The annual Medicare enrollment period runs from October to December, so we think it is important to review both the basics and a few lesser-known rules surrounding this benefit. This post will cover how and when to get into Medicare, a quick review of what exactly Medicare covers, and how much you can expect to pay for Medicare insurance.
ELIGIBILITY AND ENROLLMENT
If you are age 65 and a US citizen or permanent legal resident, you are eligible for Medicare. Your initial enrollment period starts 3 months before the month you turn 65 and runs 7 months, ending the third month after you turn 65. As an example, if your birthdate is 11/10/1957, your enrollment starts 8/10/2022 (3 months before you turn 65), and runs to 2/10/2023 (3 months after you turn 65).
The annual enrollment period gives you an opportunity once a year to change your coverage or provider. This is not the only time you can sign up for Medicare if you have never been enrolled before.
If you or your spouse continue to work beyond age 65, you have existing health insurance coverage through your (or your spouse's) employer, and your company has 20 or more employees, you can stay with your current health insurance. If this is true for you, once you retire, you will have an 8 month window to get enrolled into Medicare.
Many people will physically (well, digitally) sign up for Medicare. However, it is possible to be automatically enrolled if you meet certain criteria.
- If you receive Social Security benefits or Railroad Retirement benefits for at least 4 months prior to your 65th birthday, you will be automatically enrolled in Original Medicare.
- If you have ALS (Lou Gehrig's Disease) or End Stage Renal Disease, you will be enrolled in Medicare when you receive Social Security Disability benefits.
- Anyone else who is eligible to receive Social Security Disability is automatically enrolled in Medicare after 24 months of disability
- When you begin receiving Social Security benefits at any point after age 65, you will be automatically enrolled in Medicare Parts A and B. However, you have the ability to opt out of Part B.
HOW MEDICARE IS STRUCTURED
Original Medicare is run by the federal government and premiums are paid directly to the government (specifically, the Centers for Medicare and Medicaid, part of the Department of Health and Human Services) which in turn makes payment to health care facilities and professionals. Similar to private insurance companies' "networks," you can use any doctor or hospital that accepts Medicare, anywhere in the United States.
Medicare is structured in Parts.
- Part A. Medicare Part A is hospital insurance. This helps cover inpatient hospital care, a limited amount of skilled nursing care, a very limited amount of long term care, part-time or intermittent home health care, and hospice care.
- Part B. Medicare Part B is medical insurance. This helps cover medically necessary services provided by individual doctors and other health care providers, some types of medical equipment, and some preventative services.
These are the two primary parts of Medicare that you must enroll in. Like every other health insurance plan in America, there are limitations and restrictions regarding scope and time when it comes to what Parts A and B cover. There are also deductibles and co-insurance amounts.
In addition, there are some options to Medicare that fill in the gaps Original Medicare does not cover.
- Plan C. Better known as Medicare Advantage, Plan C is Medicare-approved plan offered by private insurance companies that bundles Parts A and B with other types of coverage such as vision, dental, hearing, and more. Most Medicare Advantage plans also include Medicare's prescription drug coverage, known as Part D. Medicare Advantage is no longer available for new enrollments as of 2020.
- Part D. Medicare Part D is drug coverage. This helps cover the cost of prescription drugs, shots, and vaccines. Part D can be purchased separately or bundled with other Medicare plans.
- Plan E. We don't talk about Plan E. (Not really - Plans E, H, I, and J have not been available for sale since 2010. Plan F is no longer available for sale as of 2020.)
- Plans G, K, L, M, and N. These are more commonly referred to as Medigap Plans or Supplement Plans. These plans are run by private insurance companies, have separate premium payments, and can cover services Medicare does not cover, Part A/B deductibles, foreign travel, and more. You cannot buy (and do not need) Medigap plans if you are covered by a Medicare Advantage (Part C) plan.
If you have had a health insurance policy at any point in the last few decades, you'll be familiar with the varying ways in which you will pay for health care. At a basic level, your out-of-pocket costs are broken down into three buckets: premiums, deductibles, and copay and co-insurance. This one-minute video from health insurance company Aetna does a good job of explaining those terms. To keep this blog somewhat shorter, we'll only discuss the monthly premiums and related items.
Each part of Medicare has its own cost structure. For Part A, the hospital insurance, most people have a $0 monthly premium because they (or their spouse) paid Medicare taxes for at least 10 years while working. This is the same 10 years, or 40 quarters, needed to receive Social Security benefits. If you (or your spouse) have earned between 30 and 39 Social Security quarters, your Part A premium will be $274/month. If you (or your spouse) have earned fewer than 30 Social Security quarters, your Part A premium will be $499/month.
For Part B, the standard premium is about $170/month, though this amount can be adjusted upwards significantly due to "late enrollment penalties" and income-based adjustments. Both of those topics will be discussed in a separate blog post.
Part D monthly premiums depend entirely on which plan you sign up for. As mentioned earlier, Part D drug coverage can be purchased as a standalone policy or bundled with other coverage. A recent plan comparison search for standalone plans in North Texas showed monthly premiums ranging from $6 to $108 for 2023.
MORE TO COME...
We will have a separate blog available in the next few weeks covering some special Medicare situations, including what happens if you’re still working but have Medicare, why it’s a good idea to apply for Medicare “on time,” and how your annual income can affect your monthly Medicare premiums. Stay tuned; all this and more in our next exciting episode blog!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.