When it comes to healthcare coverage after 65, Medicare is a crucial yet overwhelming program at first glance. While you can get Medicare for other reasons, like a disability or ALS, most folks enter the ranks when they turn 65.What do you need to know to make informed decisions about your healthcare coverage? The pyramid, the parts, the payments, the penalties, and the path forward. Let’s get into it.
Original Medicare consists of two main parts that serve as the base of the Medicare pyramid. Beneficiaries (aka you, the Medicare shopper) might get signed up for those automatically if you receive Social Security benefits or have ALS. If not, you will have to evaluate if signing up for Parts A and B are the right idea for you.
So why are there two parts? There aren’t two parts to my health insurance now! Think of Part A as your hospital coverage. It helps pay for:
Most don't pay a premium for Part A because they or their spouse paid Medicare taxes while working. If you or your spouse worked and paid Medicare taxes for at least 40 quarters (10 years), you qualify for premium-free Part A. This is why Part A is often called "premium-free Medicare."
To completely understand how your Part A coverage works, you’ll need to understand how benefit periods work. A benefit period begins the day you're admitted to a hospital or skilled nursing facility and ends when you haven't received inpatient care for 60 consecutive days. Within that 60 days, you only have to pay the deductible one time, instead of daily. Then, once that 60 days is over, if you need to go to the care facility again, a new benefit period starts, and the deductible must be paid again. For days 61-90, you pay a daily amount to stay, and another higher amount after day 91. But this is just the tip of the Part A iceberg. To understand more about benefits periods, view our video on the subject.
The second part, Part B, is for outpatient care. Things like:
Unlike Part A, most people do pay a monthly premium for Part B. This is because Part B is funded differently than Part A. While Part A is primarily funded through payroll taxes paid during your working years, Part B is funded through a combination of government funds and beneficiary premiums. The premium helps cover the cost of outpatient care and preventive services that Part B provides.
There are no benefit periods associated with Part B, but you will have to pay a deductible and 20% coinsurance for non-preventative services, including outpatient hospital services, mental health services, and durable medical equipment.
Most people hop on board during their Initial Enrollment Period (IEP). Your IEP is a seven-month window centered around your 65th birthday, beginning 3 months before your birthday month. It includes your birthday month and extends 3 months after your birthday month.
But, if you're still working and covered by your employer's health plan (or covered under your spouse's plan), you may qualify for a Special Enrollment Period. This may allow you to sign up for Medicare without penalty while you're still covered by the employer plan. You can do this up to 8 months after your employment or coverage ends too, whichever comes first.
Just be sure to check in with your HR department if you do choose to continue to work past 65. There are some rules regarding how Medicare and employer coverage coordinate depending on the total number of employees. Failing to sign up for Medicare when it is the primary payer could cost both you and your employer---not to mention the late enrollment penalties you may incur.
You may have to pay a fee on top of your premiums. Medicare calculates penalties for each part differently.
If you have to pay for Part A and don't sign up when first eligible, your monthly premium may increase by 10%. You'll have to pay this higher premium for twice the number of years you could have had Part A but didn't sign up. But keep in mind, most people don’t pay for Part A at all, so this most likely won’t apply to you.
If you don't sign up for Part B when first eligible, you may face a penalty of 10% of the standard premium for each 12-month period you could have had Part B but didn't. This penalty lasts as long as you have Part B.
While Original Medicare provides essential coverage, many people find they want additional protection for things like travel insurance, blood transfusions, and more. That's why private insurance companies offer supplemental coverage options:
Medicare Supplement Insurance (Medigap), comes into play here. If we go back to the pyramid analogy, these plans would be at the top. Standardized across carriers and most states, these policies help cover costs that Original Medicare doesn't, such as deductibles, copayments, coinsurance, and more. For more information on how these plans work, check out this playlist.
Medicare Advantage, or Part C, can also be of help to you here. Offered by private companies, these plans represent an “all-in-one” approach to Medicare – they combine Part A and part B benefits into one plan, and often provide additional benefits, such as dental, hearing, or vision. One variation of these plans, called Special Needs Plans, or SNPs, are designed to help those with lower incomes or extenuating medical circumstances, like diabetes or heart disease. More information on those can be found in this insight.
Part D (D for drugs) offers prescription drug coverage that can be added on whether you have a Supplement plan or not. These cover things like prescription drugs and insulin, but vaccinations usually are covered in original Medicare. , just like Parts A and B. To learn more about how Part D works, we have a video for that or an insight about signing up.
When deciding on your Medicare coverage, consider:
Medicare doesn't have to be overwhelming. While there are many options to consider, breaking down your choices step by step can help you make confident decisions about your healthcare coverage. Remember that you're not alone in this journey – licensed insurance agents, like us at Action Benefits, specialize in Medicare. We can help you understand your options and find coverage that fits your needs and budget.
Healthcare needs change over time, and Medicare coverage options don’t always stay the same from year to year. But don’t fret, we have you covered. We will contact you to review your coverage annually during the Annual Enrollment Period or Medicare Open Enrollment Period if you find yourself needing to change your coverage options. We can re-evaluate your options at this point.
Remember, the goal of Medicare is to help you maintain your health and independence, not confuse and disappoint. Take the time with us to understand your options, and we will help you make the most of your Medicare benefits for years to come.
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