What Is Medicare – Medicare is a federal program started in 1965 during Lyndon John’s presidential term. Before Medicare, there was no affordable way for retirees to get health insurance, and the Medicare program was designed with just that in mind.
But what exactly is Medicare, and what kind of health insurance does it provide? This article will review who is eligible for the program, when you can enroll and the four parts of Medicare.
Medicare Eligibility and Enrollment
The majority of people “age into” Medicare when they turn 65. But younger individuals can also get on Medicare if they meet specific requirements. If you are younger than 65, you are eligible for Medicare if you’ve been on disability benefits for 24 months or have been diagnosed with End-Stage Renal Disease (ESRD).
Some individuals will automatically enroll in Medicare, while others must apply. Suppose you are turning 65 and have been collecting Social Security or Railroad Retirement Board benefits for at least four months before your 65th birthday. In that case, you’ll automatically be enrolled in Parts A and B. (If you live in Puerto Rico, you’ll only automatically enroll in Part A, not Part B.)
If you have not been collecting either of those benefits, you must apply through the Social Security office. You can do so beginning three months before your birthday and have until three months after your birthday to enroll without penalties. (If you have credible health insurance, like an employer-sponsored plan, you can postpone enrollment without penalties.)
If you are transitioning into Medicare due to a disability, you’ll automatically be enrolled starting on the 25th month of your disability. Lastly, if you are diagnosed with ESRD, you’ll be enrolled in Part A, and your effective date will depend on where you are in treatment.
The Parts of Medicare
Now that you know when you can enroll let’s discuss your benefits under Medicare. Medicare is split into 4 “parts,” and there are some ancillary products you can also choose from. Parts A and B make up Original Medicare, but there are also Part C, Part D, Medicare supplements (Medigap), and a few extras.
Part A: Hospital Insurance
Hospital insurance helps with your room and board expenses if you become an inpatient at a hospital or skilled nursing facility. You’ll have a deductible and coinsurance costs based on how many days you are hospitalized.
Most people receive premium-free Part A. You’ll receive Part A at no cost if you have worked and paid FICA taxes for ten years (or 40 quarters). (Your taxes pre-paid your premiums.)
Part B: Outpatient Insurance
Outpatient insurance covers preventive care, doctor visits, durable medical equipment, surgeries, lab tests, etc. You’ll have a separate Part B deductible. Once you’ve paid it, Part B runs on an 80/20 split, with Medicare paying 80% of the cost.
Everyone pays a premium for Part B. A standard amount is set each year, which is what most people will pay. However, if you earned a high income in recent years, you might pay what is referred to as IRMAA, the Income Related Monthly Adjustment Amount. IRMAA is an extra amount that is added to your Part B premium. The Social Security Administration looks at your adjusted gross income (AGI) for two years before seeing if you’ll be subject to IRMAA.
Part C: Medicare Advantage
Part C is optional. Medicare beneficiaries enrolled in Parts A and B typically chooses either Medicare Advantage or a Medicare supplement to enhance their health benefits. You can only choose one or the other.
Private insurance companies offer Medicare Advantage plans. These plans take your benefits from Original Medicare, add some extra benefits, and roll them all into one Part C plan. Many Medicare Advantage plans have a $0 premium, making them even more appealing.
These plans have rules and limitations, so you’ll need to learn more before deciding if Plan C is right for you. You’ll need to choose providers with the plan’s network and have deductibles, copayments, and coinsurance costs throughout the year.
Part D: Prescription Drug Plans
Part D is how you’ll get your prescription drug coverage. If you enroll in Part C, you may have Part D within your chosen plan. Otherwise, you’ll need a stand-alone Part D plan.
Many insurance companies offer these plans, and the ones available to you will depend on where you live. You’ll compare your current medications with the ones covered by each plan to determine which is most cost-effective.
Medicare Supplements
Medicare supplements are not a “part” of Medicare but are the second way you can add benefits to your coverage under Original Medicare. These work as your secondary insurance plan and will pick up the remaining costs after Original Medicare pays.
There are about ten supplements to choose from, all with varying levels of coverage. Your premium is based on your chosen plan and individual factors like zip code, gender, tobacco use, and age.
We hope this quick summary of the Medicare program has been helpful. It is normal to have many questions when starting your Medicare journey. Our licensed insurance agents specialize in all things Medicare, so call us with any questions you might have. When you’re ready, we can help you choose the products that are right for you.
