Ron Elledge is a seasoned Medicare consultant and author of “Medicare Made Easy.” As a Medicare expert, he regularly consults beneficiaries on Medicare rules, regulations, and strategies.
Medicare is a health insurance program provided by the federal government for qualifying individuals, including people over the age of 65, those with certain disabilities, and individuals with end-stage kidney disease.
Some people may confuse Medicaid and Medicare programs — the primary difference between the two is that Medicaid is a needs-based insurance program, while Medicare is not. Your income is not a determining factor for Medicare qualification.
Although Medicare is a federal insurance program, there are monthly premiums for certain parts of Medicare. Additionally, Medicare does have some limitations and regulations on what it will cover for healthcare-associated costs. Read on to learn more about what Medicare covers and information on enrollment.
When you become eligible for Medicare you have choices to make. First, you must decide whether you will enroll in Part A and B or Part A only and defer Part B. Most people choose Part A because it is premium-free. However, if you are enrolled in a Health Savings Account (HSA) you will not be able to continue contributing to it if you enroll in Part A. Once your A and B choices are made you will move on to which Advantage, Supplement, and/or Part D plans to choose from.
Here’s what each part of Medicare covers.
What is Medicare Part A?
Medicare Part A is considered the hospital insurance portion of Original Medicare, so it covers costs associated with hospital stays, as well as limited stays at a nursing home, hospice care, and some costs with home health care.
You don’t have to pay a monthly premium for Medicare Part A if you or your spouse paid qualifying taxes during employment. However, if you don’t qualify for premium-free Medicare A, you can pay for it still. The premium amount you have to pay varies based on if, and how long, you or your spouse worked while paying qualifying Medicare taxes. For instance, if you paid taxes for less than 30 quarters, you will pay $458 per month based on 2020 premiums. But if you worked and paid taxes between 30 and 39 quarters, you will only pay a $252 monthly premium.
What is Medicare Part B?
Medicare Part B is considered the medical insurance portion of Original Medicare, so it covers things like trips to the doctor’s office for a check-up or a sick visit, any outpatient care you might receive, certain medical supplies, and preventive care, like an annual Wellness exam.
Nearly everyone pays a monthly premium for Medicare Part B. The standard amount for 2020 is $144.60. However, if your gross income on your tax return is high enough, you’ll be required to pay both the standard monthly premium and an Income Related Monthly Adjustment Amount (IRMAA). You are also responsible for 20% of the costs of your health services after your deductible is met.
What is Medicare Part C?
Medicare Part C, commonly referred to as Medicare Advantage, is offered by private insurance companies approved by Medicare and becomes your primary coverage. You can think of Medicare Part C as a “Medicare bundle” because it covers everything that Part A and Part B does. Some, but not all, Medicare Advantage Plans offer additional coverage for dental and vision, and even fitness memberships. Most Advantage plans include Part D prescription drug coverage. For example, Medicare Part C covers in-patient hospital stays, stays in an in-patient skilled nursing facility, and home health care like Original Medicare Part A, as well as outpatient care that Medicare Part B covers like doctor visits, lab tests, X-rays, outpatient surgery, and emergency services.
Original Medicare Part A and Part B only covers 80% of the costs of services received. Medicare Part C plans on the other hand, cover everything Part A and Part B cover but charge a small copayment and coinsurance for services. Most Medicare Advantage plans also have maximum out-of-pocket costs per year and many come with a $0 premium, which can make these plans more affordable. The costs of Medicare Advantage plans vary, since they are offered by private companies, but you can expect to pay both a monthly premium and a monthly Part B premium — unless the plan is a $0 premium plan. Also, whether plans include other benefits like Part D, dental, vision, and hearing, can affect the cost per plan.
What is Medicare Part D?
Medicare Part D refers to prescription drug coverage, so it will help cover the costs of medications that are prescribed for your health condition. Individual Medicare drug plans use a formulary developed by a pharmacy and therapeutics committee composed of pharmacists and physicians to regulate which medications they will cover and must be approved by CMS. They’re required to offer two medications in all categories necessary. In most cases if a name-brand medication is not covered, a generic will be.
Medicare Part D does have costs associated with it. The costs vary based on which type of plan you choose, but in general, you can expect to pay a monthly premium (this can be deducted directly from your Social Security if you choose), a yearly deductible that can’t be more than $435 in 2020 for some plans, and either a copayment or coinsurance percentage after your deductible is met. However, those on low-income assistance will have much of the costs covered for Part D.
What is Medigap insurance?
Medigap insurance is commonly known as Medicare Supplemental Insurance. As the name implies, it’s used as a type of supplemental insurance to cover healthcare costs that Original Medicare does not. You can only purchase Medigap insurance if you are enrolled in Original Medicare — it cannot be used with a Medicare Advantage Plan. Medigap insurance is offered through private insurance companies approved by Medicare.
You will have to pay a monthly premium for Medigap, as well as your normal monthly Part B Medicare premium. The Medigap premium is paid directly to the private insurance company you got your Medigap policy through, while the Part B premium is paid to Social Security.
