Medicare provides important health coverage for seniors, but it also has many options, rules and deadlines that can be confusing.
Give yourself plenty of time to learn about it before you enroll, and keep these five things in mind:
1. It’s the sum of its “Parts.”
Medicare has four options, called “Parts.” Parts A and B are mandatory, unless you have other insurance coverage. Part C is just another way of getting Parts A and B. Part D is optional.
Part A is hospital coverage. It helps pay for inpatient hospital, hospice and some nursing home care. Part A is typically free (it’s paid with taxes taken out of your paycheck throughout your employment), although there is usually an annual deductible. If you don’t qualify for free coverage (because you haven’t worked long enough, for example), you can buy it. The costs vary, depending on how many years you worked.
Medicare is complicated, so be sure to ask for help if you need it.
Part B is medical coverage. It helps cover doctor visits, lab tests, X-rays, etc. (generally somewhere between $150 and $200, but could be higher depending on your income) and it has a deductible.
Part C is a combination of Parts A and B offered through private insurance companies. These plans (also called Medicare Advantage or MA plans) are approved by Medicare and include both Part A and Part B, and typically Part D. They may provide more robust coverage than plans offered directly through Medicare, and you sign up through an outside company. Costs vary, so it pays to shop around.
Part D is prescription drug coverage. Private companies also provide Part D plans, and you sign up directly through them after you’ve enrolled in Parts A and B. You pay a monthly premium for Part D that varies by plan, and possibly a deductible and/or copayments for your medications.
2. Timing is everything.
Most people must enroll for Medicare near their 65th birthday. Your initial enrollment period starts three months before you turn 65 and ends three months after. (Note that there may be penalties involved for not enrolling during this initial period; see “Two reasons you might pay more for Medicare”) If you miss your initial enrollment period, the next time you can enroll is during the general enrollment period, from January 1 to March 31 for Parts A and B, and from October 15 to December 7 for Part D. There are a couple of exceptions:
- If you have insurance through your (or your spouse’s) employer, and that employer has at least 20 employees, you may be able to delay enrollment. When that employment or coverage ends, however, you’ll need to sign up for Medicare within eight months.
- Some people don’t need to wait until they turn 65 to sign up. People with certain disabilities or conditions such as permanent kidney failure or Lou Gehrig’s disease can enroll in Medicare earlier.
3. It's affiliated with Social Security—sort of.
Medicare and Social Security are separate programs, but they are closely linked. The Centers for Medicare and Medicaid Services (CMS) runs the insurance program. But the Social Security Administration processes Medicare applications, collects premium payments, answers Medicare-related phone calls, educates people receiving Social Security benefits about Medicare and automatically enrolls them in Parts A and B. Keep in mind:
- If you are receiving Social Security benefits, you will receive a notice in the mail a few months before your 65th birthday letting you know you will automatically be enrolled in Parts A and B, and reminding you to enroll in Part D if you want to.
- If you are not receiving Social Security benefits, you won’t be automatically enrolled in Medicare or notified when it’s time to sign up. It is up to you to know—and meet—the enrollment deadlines.
- If you get Social Security benefits, the monthly cost for Medicare Part B will be deducted from your Social Security benefit check, unless you choose to decline the coverage.
- If you aren’t receiving Social Security benefits, you’ll need to pay your Medicare premiums online or by mail.
4. It doesn't cover your family.
Unlike the health insurance you’re probably used to, Medicare does not cover your spouse or dependents. Each person needs to apply separately—or find health insurance elsewhere if they don’t qualify for Medicare yet.
5. It doesn’t cover everything.
Medicare pays for a lot of routine health care services, but there are several things it doesn’t cover. (There are exceptions, especially if you are enrolled in a Medicare Advantage plan.) For example, Medicare doesn’t generally pay for eye exams, routine dental care, hearing aids, long-term care or alternative medicine (such as chiropractic or acupuncture services). You may want to budget for these costs, and ask your financial professional about using an annuity to provide a lifelong stream of income to help pay for them.
Medicare is complicated, so be sure to ask for help if you need it. Your financial professional may be able to assist you, or you can contact your State Health Insurance Assistance Program (SHIP) for free, one-on-one Medicare guidance.