pays for physician services, outpatient care, medical equipment, home healthcare, and some preventative services. Part C, also known as Medicare Advantage, provides a method to receive Parts A and B through a Medicare-approved private health insurer. Part D helps pay some of the costs of prescription medications.
3. Costs – The majority of folks won’t owe any premium for Part A because they will have paid Medicare taxes on at least 40 quarters of earnings. For that didn’t meet this threshold, the standard monthly premium is $227 if you paid Medicare taxes for 30-39 quarters, and $413 if you paid less than 30 quarters.
Under Part B, the standard monthly premium is $134. This number varies based on recipients’ income level and whether they pay the premium through Social Security benefits. Individuals with incomes over $85,000 pay more, up to a cap of $428.60. Those paying though Social Security pay less – around $109 per month. Part B includes an annual deductible of $183. Once the deductible is met, your cost for care will be 20%, with Medicare covering the rest.
Costs for Medicare Part C and Part D vary. Before enrolling in any Part C or D plan, retirees should evaluate the total costs of each available plan, including the premiums, deductibles, copayments, and coinsurance.
4. Coverage – Because Part A covers hospital visits and stays, care related to inpatient treatment is covered. For instance, Medicare Part A will pay for general nursing, medications, semi-private rooms, meals, and other hospital services and supplies. The program won’t cover “extras,” like private rooms (unless medically necessary), private-duty nursing, or personal care items.
Read this part carefully. The biggest misconception about Medicare Part A is that it pays for long-term skilled nursing care. It doesn’t. What it does do is pay for the first 100 days in a skilled nursing facility following a hospital stay. And these first 100 days aren’t covered fully – there is a sliding scale of coverage based on the number of days in your stay. If you’re looking to insure that a longer stay in a facility will be covered, it’s time to look into long-term care insurance.
After meeting the yearly deductible, Medicare Part B will cover costs associated with physician visits, lab tests, and surgeries. Part B also covers medically necessary equipment or supplies, like blood sugar monitors, infusion pumps, walkers, and wheelchairs. Preventive services, such as cancer screenings, flu shots, and annual wellness visits, are also covered.
Medicare Part C, or Medicare Advantage, functions much like Parts A and B, but steps in to cover things that would otherwise be excluded, like dental care, eye exams for glasses, cosmetic surgery, and hearing exams.
Under Part D, Medicare covers some prescription drugs. It’s important to know that each Part D plan will have its own list of covered drugs, so retirees should make sure their prescription drugs are included in the individual plan’s coverage before signing up.
5. When to enroll – When it comes to Medicare Part A and Part B, you can apply for coverage from the period beginning three months before your 65th birthday to three months after your birthday. If you don’t enroll during this initial period, you can sign up during the General Enrollment Period, between January 1 and March 31 each year. If you are eligible for Part B and don’t enroll, you’ll have to pay a late enrollment penalty. This penalty lasts as long as you have Part B, and may increase your premium by as much as 10% each month.
For Medicare Part C, you can enroll during the enrollment period for Parts A and B. You can also elect to enroll during the annual Medicare Open Enrollment Period, from October 15 to December 7 each year (note that this is a different than the General Enrollment Period). Once you enroll in a Part C plan, you can choose to change your plan to traditional Medicare (including Parts A, B, and D) anytime between January 1 and February 14.
You can enroll in Medicare Part D during the same enrollment period as for Parts A and B. Another option is to enroll during the Medicare Open Enrollment Period. If you don’t enroll when you become eligible, just as with Part B, you may have to pay a penalty that will last as long as you have the prescription drug coverage.
There’s a lot more to know about Medicare and the more you learn, the better. But the information above should be enough to get you started on maximizing one of the greatest benefits offered by our government.