5 Reasons to Learn About Medicare
Medicare is America’s national health insurance program for seniors age 65 or older and for people who qualify due to specific disabilities. Medicare has been around for 55 years, and over time there has been a lot of misinformation said about the program, such as you’re automatically enrolled, or it comes free.
It is important to learn about Medicare; that way, you can avoid late enrollment penalties, prepare for your future healthcare costs, and much more. Here are the top five reasons you should learn about Medicare.
1. When to sign up for Medicare
Many seniors believe they will be automatically enrolled in Medicare when they turn 65 years old, but this is not necessarily true. The only way you will be automatically enrolled in Medicare Parts A and B is if you have been receiving Social Security benefits for at least four months before your 65th birthday month.
If you are not receiving Social Security benefits, you will want to enroll in Part A and Part B during your Initial Enrollment Period (IEP). Your IEP will last for seven months, beginning three months before your 65th birthday month and will end three months after. For example, if your birthday is in August, your IEP would start on May 1st and end on November 30th.
2. Know your healthcare coverage
Original Medicare provides you with inpatient and outpatient care through Part A and Part B. Medicare covers any service that is deemed medically necessary. You are also not limited to a network with Medicare. You can visit any doctor in the United States as long as they accept Medicare.
Medicare Part A is inpatient coverage covering things such as your room, meals, and medications while you are an inpatient in the hospital. Part A also covers post-hospital care, such as skilled nursing, short-term home health care and hospice. Medicare only covers short-term care. Therefore, it will not cover long-term care, such as a nursing home.
You will have access to many outpatient services under Medicare Part B. When you have a doctor’s visit, an ambulance ride, or need lab testing, Medicare Part B will cover it if it’s medically necessary. Medicare Part B will not cover anything that Part A covers. However, Part B can cover services you receive in the hospital, such as radiation or chemotherapy.
Medicare does not cover routine dental, vision, or hearing services, cosmetic procedures, and pharmacy drugs. If you need drug coverage, you should purchase a Part D plan.
Since Medicare does not cover retail prescription drugs, you would want to purchase a standalone Part D drug plan for drug coverage. Private health insurance companies sell part D drug plans, and you will find that Part D plans cover most retail prescriptions in America.
3. Future healthcare costs
Many seniors believe Medicare is free, and they will not have any cost-sharing expenses when visiting the doctor or hospital. This information is false, as Medicare does come with a price, and it does not cover services at 100%.
Although Medicare does not come free, there is a possibility that you qualify for a $0 premium for Part A. If you have worked 40 quarters in the United States and paid payroll taxes, then you can receive a premium-free Part A. Throughout your working years when you paid FICA taxes, you were funding your Part A premium. If you do not have the qualifying work history for a $0 Part A premium, you can purchase Part A for $471 per month in 2021.
As an inpatient, you must meet the Part A deductible before your Medicare benefits kick in. The Part A deductible in 2021 is $1,484 per benefit period. After you have paid the Part A deductible, you will not spend any money out-of-pocket for 60 days. If you are in the hospital for more than 60 days, you will have to pay a $371 co-pay for days 61 through 90.
Medicare Part B does come with a cost, and Social Security is what dictates that cost. Part B premiums are based upon your IRS tax returns from two years prior. If you apply for Medicare in 2021, then the IRS will look at your 2019 tax returns.
Most senior beneficiaries pay the standard Part B premium, which is $148.50 per month in 2021. However, if you made more than $88,000 two years prior, you may be subject to a higher Part B premium.
Like Part A, you will have to pay the Part B premium – which is $203 in 2021 – before Medicare provides cost-sharing. Once you have paid the Part B deductible, Medicare Part B will cover 80% of your Medicare-approved outpatient services. Take note that you will be responsible for the remaining 20% coinsurance.
Your Part D premium will vary by plan since private insurance companies sell these plans. In most states, Part D plans start around $10 to $15 in 2021. However, the national average Part D premium is $41 in 2021.
In 2021, Part D carriers can charge up to a $445 deductible. However, a carrier can make the deductible lower than $445, but cannot increase it. Each state has about 20 or more Part D plans, so you will want to ensure that you purchase a plan that covers your medications.
4. Avoid late enrollment penalties
As it was mentioned earlier, you should enroll in Medicare during your Initial Enrollment Period. The only way you can delay Medicare is to have a form of creditable coverage, such as large employer coverage. But what happens if you don’t enroll and don’t have creditable coverage? If you fail to enroll in Medicare, then you will likely receive a late enrollment penalty.
If you fail to enroll in Part B during your Initial Enrollment Period, you may be subject to a 10% late enrollment penalty. The Part B late enrollment penalty accrues every 12-months you were not enrolled in Part B but were eligible for Medicare.
For example, suppose you did not enroll in Medicare for four years, and you were eligible. In that case, you will receive a 40% penalty based on your Part B premium, and you will pay this penalty for the lifetime of your Medicare policy.
If you want to purchase a Part D plan, you must also enroll during your Initial Enrollment Period. Although Part D plans are considered voluntary, you will receive a late enrollment penalty if you fail to enroll in a Part D plan without creditable coverage.
You will receive a 1% penalty of the national average Part D premium for each month you did not have a prescription drug plan. The Part D late enrollment penalty would be added to your Part D premium, and you will continue to pay this penalty for as long as you are enrolled in a Part D plan.
5. Compare Medicare plans
As previously mentioned, Medicare does not cover 100% of your services and leaves you with out-of-pocket costs. Many beneficiaries purchase a Medigap or Medicare Advantage plan to help cover those out-of-pocket costs. The government does not provide these two plans to seniors like it does Medicare, so you would have to purchase one from a private insurance carrier.
Medigap plans, also known as a Medicare Supplement, help cover the “gaps” in Medicare, such as copayments, coinsurance, and deductibles. Medigap plans work alongside original Medicare, Medicare being primary, and a Medigap plan secondary. You do not have network restrictions with a Medigap plan, and if a doctor accepts Medicare, they must take your Medigap plan.
Medigap plans leave you with little to no out-of-pocket costs. For example, Medigap Plan G covers all Medicare services once you have paid the Part B deductible. So, since Medicare only covers 80% of your approved services, Medigap Plan G would pick up that 20% coinsurance you would initially pay.
Medicare Advantage plans
Medicare Advantage plans and Medigap plans are very different from one another. Unlike Medigap plans, when you purchase a Medicare Advantage plan, you will opt to receive your Part A, Part B, and Part D benefits through that carrier, instead of Medicare. Since you will receive your Medicare benefits through your carrier, the carrier will set your cost-sharing amounts.
Medicare Advantage plans also have network restrictions. For example, if you purchase an HMO Medicare Advantage plan, you will have to receive all your healthcare services within your plan’s network of doctors and pharmacies. If you were to visit the doctor outside the network, your plan will likely not provide any cost-sharing help.
Don’t wait until your Initial Enrollment Period to begin learning about Medicare. There are many free Medicare resources online, and there are even Medicare brokers that can help enroll you in a plan. Reach out to trusted Medicare broker for Medicare help or visit Medicare.gov for more information.