In whatever way proposed federal health care legislation ultimately does or does not change Medicare, it’s important for those approaching retirement age to understand the basics of the system as currently arranged.
Medicare can be confusing. A survey by PrescribeWellness indicated that 49% of Americans feel that the most confusing part of Medicare is choosing the right plan for their needs, and about a quarter cited confusion regarding which providers offer coverage under the various parts of Medicare.
Since a lack of action can result in penalties for those who are eligible and don’t enroll on time, let’s examine the key aspects of Medicare and alleviate some confusion surrounding this program.
When to enroll
Medicare eligibility begins at age 65 for most of us, though you might be eligible at an earlier age if you are disabled and have been receiving Social Security disability checks. If you are receiving Social Security retirement benefits, you will automatically be notified of your Medicare eligibility at age 65. Those who do not receive SS benefits must take the initiative and contact Medicare to enroll. You have a seven-month window—which includes the three months before you turn 65, the month you turn 65, and the three months after—to sign up for Parts A and B.
Note that Medicare is an individual plan; if you are married each spouse must sign up separately when eligible.
What are the different parts of Medicare and how much will they cost?
Medicare is no monolith—the program encompasses several different plans:
Part A covers hospital care, skilled nursing facility care, nursing home care as part of an overall treatment plan, and hospice and home health care services.
Medicare Part A is typically free if:
- You receiving or are eligible to receive retirement benefits from Social Security or the Railroad Retirement Board.
- You or your spouse has had Medicare-covered employment for at least 10 years.
- You are under age 65 and have received Social Security or Railroad Retirement Board disability benefits for at least 24 months.
- You suffer from end-stage renal disease and meet certain requirements.
If you are not eligible for free Part A coverage, the cost in 2017 is $413 per month if you paid into Medicare for less than 30 quarters while working—the cost is lowered to $227 per month if you paid in for between 30-39 quarters.
Part B covers medically necessary services and supplies as well as preventative health services. Some examples include:clinical studies, ambulance services, eligible durable medical equipment, inpatient and outpatient mental health services, and a second opinion prior to surgery.
The standard Part B premium for 2017 is $134 per month, but this may increase at incremental levels to a maximum of $428.60 per month, based upon your income level.
Part C, also known as Medicare Advantage Plans, are plans offered by a private insurer who contracts with Medicare to cover the benefits offered under Parts A and B. Most Advantage plans also offer prescription drug coverage and may offer other services and coverages not typically covered by traditional Medicare.
Part D provides prescription drug coverage not provided in original Medicare (Parts A and B) via private insurance companies or other Medicare-approved providers. You can also obtain prescription drug coverage via a Medicare Advantage program (see Plan C referenced above), and costs, drugs, and provider coverage will vary.
Beyond the initial seven-month enrollment period, there is an annual “open enrollment” period each year that runs from October 15 through December 7 where you can change coverages and providers.
Some important considerations to factor into your decision regarding the plan that might be right for your individual needs and complement any existing coverage include:
Do you need an additional level of prescription drug coverage? If, for example, your drug program has changed in terms of the medications covered, the levels of coverage and deductibles or pharmacies that are covered, you might consider another provider.
Do you want supplemental coverage?
Are you more comfortable with one particular type of managed care, such as an HMO or PPO?
Items typically not covered by Medicare
There are a number items that traditional Medicare Parts A and B don’t cover:
- Long-term care
- Routine dental care
- Eye exams related to eyeglass prescriptions
- Cosmetic surgery
- Hearing aids and fitting exams
- Routine foot care
- Services delivered outside of the U.S.
Some Medicare Advantage or other Medicare supplements may cover some or all of these items, depending on the provider.
Penalties and late fees
There are various penalties and late fees for failing to enroll in various parts of Medicare within a prescribed time frame.
If you are not eligible for the free version of Part A and fail to enroll on time, you could incur a penalty of up to 10% of the monthly premium. This increase will last for twice as many years as you were eligible for Part A but failed to sign up.
Similarly, failing to enroll in Part B when first eligible can result in a 10% penalty for each full 12-month period for which you were eligible but didn’t enroll—and the penalty remains in place for as long as you have Part B coverage.
Penalties for failing to enroll in a Part D plan may be applied if you fail to obtain coverage for any continuous period of 63 days or more after your initial enrollment period. The coverage requirement can be met in several ways, including enrollment in:
- A Medicare Part D drug plan
- A Medicare Advantage plan that includes prescription drug coverage
- A Medicare supplemental plan that offers drug coverage
- Credible prescription drug coverage through a workplace plan, inclusion on a spouse’s plan or other coverage
If you are working past age 65 and your employer has more than 20 employees, your company must provide the same health plan as it does for other employees. In companies with fewer than 20 employees, Medicare becomes the primary payer of claims for those who are eligible.
Those who work for larger companies might find that enrolling in Medicare as soon as you are eligible might make the most sense, as your costs for some items may be lowered. And once your leave your job, you will be granted a special enrollment period during which you can enroll penalty-free.
Whether you sign up, even if you are covered by another provider, is an individual decision based on your unique situation.
Medicare is complex and confusing, though you can use the details contained in this guide to navigate the distinctions of the program. Beyond these basics, those approaching age 65 should do some additional research to be appropriately prepared.