When people retire, they lose their employer-sponsored health insurance. But as long as they don’t retire before age 65, most people should have access to Medicare. Medicare is the federal health insurance program for people over the age of 65, some younger people with disabilities, and those with permanent kidney failure.
To enroll in Medicare properly, you’ll have to do some research into the different parts of the program, the premiums associated with each part, and the deadlines you’ll need to meet for submitting information. In this article, we’ll go over some of the basics of Medicare and give tips on how to prepare for the switch.
- There are four “parts” of Medicare, including hospital insurance, medical insurance, drug coverage, and Medicare Advantage, an alternative way of receiving Medicare benefits through a private company (think HMO or PPO).
- Most people don’t pay a premium for Part A coverage (hospital insurance), as long as they qualify for Social Security retirement or disability benefits.
- Parts B, C, and D (medical insurance, drug coverage, and Medicare Advantage) all come with premiums, though you may not be billed for them if it’s deducted automatically from your Social Security benefit.
The Parts of Medicare
There are four parts of Medicare.
- Part A (hospital insurance) covers inpatient and hospital coverage, skilled nursing facility care, and some home healthcare.
- Part B (medical insurance) covers services from doctors, outpatient care, medical equipment like wheelchairs, and preventative screenings like shots and vaccines.
- Part D (drug coverage) covers the cost of prescription drugs.
- Part C (Medicare Advantage) is an alternative way of receiving Medicare benefits in which you pay premiums to a private Medicare-approved company.
Original Medicare is the term used to refer to Parts A and B of the program. They are differentiated from Medicare Advantage (Part C), which involves a sponsor company.
Most people will qualify for Part A Medicare without needing to pay a premium. If you qualify for Social Security, you qualify for premium-free-Part-A. Similarly, if you got Medicare before the age of 65, you won’t need to pay premiums for Part A coverage.
Part B includes a premium everyone has to pay. You’ll pay the premium each month, even if you don’t get Part B covered services. It’s important to note here that if you don’t enroll in Part B coverage as soon as you’re eligible, you’ll be charged a late enrollment fee each month in addition to your premium for as long as you have the coverage. These fees will add up, and we’ll discuss below how to make sure you sign up for Part B coverage at the right time.
Premiums for Parts C and D can vary depending on which plan you join. Be sure to consider all of your options before selecting what kind of coverage you want to receive.
Part of the confusion surrounding Medicare has to do with which parts you can have simultaneously. For example, if you qualify for Part A coverage, you have a choice as to whether or not you want to pay the premium to get Part B coverage. You also can choose to add on Part D coverage as a stand-alone plan.
When you enroll in a Part C Medicare Advantage plan, you actually sign up for Parts A and B with the government, even though you receive your Medicare benefits from another company. Most Medicare Advantage plans also include Part D coverage automatically, in addition to other services not covered by Medicare, like routine vision and dental care. Not every Part C plan is the same, though, so you’ll need to research carefully before selecting one.
Medicare Eligibility Requirements
Eligibility for Medicare is contingent on three things: being 65 or older, being a citizen of the United States, and having worked (or having a spouse who has worked) for ten years in Medicare-covered employment. There are exceptions to this, though, and some people under the age of 65 may qualify for Medicare early.
For example, if you’ve qualified for Social Security disability benefits for at least 24 months, receive a disability pension from the Railroad Retirement Board, have Lou Gehrig’s disease, or have permanent kidney failure, you may qualify for Medicare before 65. You also have the opportunity to pay into the Parts if you don’t qualify, though you’ll need to pay additional premiums.
The Pros and Cons of Medicare Advantage
When deciding to opt for either Original Medicare or Medicare Advantage, there are a number of factors you’ll want to consider. Original Medicare allows you to go to any doctor or hospital anywhere in the U.S. that takes Medicare, and you usually don’t need a referral to see a specialist. This is a considerable advantage of Original Medicare as it streamlines your health services and allows you greater flexibility and peace of mind when you’re traveling.
Medicare Advantage, on the other hand, limits you to seeing doctors and providers who are in your network. You’re also more likely to need a referral when seeking out specialists.
When it comes to cost, Medicare Advantage is (surprisingly) sometimes the cheaper option of the two. This is mainly because Medicare Advantage plans have a yearly limit to what you pay out-of-pocket for services Parts A and B cover. Once you hit that limit, you don’t have to pay for additional costs incurred for services covered by those Parts. Also, Medicare Advantage plans generally include Part D coverage for free.
However, this is not always the case. Sometimes Original Medicare will be cheaper, especially if the Medicare Advantage plan you enroll in has high out-of-pocket costs. Premiums vary between Medicare Advantage plans, too, so do your research before choosing.
In terms of coverage, Medicare Advantage plans have to cover all the medically necessary services that Original Medicare covers. They’ll sometimes offer a few additional benefits, like routine vision and dental care.
Enrolling in Medicare
Some people will automatically be enrolled in Medicare Parts A and B if they’ve been receiving Social Security benefits for at least four months before turning 65 or received disability benefits for at least 24 months before turning 65. If you’re one of these people, you’ll be enrolled in Parts A and B without any additional action being necessary.
Remember that you can begin taking Social Security at age 62, but your full retirement age won’t be until you’re 66 or 67 (depending on your birth year). It’s entirely possible you won’t be receiving Social Security by 65, in which case you’ll need to enroll yourself.
Once you turn 65, you can enroll through the Social Security Administration’s website or in person at a Social Security office. You’ll want to have copies of your birth certificate, state ID, and proof of U.S. citizenship when you apply. You may also need your Social Security card and a W-2 form, though not always.
Signing up for Parts C and D is optional and must be done separately. If you need supplemental insurance to help pay for deductible costs or out-of-pocket copays, you may also want to consider enrolling in Medigap.
Late Enroll Fee for Part B
It’s essential to be aware of when you become eligible for Medicare (65 for most of us) because if you don’t enroll in Plan B as soon as you’re eligible, you’ll start accumulating additional costs from late enrollment fees.
The fee is considerable, too, totaling an additional 10% of your current monthly premium for each 12-month period you could have taken Part B insurance but didn’t. For example, if you waited a full 24 months to enroll in Part B coverage, your premium will include a 20% extra fee on top of the premium.
These fees last for life, too, meaning as long as you have Part B coverage, you’ll have to pay the late enrollment fee. For this reason, it’s vital to enroll in Part B coverage as soon as you’re eligible if you intend on getting medical insurance through Medicare at any point in your life.
What If I Retire Before 65?
If you retire before 65, you’ll face a bit of a conundrum. Without employer-sponsored health insurance and without qualifying for Medicare, you may turn to a partner to try to get health coverage. As you plan for retirement, keep in mind how much you’ll pay in premiums to Medicare each month, whether you’re opting for Original Medicare or a Medicare Advantage plan.
Healthcare costs are often the thing that throws a wrench in retirees financial plans, so having some wiggle room to account for unexpected health-related costs is often wise.
The Bottom Line
When you turn 65, you’ll probably make the transition from an employer-sponsored health insurance plan to Medicare. At that point, you’ll need to make a few decisions and do a lot of research. Do you want Original Medicare – access to hospital insurance and medical insurance – or a private Medicare Advantage plan? Do you want to add Part D prescription drug coverage to your Original Medicare plan? Everyone will have to make decisions related to their health insurance for themselves.