What is Medicare?
Medicare is the federal health insurance program for people who are 65 years of age or older. People younger than 65 can also qualify if they have certain disabilities. The Medicare program assists with health care costs, but typically will not cover medical expenses or long-term care.
Original Medicare coverage consists of Part A and Part B. Additionally, you can add Medigap which is Medicare Supplement Insurance. Medigap will cover costs that Medicare does not cover including deductibles and copayments.
Medicare Advantage offers a bundled plan from a private company that includes Part A and Part B and may include Part which is drug coverage. Social Security will process your Medicare application even though the Centers for Medicare and Medicaid Services is in charge of the program.
Medicare Part A is your hospital insurance. Part A will pay for inpatient hospital care or temporary care at a skilled nursing facility as long as you stayed in a hospital prior to the facility. Furthermore, PArt A will pay for some hospice care or home health care.
People who are citizens or permanent residents and at least 65 years old are eligible for Part A. If you receive or are eligible for benefits from Social Security or the Railroad Retirement Board (RRB) you are eligible and will not pay premiums for Medicare Part A. Also, if your spouse receives or is eligible for Social Security or RRB benefits, whether living, deceased, or divorced, you may be eligible as well.
If you are younger than 65, you may qualify for Medicare Part A at no cost if you have been entitled to Social Security disability benefits for two years, you collect a disability pension from the RRB and meet additional requirements, you receive disability benefits from the SSA due to Lou Gehrig’s disease, you were employed by a government job for long enough, or you meet other conditions related to your employment or disability.
There are additional requirements and qualifications that may make you eligible for Medicare under different circumstances. If you believe you should be covered because you or your spouse worked in a government job or you have a deceased child who was fully insured, contact your local Social Security Administration field office or call 1-800-633-4227.
It is recommended that you sign up for Medicare three months before you turn 65. You can visit SSA.gov to apply.
Medicare Part B is medical insurance that will help you pay for doctor service, home health care, some medical equipment, outpatient care, and qualifying preventive services. Also, if you are not eligible for Part A at no cost, you can choose to buy Part B without paying for Part A under certain circumstances.
The base rate for Medicare Part B in 2021 is $148.50 per month, but higher-income individuals pay more relative to their income amount. Your premium will be determined by your modified adjusted gross income coming from the most recent information that the Social Security Administration has from the IRS. For 2021, this will most likely be your 2019 income that was used for the tax return you filed in 2020. If you modified adjusted gross income for 2019 was less than $88,000 for an individual or $176,000 for a married couple filing jointly, you will pay the standard rate. The maximum premium is $504.90 per month and that applies if your modified adjusted gross income is higher than $500,000 for an individual or $750,000 for a couple.
The 2021 deductible for Part B is $203 and after you meet this deductible you will usually pay 20 percent of the Medicare-approved amount for most doctor services, outpatient therapy, and Durable Medical Equipment.
You can opt out of Part B if you choose to do so, but you have to have primary coverage through spouse benefits, veteran benefits, or through an employer. If you decide to opt out of Part B, your Social Security benefits will not be affected, but you may pay increased premiums if you ever decide to re enroll in Part B at a later time.
If you were automatically enrolled in Part A and Part B, you can follow the instructions that you received with your Medicare card. You will also have to return the card in order to stop paying for Part B. If you signed up through Social Security, you can contact them to opt out.
Supplemental policies known as Medigap can help you pay for you out-of-pocket copayment for Medicare. It may also help you pay for deductible and coinsurance related fees and expenses.
Medicare Advantage Plan
Medicare Advantage Plan used to be known as Medicare Part C and includes all of the benefits and services that Part A and Part B cover, but they are bundled under a single plan. It can cover additional benefits such as dental, hearing, and vision.
Many Medicare Advantage plans give additional coverage and may even lower your out-of-pocket amounts. With this type of plan, you cannot have Medigap because Medicare Advantage covers a lot of the same benefits. With Medicare Advantage you may have extra hospital days than you would be covered by Original Medicare. You will also have HMO plans, PPO plans, and more.
Medicare Part D is prescription drug coverage. Anyone who receives Original Medicare is eligible for Part D and these benefits can be built into Medicare Advantage or come as an additional plan by itself. To receive Medicare Part B, you will pay an additional premium each month.
If you do not sign up for Part B when you are initially eligible, you may pay a penalty at a later time. If you make at or above the threshold levels of $88,000 for individuals or $176,000 for a couple filing jointly, you may pay more than the standard premium. The 2021 standard premium is around $30 per month.
Do You Have to Sign Up?
If you receive Social Security benefits at least 3 months before you turn 65, in most cases you will automatically receive Medicare Part A and Part B on the first day of the month when you turn 65. If your birthday falls on the first day of the month, your Medicare Part A and Part B coverage will begin on the first day of the previous month.
You will automatically receive Medicare Part A and Part B if you have received Social Security disability benefits for at least 2 years. If you reside in Puerto Rico, you will automatically be enrolled in Medicare Part A, but will have to sign up for Medicare Part B in order to receive it.
If you are not receiving Social Security benefits at least four months before you turn 65, you will have to sign up with Social Security in order to receive Medicare Part A and Part B coverage. To sign up you can apply online at SSA.gov. Additionally, when you receive coverage, you can decide to receive Part C or Part D for additional coverage.
You will receive coverage at different times depending on the exact situation. If you enroll one to three months before you reach 65 years of age, you will receive Medicare benefits the month that you hit 65. If you enroll the month you reach 65, you will receive Medicare one month after. If you enroll one month after you reach 65, you will receive Medicare two months after. If you wait two to three months after you reach 65, then you will have Medicare three months after the month you enrolled.
Whether you decide to get Part B should depend on your unique situation. Be sure to consult with a financial advisor for more information before you decide whether to receive Part B or to opt out. For more information about Part B, check out this webpage.