- 15 min read
What is Medicare?
Our essentials guide to Medicare will walk you through what Medicare is, walk you through the Medicare journey, and avoid making mistakes.
If you find yourself approaching the age of 65 or helping someone make decisions regarding their Medicare, you may already know that it can be a confusing and overwhelming process. Medicare comes with a lot of different rules, requirements, and options, making it difficult to navigate.
We will help you understand what Medicare is, how it works, and determine which coverage is right for your situation so you don’t have to worry about healthcare when you retire. Whether you are looking to understand Medicare eligibility, enrollment, expenses, or finding assistance, this guide has got you covered.
Understanding Medicare
To understand Medicare, you have to know what it is. Simply put, Medicare is a federal healthcare system that benefits those who are 65 and older or have been diagnosed with a chronic illness such as End-Stage Renal Disease (ESRD) or Lou Gehrig’s Disease (ALS). More than 67 million people are enrolled in Medicare and with a system this large comes a lot of intricacies that make Medicare difficult to understand.
Medicare vs Medicaid
Medicare and Medicaid sound similar but it’s important to keep them separate. Medicare, as we discussed, is a federal program meant for people 65 and older or people with certain disabilities or conditions. Medicare sets standards for costs and coverage to ensure that coverage is the same no matter what state you live in.
Medicaid is a joint federal and state program to cover medical costs for people with limited income or resources. The federal government sets rules that all state Medicaid programs have to follow but each state runs its own program so they can set eligibility requirements and benefits.
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When Am I Eligible for Medicare?
Now that you know what Medicare is, let’s talk about the most fundamental aspect of entering into this system: eligibility. While 65 is the magic number when it comes to enrolling in Medicare, there are additional criteria you have to meet. In some cases, you don’t even need to be 65 to be eligible for Medicare.
Who is Eligible for Medicare?
Most people eligible for Medicare are at least 65 and have paid into the Medicare tax system through FICA taxes or self-employment taxes for at least 40 quarters, which is equivalent to 10 years of work. However, if you don’t have 40 quarters to draw from, you may need to draw benefits from someone else’s work record.
If you do not have the required 40 quarters of work history to be eligible for Medicare, there is still a way to qualify based on your spouse or ex-spouse’s work record. If you have been married for at least one year and your spouse is at least 62 years old and eligible for Social Security, you can draw Medicare eligibility from their work record. If you are divorced, you may be eligible to receive benefits from your ex-spouse’s work record if your marriage lasted for at least ten years and there was no remarriage before age 60.
In the unfortunate event of a spouse’s death, you can still qualify for Medicare by drawing benefits from the deceased spouse’s work record, as long as the marriage lasted at least nine months and there was no remarriage before age 60. Even if you were divorced from the deceased spouse, you may still be eligible as long as the marriage lasted at least ten years. The key is always to look for 40 quarters, either from your own work record or someone else’s. In situations where you are drawing quarters from someone else’s record, you’ll have to provide documentation.
As previously mentioned, most people are eligible for Medication at 65, however about 15% of those eligible for Medicare are under 65. These individuals have come into the Medicare system due to a disability or certain health conditions like Lou Gehrig’s disease or permanent kidney failure.
How Do I Enroll in Medicare?
Secondary to confirming your eligibility is also determining how to enroll in Medicare. There are two ways to start your Medicare journey: auto-enrollment and self-enrollment.
How Do I Know if I'm Automatically Enrolled in Medicare?
If you’re already receiving Social Security benefits like retirement benefits, widow/widower benefits, or spousal benefits, you’ll automatically be enrolled in Medicare when you turn 65. Your Medicare card will be sent to you around 100 days before your 65th birth month.
Self-Enrolling in Medicare
If you’re not receiving Social Security benefits, you’ll have to self-enroll in Medicare. The enrollment period often called the Initial Enrollment Period (IEP), spans seven months and starts three months before your 65th birth month and ends three months after. During this period, you have the opportunity to enroll in both Medicare Part A and Part B.
Do I Have to Enroll in Medicare at 65?
Just because you’re eligible for Medicare, doesn’t mean you have to enroll in Medicare. If you have employer-provided health insurance from a larger company with 20 or more employees, you can delay starting Medicare at 65.
