Understanding Medicare Plans, Enrollment, and Eligibility
If you’re like most people, the process of choosing a health insurance plan can be more than a little overwhelming! Reviewing plan after plan and trying to figure out which one best suits your needs is enough to make anyone’s head spin! How much insurance do you really need? Will paying a higher premium really reduce your out-of-pocket expenses that much? Should you purchase supplemental insurance?
To make the process a little easier, here is a basic explanation of the various plans offered by Medicare, as well as enrollment and eligibility requirements.
Who is Eligible?
As a general rule, you can receive Medicare if you are 65 or older, if you are younger than 65 but have certain disabilities, or if you have End Stage Renal Disease. You do not have to pay premiums for Medicare Part A (Hospital Insurance) if you are 65 years or older and if you or your spouse worked and paid Medicare taxes for at least 10 years. If you are receiving (or are eligible to receive) Social Security or Railroad benefits or if your or your spouse had Medicare-covered government employment, you qualify for Medicare Part A when you turn 65.
If you or your spouse did not pay Medicare taxes, you may still be able to buy Medicare Part A when you turn 65 as long as you are a permanent resident of the United States.
Medicare Part A (Hospital Insurance) is available to most people premium-free. Part A covers hospital stays, care in a skilled nursing facility, hospice care, and some in-home health services. As a general rule, you should sign up for this coverage as soon as you are eligible. If you are employed or have health coverage as part of your retirement, this may be all the Medicare coverage you need. It can be used in addition to your other coverage to help pay for inpatient care.
Medicare Part B is Medicare Insurance. It covers doctor’s visits, outpatient care, medical supplies, and preventive services. You will have to pay a monthly premium for this coverage. Usually, it is deducted from your Social Security, Railroad Retirement, or Civil Service Retirement. In other cases, you will receive a bill directly from Medicare. If you have other coverage, you may want to hold off on enrolling in this plan. If you need it later, you can enroll in Part B without paying a penalty as long as you qualify for a special enrollment period.
If you choose to enroll in both Part A and Part B, you can decide whether you want your coverage to come directly through Medicare (Original Medicare) or a Medicare Advantage Plan (Part C). Medicare Advantage Plans are offered by private insurance companies that have been approved by Medicare.
Here are a few of the main differences between Original Medicare and Medicare Advantage:
- The majority of Medicare Advantage plans offer prescription drug coverage.
- Medicare Advantage Plans have an annual out-of-pocket maximum, but there is no cap in Original Medicare.
- Original Medicare will cover about 80% of your health care costs.
- Some Medicare Advantage Plans cover vision, dental, assisted living, or long-term care.
- More doctors accept original Medicare than Medicare Advantage.
- Medicare Advantage plans will restrict you to their network of health care providers.
This is a prescription drug plan. If you choose to enroll in Original Medicare and would like help paying for medications, you may want to add this to your plan. If you choose a Medicare Advantage Plan, prescription drug coverage is most likely already included in your premium.
This is coverage offered by private insurance companies specifically to fill in gaps in Medicare coverage and lower out of pocket costs. Medigap policies can help pay for copayments, coinsurance, and deductibles. Some of them may also cover health care outside of the United States. You can only purchase this supplemental insurance if you are enrolled in Original Medicare.
When to Enroll
When you first become eligible for Medicare, you have a seven-month window in which to sign up. This is called your Initial Enrollment Period. Most people first become eligible at 65. If this is the case with you, this window begins three months before you turn 65, includes the month you turn 65, and ends three months after you turn 65. If you want to avoid gaps in your coverage, it’s important to sign up at least one month before your 65th birthday.
If you do not sign up for Medicare Part B when you become eligible, you will have to pay a late enrollment penalty in the form of a higher premium for as long as you have Part B.
The exception to this rule is for people who continue working after they turn 65. In this case you would qualify for a special enrollment period (SEP) and would be eligible to apply for Medicare any time as long as you or your spouse are working and covered under a group health insurance plan based on that work.
An eight-month SEP also applies starting the month after employment ends or the month after group health insurance based on current employment ends.
Usually you won’t have to pay a late enrollment penalty if you sign up during a SEP.
Once you have enrolled, you will not have to reenroll every year, but you will be given a chance to evaluate your current needs and adjust your coverage if necessary.
Before making a final decision on your health insurance, it’s important to compare plan premiums, as well as covered services and your expected out-of pocket expenses. These will all be different depending on your health needs and on what plans are offered where you live. For help comparing plans in your area, the Medicare website offers an online plan finder. You can visit this link to conduct a search based on your unique circumstances.
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