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Demystifying Medicare

All Americans who are age 65 and over are eligible for Medicare.  Medicare can be overwhelming for those approaching age 65 and faced with having to enroll in this government managed health insurance program.  The purpose of this blog is to take some of the mystery out of Medicare and assist you with the appropriate steps to take when enrolling in the program.  (If you are still working at 65 and wondering whether you have to enroll in Medicare, please refer to our blog, 65 and Working: Should I Enroll in Medicare? for more information.)

The first question someone soon to become eligible for Medicare asks themselves is “When should you enroll in Medicare if you are not currently covered by an employer health plan?”  The answer depends on whether you have already filed for Social Security benefits:

  1. Already receiving Social Security benefits:

If you are under 65 and already receiving Social Security benefits, you automatically receive original Medicare Part A and Part B (described below) starting the 1st day of the month you turn 65.  If your birthday is on the 1st day of the month, Part A and Part B will start the first day of the prior month.  You can also enroll for Medicare prescription drug coverage (Part D) when you first become eligible for Medicare.  This enrollment does not happen automatically.  You have to take time to determine which drug plan best fits your situation.  If you decide not to join a Medicare drug plan when you first become eligible and you don’t have other creditable drug coverage, you’ll likely pay a late enrollment fee if you join later.

  1. Age 64 and not receiving Social Security benefits:

If you are not currently receiving Social Security benefits or are not entitled to Social Security benefits, you will need to enroll in Medicare.  Contact Social Security 3 months before you turn 65 or apply online at www.socialsecurity.gov/retirement.

Your “initial enrollment period” to enroll in Medicare is a 7 month period that begins 3 months before the month you turn 65, includes the month you turn 65 and ends 3 months after the month you turn 65.  If you enroll in Medicare during the first 3 months of your initial enrollment period, in most cases, your coverage starts the first day of your birthday month.  If you enroll during your birthday month or during the last 3 months of the enrollment period, your Medicare coverage will be delayed.  Waiting to enroll until after this initial enrollment period will result in penalties (there are some exceptions if you are still working and covered under your employer’s plan).

There are four parts to Medicare:

Medicare Part A (Hospital Insurance) helps cover:

  • Inpatient care in hospitals
  • Skilled nursing facility care
  • Hospice care
  • Home health care

Medicare Part B (Medical Insurance) helps cover:

  • Office visits
  • Outpatient care
  • Home health care
  • Durable medical equipment
  • Many preventative services

Medicare Part C (Medicare Advantage):

  • Includes all benefits and services covered under Part A and Part B
  • Usually includes Medicare prescription drug coverage (Part D)
  • Run by Medicare-approved private insurance companies that follow rules set by Medicare
  • May include extra benefits and services for an extra cost

Medicare Part D (Medicare prescription drug coverage):

  • Helps cover the cost of prescription drugs
  • Run by Medicare-approved private insurance companies that follow rules set by Medicare
  • May help lower your prescription drug costs and help protect against higher costs in the future

Most individuals have 2 choices for Medicare coverage:

Option #1: Original Medicare (A, B, D and Medigap) – Original Medicare includes Part A (no premium) and Part B (monthly premium) and is provided by Medicare directly.  You have your choice of doctors, hospitals and other providers that accept Medicare.  If you choose to go with Original Medicare, you will also likely need to buy Part D, which is the prescription drug coverage.  In addition to your Part B premiums, you will pay for any copayments, coinsurance and deductibles unless you purchase a Medigap policy.

Option #2: Medicare Advantage (A, B, C) – Often referred to as Part C, Medicare Advantage is another way to get Medicare coverage.  If you join a Medicare Advantage plan, you still have Medicare but will get your coverage from the plan rather than Original Medicare.  These plans are sold by Medicare approved private insurance companies and cover all of the services that Original Medicare covers.  Medicare Advantage plans may offer extra coverage like vision, dental, hearing and other wellness programs and most include Medicare prescription drug coverage (Part D).  With most of these plans, you need to use the plan’s network of doctors, hospitals and other approved providers.  Part B premiums are paid to the government just like with Original Medicare and you will have a Part C premium that you pay to the insurance company.

If you opt for Original Medicare, you may want to consider purchasing a Medigap or Medicare supplemental insurance policy.  Medigap policies are sold by private insurance companies and help pay for some of the costs that Original Medicare doesn’t cover such as copayments, coinsurance and deductibles.  Keep in mind that every Medigap policy must follow federal and state laws and hence insurance companies can only sell you a “standardized” policy identified in most states by letters A through D, F, G and K through N.  The difference between the various Medigap policies is the percentage of coverage for medical costs.  For instance, all Medigap policies cover 100% of skilled nursing facility care coinsurance costs except for K & L.  You will pay a premium for your Medigap policy in addition to your Part B premium and each policy covers only one person.

Once you have enrolled in Medicare, you do not have to re-enroll every year.  However, there is an open enrollment period each year during which you can make changes to your Medicare health and prescription drug coverages.  In 2017, open enrollment runs from October 15th through December 7th.  Medicare health plans and the prescription drug plans can make changes each year to things like premiums, coverages and networks.  It’s important to review the information you receive each year to make sure you want to continue with the plan you have.  During open enrollment, you can keep your plan, choose a different plan or switch to Original Medicare if you have a Medicare Advantage plan or visa versa.  Any changes become effective January 1st of the following year.