Understanding Medicare can be a confusing process, especially for those of us who are entirely new to it. There are dozens of plan options, covered services, and health insurance terms that can be overwhelming if you’re learning about Medicare for the first time. What’s important to know is that if you’re confused, you’re not alone! We’re here to break down the basics of Medicare to help you get started. Keep reading for more information and answers to the most frequently asked questions about Medicare.
- Medicare is a federal health insurance program meant to provide healthcare to seniors aged 65+, younger people with disabilities, and people diagnosed with End Stage Renal Disease (kidney failure) or Amyotrophic Lateral Sclerosis (ALS).
- Part A and Part B of Original Medicare do not cover prescription drugs, but Medicare Prescription Drug Plans (Part D) and Medicare Advantage (Part C) do.
- While there is no legal mandate, it is strongly recommended to have supplemental coverage to help with the benefit gaps and cost-sharing requirements found in Original Medicare.
- Supplemental coverage is available through Medicare Advantage (Part C) or Medigap policies.
What is Medicare?
Medicare is a federal health insurance program intended to provide adequate healthcare to adults aged 65 and up. It was implemented in 1965 with seniors’ health in mind, but has since been expanded to additionally cover individuals under 65 with long-term disabilities. Medicare helps cover medical services, prescription drugs, home healthcare, and routine doctor’s visits for eligible participants. The program has two parts: Part A, which covers inpatient hospital services, and Part B, which covers outpatient medical services. One of the most attractive features of Medicare is that it provides coverage for individuals regardless of income level, health status, or medical history. Today, Medicare has been essential in providing quality health care and financial security to millions of seniors and adults with disabilities.
How Can Someone Qualify for Medicare?
In general, Medicare is available for seniors 65+, younger people with disabilities, and people diagnosed with End Stage Renal Disease (kidney failure) or Amyotrophic Lateral Sclerosis (ALS). Within these characteristics, however, there are additional requirements that determine which plan option you qualify for and how much you must pay.
If you’re 65 or older, you are eligible for full Medicare benefits if you meet any of the following requirements:
- You’re a U.S. citizen or have been a permanent legal resident for at least 5 years
- You receive Social Security or Railroad Retirement payments or are are deemed eligible to receive them
- You or your spouse is a government employee/retiree
- You paid Medicare payroll taxes while working
If you’re under 65, you are eligible for full Medicare benefits if you meet any of the following requirements:
- You have been entitled to Social Security disability benefits for at least 24 months (consecutively or non-consecutively)
- You receive a disability pension
- You have Amyotrophic Lateral Sclerosis, also known as ALS or Lou Gehrig’s Disease
- You have End Stage Renal Disease and require regular kidney dialysis or need a kidney transplant
When Can Eligible Enrollees Apply for Medicare?
When you first become eligible for Medicare, there is a 7-month long initial enrollment period to sign up for Part A and/or Part B. It begins 3 months before you turn 65 and ends 3 months after you turn 65. In most cases, not signing up for Part B when you’re first eligible may result in a late penalty fee. Additionally, waiting until the same month you turn 65 to enroll could result in Part B coverage being delayed, therefore causing a gap in your coverage.
If you miss the initial enrollment period, you can apply for Medicare during the General Enrollment Period between January 1st and March 31st each year. You can also consider applying during a Special Enrollment Period if you qualify. Find out all eligibility requirements and dates using the Medicare eligibility tool.
What About Prescription Drugs?
Since 2006, everyone with Medicare, regardless of income, health status, or prescription drug usage has been given the optional benefit for prescription drug coverage. There are two primary ways to get prescription drug coverage through Medicare.
- Medicare Part D: Part A and Part B of Original Medicare do not cover prescription drugs. Those who are already entitled to Parts A and/or B can apply for Part D, an additional plan that supplements Original Medicare benefits. Part D plans, also known as PDPs, are required to cover the most common drugs, but may choose specific drugs to cover. Each plan has a formulary – a list of prescription drugs covered under that policy.
- Medicare Advantage (Part C): Medicare beneficiaries have the option to receive benefits through a private health plan, such as an HMO or PPO. These are provided through private insurance providers who work in conjunction with the Medicare program, but establish their own coverage rules and regulations. Medicare Advantage or Part C plans are considered all-in-one packages, as they typically cover Part A, Part B, and Part D benefits.
Do I Need to Purchase Supplement Coverage With Medicare?
Original Medicare provides financial protection against the high costs of healthcare services, but Parts A and B do not cover all medical needs that are important for seniors and those with disabilities, such as assistance equipment, dental services, and vision/hearing services. Additionally, many Medicare policies can have high deductibles or no limit on out-of-pocket spending. While there is no legal mandate, we strongly recommend having supplemental coverage to help with the benefit gaps and cost-sharing requirements found in Original Medicare.
Supplement Option: Medigap (Medicare Supplement Insurance)
Medigap is additional health insurance that you can purchase from a private company to pay for the healthcare costs not covered by Original Medicare, such as copayments, deductibles, and healthcare outside of the U.S. To be eligible for a Medigap policy, you must already be enrolled in a Medicare Part A and Part B plan. In addition to the Part B premium, you will have to pay a premium to the insurance company providing your Medigap policy. Medigap policies only apply to one person, so if you and your spouse are interested in Medigap, you will have to enroll separately. If you’re interested in purchasing a Medigap plan, the open enrollment period begins six months before your 65th birthday if you are already enrolled in Medicare Part B or are within six months of enrolling in Medicare Part B.
Supplement Option: Medicare Advantage (Medicare Part C)
Medicare Part C or Medicare Advantage plans include Part A (Hospital), Part B (Medical), and Part D (Prescription Drug) services, making them an all-in-one package. Most plans offer additional benefits that aren’t covered by Original Medicare, such as vision, dental, and hearing, so many seniors or people with disabilities might consider this an ideal plan. In general, MA plans are more affordable than Original Medicare, with premium prices and out-of-pocket costs generally being lower. Each MA plan has its own rules for out-of-pocket costs, coverage, and patient responsibility, so be sure to read plans thoroughly if you’re interested in enrolling. Medicare Advantage plans can be found on the Medicare plan-finder tool.
Medicare Coverage Gaps
As mentioned previously, supplemental coverage is recommended to help you avoid the financial dangers that come with Medicare. Original Medicare has various cost-sharing requirements that obligate you to pay coinsurance, deductibles, and copayments. Original Medicare policies often do not have an annual limit on a beneficiary’s out-of-pocket costs, meaning you will likely pay up to thousands of dollars for medical expenses with no maximum cap. The best way to protect yourself from paying such high costs is to enroll in supplemental Medicare coverage, such as Medigap or Medicare Advantage.