For individuals who do not start Medicare at 65 and want to enroll later, there is a Special Enrollment Period (SEP) available. This allows individuals to enroll in Medicare after age 65 if they or their spouse are still working and covered by an employer-provided health insurance plan. To qualify for the SEP, it is essential to have maintained continuous credible coverage since your 65th birth month, without any gaps in coverage.
Conversely, some people must start Medicare at 65 to avoid lifelong penalties. This includes individuals covered by retirement insurance, COBRA insurance, Affordable Care Act (ACA) marketplace plans, TRICARE for life (retired military), and individuals covered by an employer-provided health insurance plan from a small employer with 19 employees or less.
How Do You Find Your Medicare Number?
Once you’ve received your medicare card, you’ll need to carry it with you as you would your previous insurance card. The only exception to this would be if you purchase a Medicare Advantage plan. In this case, you’ll carry your Medicare Advantage card as this will be what you present to healthcare providers.
On the front of your Medicare card, below your name, you’ll find your Medicare number. Your Medicare number is made up of four letters and five numbers and will always begin and end with a number.
What Are the Parts of Medicare?
Now that you know how to enroll in Medicare, you have to know the different parts of Medicare, what they cost, and what they cover. The remainder of this guide will provide a brief overview of the essential parts of Medicare such as Medicare Part A and B, Part C plans, and Part D drug plans. You’ll also learn about the other types of coverage offered to help you extend your coverage and minimize your financial liability.
How Much Does Medicare Cost?
Like any form of insurance, Medicare does come at a cost. Understanding your expenses will help you make better decisions about your coverage. These expenses encompass premiums, deductibles, copays, co-insurance, maximum out-of-pocket costs, and excess charges. Let’s start with the premiums associated with Medicare Part A and Part B.
How Much Does Medicare Part A Cost?
The Medicare Part A premium is generally free for most people as long as they or their spouse have paid Medicare taxes for at least 40 quarters. However, individuals with less than 40 quarters may have to pay a monthly premium of $278 or $505 for Medicare Part A, depending on how many quarters they have.
How Much Does Medicare Part B Cost?
The Medicare Part B premium is set at $174.90 per month (2024 rates) for most people. However, higher-income individuals may have to pay an additional surcharge called the Income-Related Monthly Adjusted Amount (IRMAA) based on their Modified Adjusted Gross Income (MAGI).
Gaps in Coverage
Original Medicare, which includes Part A and Part B, has financial gaps that require out-of-pocket expenses. These gaps include deductibles, copays, coinsurance, and excess charges. The out-of-pocket expense associated with Original Medicare can be quite costly, but there are ways to fill those gaps. Let’s start with what Medicare Part A and Part B cover and the associated costs.
What Does Medicare Part A Cover?
Medicare Part A is often called hospital coverage because it covers inpatient services like hospital stays. The Part A deductible is currently $1,632. Since this deductible isn’t annual, it can occur up to six times throughout the year depending on your benefit period. The Medicare Part A benefit period refers to the span of coverage for inpatient hospital and skilled nursing facility care. It starts when you’re admitted to a hospital or Skilled Nursing Facility (SNF) and ends once you’ve been out of such care for 60 consecutive days. This Part A deductible covers inpatient hospital stays up to 60 days. If the hospital stay exceeds 60 days, you’ll pay a daily $408 coinsurance and a daily $816 coinsurance for hospital stays between 91 and 150 days. Extended hospital stays may require additional costs.
Finally, if you are staying in an SNF between 21 and 100 days, you’ll be subject to a daily $204 copay.
What Does Medicare Part B Cover?
While Medicare Part A covers inpatient expenses, Medicare Part B covers all outpatient services. The Part B deductible is currently $240 and applies annually. Once you’ve met your part B deductible, Medicare pays 80% of the approved amount, and individuals are responsible for the remaining 20% (coinsurance). Additionally, some doctors may charge an excess charge of up to 15% above the Medicare-approved amount for any services.
What is a Medicare Supplement Plan?
Medicare, similar to standard insurance only fully covers preventive services like annual exams, but you are on the hook for most other services. If you want to fill the gaps that Medicare doesn’t cover, a Medicare Supplement plan is for you. Sometimes called Medigap plans, these plans are meant to help pay for Original Medicare’s out-of-pocket costs. These plans are sold by private insurance companies, and individuals must pay a separate premium for Medigap coverage.
