Medicare is a tricky subject to grasp for most people and that’s to be expected when there are so many pieces to the puzzle. The easiest way to expand your understanding of Medicare is to break it up piece by piece.
Becoming Eligible for Medicare
Before we get to the nitty-gritty, let’s talk about who is eligible for Medicare. Many people think that you must be taking our Social Security benefits in order to enroll in Medicare, but that’s not the case.
The most common way people become eligible for Medicare is simply by turning 65. The other way you can become eligible for Medicare is if you have been receiving Social Security disability benefits for at least 24 months.
When and How to Enroll in Medicare
With Medicare, there are specific enrollment windows for each part of Medicare. The first enrollment window you experience is your initial election period (IEP). This is when you will enroll in Medicare Part A, Part B, and also Part D if you need drug coverage.
Part C is optional – an alternative to Parts A and B (we will talk more about this later).
Your IEP starts 3 months before your 65th birthday month and stops 3 months after your 65th birthday month. For example, if your birthday is June 10th, your IEP begins March 1st and ends September 30th.
How you enroll depends on whether you are taking Social Security income benefits. If you started taking benefits prior to turning 65, then you will be auto-enrolled in Medicare Part A and Part B. However, if you aren’t taking benefits yet, then you will have to enroll yourself.
If you fail to enroll in Medicare Part A, Part B, and Part D during your IEP and enroll later, you may incur a penalty. The late fees are determined by how many months or years you went without coverage.
However, some people can delay enrollment without gaining a late penalty. The most common reason people delay Medicare is to continue working past age 65.
If you continue to work for a large employer that has 20 or more employees and you are enrolled in their group health plan, you can delay enrollment into Medicare until you retire.
Parts of Medicare
Each part of Medicare pays for specific parts of your medical care. Medicare Part A covers your inpatient hospital stays. You can easily remember what Part A is for by thinking of it as your “room and board” while at the hospital and a skilled nursing facility. It covers inpatient stays.
Medicare Part B covers services such as doctor visits, lab work, x-rays, surgeries, and medical supplies. Other items and services that Part B covers are durable medical equipment, preventive care services, and chemotherapy.
Medicare Part D is your retail prescription drug coverage. Part D plans are sold by private insurance carriers, not Medicare.
Medicare Advantage Plans
You probably noticed that we didn’t talk about Part C yet. That’s because it is a voluntary Medicare plan called Medicare Advantage (MA). MA plans are similar to the type of managed care plan you probably have had through your employers in the past.
They have a monthly premium, deductible, copays, and coinsurance pre-set by the private insurance carriers that sell them. They usually include drug coverage as well so you won’t need a separate Part D drug plan.
MA plans take over your Medicare Part A and Part B coverage. These types of plans are required to cover you as well as Original Medicare (Part A and Part B) does. However, they are able to offer you better coverage if they choose to do so, and they can even include extra benefits that Original Medicare doesn’t pay for.
Medicare Supplement Plans
Medicare Supplement Plans, or Medigap plans, are another option for extra coverage. These plans cover the gaps in Medicare. Gaps are things like deductibles, copays, and coinsurance. Medigap plans only pay after Medicare pays, so if Medicare denies a claim, so will your Medigap plan.
Because Medigap plans usually offer such comprehensive coverage, they have higher premiums than MA plans. With both MA and Medigap Plans you must continue to pay your Part B premium while enrolled in the plan.
The best time to enroll in a Medigap plan is during your one-time open enrollment (OE). This period starts the day your Part B is effective and lasts for 6 months. This is the best time because this is usually the only time you can apply for a Medigap plan without having to answer health questions.
Although we could write a book on Medicare, these are the basics. Once you’ve got the basics down, the rest should seem easier.