If you’re new to Medicare and having difficulty understanding what it is, you’re not alone. Medicare is many things, but “straightforward” isn’t one of them. Plenty of people come away from their 65th birthday feeling the need for a Medicare for Dummies book.
We’re going to break it down for you in this article so that you can learn all about the different Medicare parts and costs – without having to add a dummies guide to Medicare to your shelf.
What is Medicare, and What Does Medicare Cover?
Medicare is a really good health insurance program. It’s accepted almost everywhere. Once you join Medicare, you can stay on it forever.
Medicare covers Americans aged 65 and over, and for certain people who collect Social Security Disability Insurance.
- Original Medicare is Medicare Part A and Medicare Part B, together. Just about everyone who uses Medicare as their primary insurance must sign up for Original Medicare.
- Medicare Part A pays for hospital expenses, inpatient care, and most drugs given to you during that time.
- Medicare Part B covers doctors and outpatient services, including preventive care like flu shots.
- Original Medicare does not cover most medical bills in full, but covers a large portion of medical expenses.
- Medicare Supplement (or Medigap) plans are private add-ons to Medicare which pay most of the costs that Original Medicare would leave to you.
- Medicare Advantage, formally known as Medicare Part C, can be purchased from Medicare-approved private insurers at a steep discount if you are unhappy with the coverage from Original Medicare. It replaces Original Medicare for you.
- You still need to maintain your Part A and B to remain on Medicare Advantage.
- Medicare Part D, also known as Medicare prescription drug coverage, is a separate policy that you can purchase which offers help paying for medications.
The different components of Medicare is where things get confusing. If you are already enrolled in Medicare or have looked into signing up for the program, you’ve probably heard about Medicare Parts A, B, C, and D.
If you are 65 or over, you most likely qualify for Medicare. In addition to age, the two requirements you need to fulfill in order to qualify are:
- You must be a U.S. citizen or have been a permanent resident for at least 5 years.
- You must have paid Medicare taxes for at least 10 years. This is oftentimes done automatically by your employer.
What Medicare Doesn’t Cover
It’s important to note that Original Medicare doesn’t cover prescription medications. For prescription drug coverage, you’ll need to purchase Medicare Part D – either on its own or as part of a Medicare Advantage plan – in addition to Medicare Part A and Part B.
Medicare Part B Coverage Exclusions: Part B leaves out a few types of services that become necessary with age, like hearing aids.
Medicare Advantage Coverage Differences: Medicare Part C, often referred to as Medicare Advantage, is takes you out of Original Medicare and lands you in the care of a private insurance company. Medicare Part C must cover what Medicare Part A and B covers. Advantage plans can choose to bundle in additional things that erase the coverage gaps of Original Medicare, like Medicare Part D coverage or hearing aids (not covered by Original Medicare).
However, details vary based on which insurance provider you choose. Since Medicare Advantage plans are customized by each insurer, specific benefits are not standardized like they are with government-run Original Medicare.
Medicare in Different Locations: Original Medicare works across the U.S. and its territories, like Guam and Puerto Rico. Medicare Advantage plans are typically more limited. Both Medicare Supplement and Medicare Advantage plans can pay for emergency medical care outside of the country.
What Medicare Costs
Like with other health insurance plans, you’ll have to pay a monthly premium as well as an out-of-pocket deductible for a full range of Medicare costs.
Medicare Part A Costs:
- Most people don’t pay monthly premiums for Medicare Part A. If you or your spouse paid Medicare taxes for 10 years, you won’t pay for Part A each month.
- This is a good thing. The premium for the few people who don’t get free Part A can be $422 per month.
- Medigap and Medicare Advantage plans can protect you from paying out-of-pocket costs in the hospital. Without this extra coverage, the deductible per benefit period (essentially, per hospital visit) is $1,340 in 2018.
Medicare Part B Costs:
- In 2018, the standard Part B premium is $134 a month.