What is a Medicare Advantage Plan?
Medicare Advantage plans, sometimes called Part C or replacement plans, offer an alternative way to receive Medicare benefits. These plans are offered by private insurance companies and provide all the benefits of Original Medicare (Part A and Part B) plus additional coverage, such as prescription drugs and a dental allowance. Medicare Advantage plans often have lower or no additional premiums, but individuals must pay copays and coinsurance for services received.
Medigap vs. Medicare Advantage
While either plan can help cover the costs of Original Medicare, there are benefits and drawbacks to each. For example, a Medigap plan is great because it functions similarly to Original Medicare in that you can see any doctor you want so long as they accept Medicare. However, the premiums for these types of plans are higher, and supplemental plans may not be right for those with TRICARE or FEHB benefits.
The primary draw of Medicare Advantage plans is that many of them are free or low-cost and offer additional benefits like free or discounted gym memberships. However, Advantage plans only work if your provider is in-network, meaning you may not be able to keep the doctor you like if they’re out of network. Plus, Medicare Advantage’s pay-as-you-go system also sets you up to pay more out of pocket over time than a supplemental plan.
It’s hard to say whether Medigap plans are objectively better than an Advantage plan, because it all comes down to which plan is better for your situation and which you can afford.
Prescription Drug Coverage
Medicare Part D plans provide coverage for prescription drugs. These plans vary in cost, with average premiums ranging from $10 to $70 per month. It’s important to choose a Part D plan that covers your specific medications and meets your needs.
Medicare Vision Coverage
Vision is an important part of overall wellness, however, Medicare is similar to standard health insurance companies in that they don’t cover vision services unless it’s deemed medically necessary. If you want coverage for eye exams or prescription lenses, you’ll need to either purchase vision insurance or find an Advantage plan that offers vision coverage.
Medicare Dental Coverage
Similar to vision insurance, Medicare only covers dental procedures that are considered medically necessary. If you want coverage for routine cleanings, dentures, and more, you’ll need to purchase dental insurance or look for an Advantage plan that offers a dental allowance.
Getting Medicare Help
If you’re feeling a little overwhelmed by what Medicare is and how to navigate it, you aren’t alone. Fully understanding Medicare on your own requires a lot of education. If you’re at the start or midway through your Initial Enrollment Period, you don’t have enough time to learn everything you need to learn before deciding on your healthcare coverage. While you can call Social Security or Medicare for generic help, navigating the complexities of Medicare often requires expert guidance. There are two types of agents you can seek help from: captive agents and brokers.
Should I Work With an Agent or Broker?
Whether you work with a Medicare agent or broker, you can rest assured you are getting reliable, professional assistance through the Medicare process. However, Medicare agents are typically called captive agents because they work for a specific insurance company and can only offer plans from that company. While they may provide useful information, their coverage options are limited. Brokers, on the other hand, work with multiple insurance companies and can provide a broader range of options.
When seeking assistance, it’s important to work with an agent who discusses both Medigap plans and Medicare Advantage plans. Some agents may focus on a specific plan type due to higher commissions, but it’s crucial to have a Medicare advisor with an unbiased view who will explore all available options with you.
Whether you choose an agent or broker, the price for insurance plans remains the same. Insurance companies set the premiums, and there is no cost for assistance. Agents are paid by the insurance companies, eliminating any financial burden on the individuals seeking help.
Gain a Better Understanding of Medicare at a Medicare Seminar
Understanding Medicare and making the right decisions can be challenging. However, by breaking down the essentials of Medicare eligibility, enrollment, expenses, and finding assistance, we hope to simplify the process for you. Whether you choose Original Medicare with a Medigap plan or Medicare Advantage, it’s important to weigh the costs, benefits, and your specific healthcare needs. Seeking help from knowledgeable agents can further guide you throughout the process and ensure you make the right Medicare decisions.
At Medicare School, we hope to provide you with the resources you need to make the best decision for your retirement. If you’re looking for a more in-depth explanation of Medicare, download our Complete Medicare Guide or sign up for our virtual workshop taught by Chief Educator, Marvin Musick.
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