Medicare. What you need to know to get started! Part 1

Medicare Get Started

The magic age of 65

You may be close, or you may know someone who is close to 65.  It’s time . . . you’ve heard about it.  Yes, it’s time to figure out this whole Medicare thing.

But where do you even begin?

Today, let’s back up and learn some basics to make this journey a little better.

Is it Medicare or Medicaid?

If you have not thought about Medicare much, the first question may be “Is it Medicare?” The answer is yes. Here’s quick vocabulary breakdown.

Medicare

  • Federal Program for health insurance.
  • Provides health coverage if you are 65 and older.  (It also provides health coverage if you have a severe disability.)
    • It is the primary medical coverage provider for many adults 65 and older.
  • Eligibility has nothing to do with income.
  • What does it cost? It depends on the coverage you choose.
    • Like “regular” health insurance it can have premiums and then could have deductibles, co-insurance or co-pays.

Medicaid

  • Joint Federal and State government programs. Governed by States.
  • Each state creates a program but there are federal guidelines which list mandatory benefits and optional benefits.
  • Supports low-income people, people with disabilities, elderly, etc.
  • What does it cost?  It depends on your income and your state’s rules.
    • It can have premiums, deductibles, co-insurance or co-pays.

When is sign up required?

Do I really need to sign up for Medicare?

The most likely answer: Yes, you do!

  • And P.S.  You have to be proactive and enroll!  Medicare doesn’t notify you unless you are already getting Social Security or Railroad Retirement Board benefits.
  • The exception: if you’re already receiving Social Security benefits, you will automatically be enrolled in Parts A and B (which we discuss next) the month you turn 65.  

When do I sign up?

A key point to remember:  Enrollment beings 3 months before your 65th birthday and continues for 7 months.

  • This is called your Initial Enrollment Period (IEP)
  • You officially become eligible at 65.  BUT . . . delaying enrollment can result in penalties.

What is Part A & Part B?

If you talk to people who are on Medicare, you may hear phrases “Part A”, “Part “B”, etc.  Medicare has different options and you need to make choices when you sign up.

Let’s break down these 4 different programs and what they cover.  There’s Part A and B (with additional coverage for A & B called Medigap).  There’s the alternative to A&B called C which you purchase through private insurance companies.  And then there’s Part D for prescription medication coverage.

Let’s start with Plans A & B. These benefits are directly from the government and are also called “original Medicare“.

Part A

Hospital stays, skilled nursing facilities, etc.

  • No Premiums if you reached the age of 65 and are entitled to Social Security benefits.   
  • Annual deductible for 2018:   $1,340.
  • After you meet the deductible, Medicare will pay for almost all hospital charges first 60 days.
    • Medicare pays for 90 days of hospital care per “spell of illness” (no limit on number of spells) + an additional lifetime reserve of 60 days.
    • After 60 days of hospital care, you will pay more for days 61-90 and then can tap in to the 60-day lifetime reserve.
    • See this article: “spell of illness” begins when the patient is admitted to a hospital or other covered facility, and ends when the patient has gone 60 days without being readmitted to a hospital or other facility.

Part B

Physician Fees (office visits, ambulance, diagnostic tests, etc.)

  • Premiums depend on your income.
    • 2018 cost:  $130/month unless you are in the “higher income” range.
    • The cost is adjusted annually.
  • Annual deductible
    • 2018:   $183.
    • Once deductible met: you pay 20% for reasonable charges.
  • Plan B but want more?  There is “Medigap”
    • Medicare doesn’t cover everything, so you can purchase “Medigap” insurance from a private insurer if you want additional coverage.
    • Generally, they are labeled: A,B,C,D,F,G,K,L,M,N.
      • Each of the 10 packages covers the same across all insurance companies.
      • BUT the premiums can vary!
    • But there are twists and turns depending on what state you live in.  For example, some states may not authorize all the plans.
    • You can’t be denied a Medigap policy if you apply within 6 months of enrolling in Medicare Part B.
    • Medigap does not cover prescription drugs since there is now a Medicare drug program.
    • Want help:  go to this Medicare site and start a search.

Alternative? Part C

Private insurance companies

  • This Part is also referred to as “Medicare Advantage”.  This is an alternative to the original Medicare.
  • These are plans purchased through private insurance companies.
  • They must offer the same benefits as Part A and Part B and may offer extra coverage like vision, dental, or drug coverage.

Key points

  • Premiums vary
  • Benefits vary
    • These plans may include Preferred providers or HMO’s which require you to go to certain doctors etc.
  • You must be enrolled in Parts A and B.
  • With these plans, you can’t have a Medigap policy.
  • Medicare.gov is a website that helps you search for plans.

Then there’s Part D: drug coverage

Why would you think about Part D?

  • You sign up for Part A and B which do NOT have drug coverage.
  • You sign up for Part C but drug coverage is not included.

Key Points

  • Premiums depend on your income.
    • Premiums for 2018: average $34/month . . . costs vary based on your plan and where you live.
  • Plans differ not only in premiums, but also deductibles and the drugs they cover, etc.
  • Medicare.gov is a website that helps you search for plans.

Disclaimer: The information on this post and on the Barb Brady CPA website are for general information purposes only; it is not intended to be accounting, financial, tax, or legal advice. For further information, see Terms of Service.