5 Things You Should Know Before You Apply for Medicare
The Most Important Things to Know Before You Apply for Medicare
As you approach retirement age, you’re going to start getting inundated with information about Medicare. You’ll receive a big guide from the government called “Medicare & You” but it’s hardly a page-turner, and you’ll also be getting absolute piles of advertisements from insurance companies. It can be legitimately difficult to sort out facts from a sales pitch, as companies compete for your attention.
This can all be overwhelming for someone who hasn’t looked into Medicare before. So, we wanted to put together a ‘beginner’s guide’ talking about the basics of Medicare.
Five Things You Should Know Before You Apply for Medicare
1. What Is Medicare?
Simply put, Medicare is a government-run insurance program that is designed primarily to provide healthcare to people after their retirement. All US citizens aged 65 and older can enroll in Medicare, as well as legal residents who have lived in the country for at least five years continuously.
In addition, because Medicare is primarily tax-funded, you need to have paid Medicare payroll taxes for at least ten non-consecutive years to quality.
Younger people can also occasionally receive Medicare, usually if they are disabled and have been receiving Social Security disability benefits for at least 24 months.
Medicare is designed to pay for most of a person’s medical needs, with different programs funding doctor’s visits, hospitalization, outpatient care, and prescriptions. These are called “Parts” and those who apply for Medicare have several choices in which Parts they choose to utilize.
2. What Medicare Parts are there?
There are four primary Medicare Parts, or plans.
Medicare Part A is hospitalization coverage, as well as covering other stay-in facilities such as nursing homes.
Medicare Part B covers all outpatient services. This includes routine doctor’s visits, tests, lab work, outpatient surgeries, and at-home medical equipment.
Medicare Parts A and B come as a package. Generally speaking, you can’t get one without the other.
Medicare Part C is a bit complicated. It’s also called “Medicare Advantage,” and acts as an alternative to Medicare Parts A, B, and sometimes D. These are insurance plans provided by private companies, but that are partially funded by government Medicare funds. Many Medicare Advantage programs also include prescription drug coverage.
Medicare Part D is the primary prescription drug coverage. You get a card that allows you to receive prescriptions at participating pharmacies at much lower rates. Part D is optional but highly recommended, given the high prices of most prescriptions.
3. What does Medicare cost?
Medicare is primarily funded through payroll taxes, as well as interest-bearing trusts, but some aspects of the program still involve out-of-pocket payments as well.
Let’s break this down a bit.
Medicare Part A – the hospital coverage – is basically free, as long as you meet the requirements of being 65 years old and paying payroll taxes for at least ten years before enrollment.
Medicare Part B, which covers outpatient services, does have a monthly fee based on a person’s income. The base rate is currently $148.50 per month, which is what you pay if your income is up to $88K per year as an individual, or $176K per year when filing joint taxes with a partner.
This scales upward as your yearly income increases. The maximum you might have to pay is $504.90 per month, but only if you’re making over $500,000 a year.
Typically, these fees are taken directly out of your Social Security benefits, so you don’t have to personally make payments. Also, should your income drop significantly in the middle of a year, it’s possible to file a request for reconsideration, to lower your monthly fees accordingly.
Medicare Part C aka Medicare Advantage fees will vary entirely based on the private insurance plans you choose. There’s no way to generalize the costs of Part C. Keep in mind, participation in Part C is entirely optional.
Medicare Part D costs can also be hard to estimate, as there are many different state-sponsored prescription coverage programs you can choose from. There are often 20 or more different plans per state! However, these are generally quite affordable, with a nationwide average of just over $40/month.
These costs are often paid directly to an insurance provider, although in some cases, you can also have these fees deducted from your Social Security benefits.
4. What Does Medicare Cover?
Like all insurance plans, not all costs, procedures, or prescriptions are covered – however, the coverage is generally quite good. If you’ve had employer-sponsored insurance in the past, this should be familiar territory.
There’s too much detail to cover in-depth, but here are some of the most important points.
Medicare Part A will pay for up to 60 days in the hospital per year, with a single deductible of $1,484. After 60 days, the amount paid out by Medicare will begin to diminish, with you paying increasingly more out-of-pocket the longer you stay.
If you have reason to believe you’ll be spending a long time in the hospital, you will want to pick up supplementary coverage from a private insurer – or use Medicare Part C plans – to handle the difference.
Medicare Part B is more straightforward. You pay a single once-per-year deductible of $203, and then it pays for 80% of all outpatient services. The remaining 20% will be on you to pay, and there’s no cap on what this amount may be.
Those with long-term or chronic illnesses may also want to look into supplemental coverage.
Medicare Part C, again, depends entirely on what private insurance coverage you choose to enroll in.
Medicare Part D also varies quite a bit in what it covers and how much it pays. This is one of the reasons there are so many Part D plans to choose from. You can choose a plan which fits your individual healthcare needs, and balance monthly costs against your expected pharmaceutical bills.
5. Medigap vs Medicare Advantage
We’ve mentioned supplemental coverage a few times. This is typically referred to as “Medigap,” insurance plans specifically designed to expand coverage beyond standard Medicare Part A & B coverage. Medigap plans only kick in after Medicare has made its own payments.
Medigap plans tend to be quite comprehensive, but they can also be expensive because of that.
Medicare Advantage – aka Medicare Part C – is the other option. Advantage programs payout instead of Medicare Part A & B. (And sometimes instead of Part D as well.) These plans work almost exactly like the insurance you would have received before retirement. There are doctor’s networks, you pay co-pays and deductibles, and specific procedures covered will vary depending on the plan.
However, on the whole, Medicare Advantage tends to be cheaper than Medigap plans. The tradeoff is that the coverage may not be as comprehensive.
Have More Medicare Questions? We Can Help!
At Good & Associates, we want people to be fully educated before they apply for Medicare. If you have questions about plans, policies, and processes, we’re always happy to help. We can also work with you, as a fully licensed California insurance broker, to find the best Medicare Part C or Part D plan to fit your medical needs and your budget.