- You generally pay for 20 percent of Part B outpatient services on your own, while Part B pays for the other 80 percent.
Medicare Part C Costs:
- Those who elect to join Medicare Advantage will pay the Part B premium and a premium for their Part C coverage. However, many Medicare Advantage plans have a “zero dollar” premium.
- Medicare Advantage plans set their own copayments and deductibles, subject to an out-of-pocket maximum. Your maximum out-of-pocket costs for Medicare Advantage are $6,700 per year as of 2018.
Medicare Part D Costs:
- Standalone Part D premiums typically ranges from $30 to $35 per month.
Should You Join Medicare?
- The Initial Enrollment Period for Medicare is a seven-month period lasting from three months before your 65th birthday until three months after your birthday month.
- If you delay signing up, and you’re not getting coverage through your employer, you’ll face financial penalties.
- If you do receive health insurance through your job, you can wait to sign up for Medicare without a penalty once that insurance ends.
You’ll probably want to sign up for Medicare as soon as you become eligible. You can start receiving Medicare right when you turn 65, but you aren’t automatically signed up to start receiving benefits. You still need to enroll in the program, and at the right time.
You can sign up for Medicare as early as three months before your 65th birthday, at the start of your Initial Enrollment Period. Your Initial Enrollment Period lasts from three months before your 65th birthday until three months after your birthday month.
Ideally, you should sign up before your 65th birthday. If you wait until after your birthday month to enroll, coverage will be delayed.
Medicare enrollment is only automatic if you received Social Security or Railroad Retirement benefits for the 4 months before your 65th birthday.
If you are not ready to retire at 65, you may be able to receive health insurance through your employer without penalty. In these situations, you can sign up for Medicare without penalty up to 8 months after your employer coverage ends.
Cutting Out-of-Pocket Costs
- Most people with Medicare have some sort of extra coverage.
- Supplemental plans help reduce coverage gaps that could lead to high out-of-pocket costs.
- Your options include a Medicare Supplement plan, Medicare Advantage, and Medicare Part D.
- You’ll generally want to enroll in extra coverage as soon as possible, so that it starts once your Original Medicare begins. You may not be guaranteed enrollment or the lowest possible rate if you wait more than a few months.
One of the biggest problems people with Medicare face is coverage gaps that can lead to high out-of-pocket costs. To cut these expenses, consider enrolling in some form of supplementary coverage.
Medicare Supplement plans, sometimes referred to as Medigap, pay for some of the expenses that Medicare Part A and B does not cover, such as copayments. There are 10 different types of Medicare Supplement plans providing different levels of coverage, and at different costs.
Medicare Advantage is another way to get supplemental coverage, though it is not a Medicare Supplement plan. Medicare Advantage typically has lower premiums than Medicare Supplement plans, but has more added fees like copayments and higher deductibles. Deciding between Medicare Advantage or a Medicare Supplement plan will come down to your specific needs and which option is better suited for you personally.
How to Avoid Medicare Mistakes
There’s no denying that finding the right health plan can be confusing, especially when it comes to Medicare. It’s important to get familiar with Original Medicare basics before making any big decisions.
Reading More: Online research is a safe way to understand Medicare. We understand that reading our dummy guide to Medicare won’t answer all of your questions. If you still need help understanding Medicare, you can continue to browse HealthCare.com.
Personal Guidance: You can also call HealthCare.com to connect with a local, independent broker through for personal advice on the ins-and-outs of Medicare. An agent can answer any questions that you have, keeping your bills as low as possible while still getting you the coverage you deserve.
Keep in mind that understanding Medicare will get easier. It’s definitely difficult at first, but once you’re enrolled the program is actually very easy to use – almost every doctor sees Medicare patients, and most of your needs are considered by the plan. To help keep you from getting too overwhelmed in the meantime, we’re here to help.
Get a Free Medicare Quote
- Get an instant quote for Medicare plans
- Compare prices from over 70 carriers
- Find a plan that fits your budget