Medigap insurance can help cover the costs of your deductible, your copayments, and your coinsurance under Original Medicare. However, people born after January 1, 2020, Medigap insurance can no longer cover the Part B deductible. However, people born before January 1, 2020 can still purchase Plan F, which will cover the cost of the Medicare Part B deductible. Additionally, Medigap insurance can’t be used to cover the costs of certain health expenses, including long-term care, vision care and eyeglass, dental care, hearing aids, or private-duty nursing care.
For prescription drug coverage, you’ll need to enroll in a Medicare Part D plan — no Medicare Supplemental plans sold today cover prescriptions. Keep in mind that if you enroll in Original Medicare Part A and Part B, plus a Supplemental plan, but fail to enroll in a Part D plan, you’ll begin accruing Part D late enrollment penalties for every month you aren’t enrolled in a Part D plan. Some exceptions may apply such as if you have drug coverage through the VA.
What isn’t covered by Medicare?
Original Medicare does not cover certain health services and costs, including:
- Long-term care
- Dental care (with some exceptions)
- Vision exams needed to prescribe glasses
- Cosmetic surgery
- Hearing aids and related exams
- Routine foot care
How do I enroll in Medicare?
There are a few different ways to enroll in Medicare. Some people are automatically enrolled in Medicare and others will have to sign up on their own. However, everyone should check with Social Security three months before their expected start date to make sure everything is in order.
You will be enrolled automatically in Medicare if you:
- Are already receiving Social Security benefits (at least four months prior to start)
- Receive Railroad Retirement Board benefits (at least four months prior to start)
- Are under the age of 65, but have a social security disability for 24 months
- Have Amyotrophic Lateral Sclerosis (ALS) or end stage renal disease
You will have to enroll in Medicare on your own if you:
- Are about to turn 65
- Are already 65, but not receiving Social Security benefits
There are also some individual circumstances that may change when you enroll. For instance, if you have employer insurance, you may be able to wait to apply for Medicare Part B instead of being required to apply when you turn 65.
Medicare Enrollment Periods
The Initial Enrollment Period (IEP) for Medicare is a 7-month period beginning 3 months before you turn 65, the month in which you turn 65, and 3 months after you turn 65. For example, if you turn 65 on June 14, your IEP is from March 1st through September 30.
It’s important to know that if you do not sign up during your initial enrollment period, and you are not covered by an employer health plan or are volunteering overseas for at least 12 months, you’ll begin accruing Part B late enrollment penalties, and will only be able to enroll during the General Enrolment Period (GEP). The GEP runs from January 1st through March 31st each year with coverage starting July 1st.
Medicare Advantage plans cannot start before your Part B start date, so if you do not enroll in Part B by the end of your IEP, you’ll have to wait until the GEP for Medicare Advantage enrollment also. This is also true for Medicare Supplement and Part D plans as well.
When does Medicare coverage start?
What month your Medicare coverage begins depends on what month you enroll in Medicare in relation to your 65th birthday. Remember during the IEP, you can enroll three months before you turn 65, the month you turn 65, and three months after you turn 65.
Depending on which of those three time frames you enroll in Medicare, will change the date your coverage starts. For example:
- If you enroll in Medicare during the three months before you turn 65, Medicare coverage begins the first day of the month you turn 65.
- If you enroll in Medicare the month you turn 65, your Medicare coverage will start the first day of the month after you turn 65.
- If you enroll during the month after you become 65, your Medicare coverage will begin two months after you sign up.
- If you enroll two or three months after you turn 65, your coverage starts three months after you sign up.
Let’s run through the scenarios above, by saying for example, you turn 65 on May 10.
- If you enroll in February, March, or April, three months before your birthday, your coverage will begin on May 1.
- If you enroll in May, the month you turn 65, your coverage will start June 1.
- If you enroll in June, the month after your turn 65, your coverage will begin August 1.
- If you enroll in July, two months after you turn 65, your coverage will start on October 1.
- If you enroll in August, three months after you turn 65, your coverage will begin November 1.
You can coordinate your ancillary coverage — supplemental plans, Medicare Advantage plans, and Medicare Part D — to start the same day as your Medicare Part A and B coverage.
When you are ready to apply for Medicare, you can fill out an online application through the Social Security website, or in-person at your local Social Security office.
- “Part B costs”, U.S. Centers for Medicare & Medicaid Services [Accessed August 2020]. Available at: https://www.medicare.gov/your-medicare-costs/part-b-costs
- “What’s Medicare Supplement Insurance (Medigap)?”, Medicare.gov. [Accessed August 2020]. Available at: https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap
- “2020 Medicare Parts A & B Premiums and Deductibles” [November 8, 2019], U.S. Centers for Medicare & Medicaid Services. [Accessed August 2020], Available at: https://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-and-deductibles
- “Understanding the Benefits”, Social Security Administration [Accessed August 2020], Available at: https://www.ssa.gov/pubs/EN-05-10024.pdf
- “Medicare Costs at a Glance”, U.S. Centers for Medicare & Medicaid Services, [Accessed August 2020], Available at: https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance