Getting Started: A Guide to Understanding the Basics of Medicare
The US Census Bureau estimates that approximately 10,000 Americans retire every day and become members of America’s Medicare system. Most Americans have heard of Medicare and think it’s a complex system. Actually, understanding Medicare doesn’t have to be complicated at all.
If you are ready to apply for Medicare, then this article is for you! We’ve compiled some Medicare fundamentals for you. Study these basics today so that you are primed and ready to enjoy this benefit you’ve worked your entire career to enjoy.
Medicare is sponsored by the US government to provide health care coverage to US seniors 65 years and over. The Medicare health insurance program is supported through many sources including deductions from US worker paychecks and funding from the federal budget.
The US government legislated Medicare in 1965 when they enacted Title XVIII of the Social Security Act. Medicare was developed because seniors during those times, couldn't get quality health care, regardless of their medical history or monthly earnings. The Centers for Medicare & Medicaid Services (CMS) manages Medicare today that provides service to over 60 million Americans currently enrolled in the system.
Sometimes people confuse Medicare with Medicaid. Medicaid is a federal and state health care insurance program that offers health care services to low-income persons, at all ages.
Is Medicare Only Available for Retired Seniors?
Medicare is not a service only available for retired senior citizens. Younger adults with specific disabilities or medical conditions can also receive Medicare services.
When Should You Apply for Medicare and When Does it Start?
You can sign up for Medicare during your birthday month when you are turning 65 years old. You can also enroll in Medicare either three months before or after you turn 65. Medicare coverage begins on the day you sign up.
If you wait too long to enroll in Medicare, you might have a gap in your health care coverage. You also run the risk of incurring late enrollment fees.
Once you sign up for Medicare, you’ll receive a membership card in the mail that has a unique, individual Medicare Number that applies to you. Your Medicare card will show the date your coverage begins. Show this card to health care providers whenever you arrive for your appointments.
If you need help replacing your card, you can sign into the CMS website. They’ll have instructions on how you can print out a new one.
How Medicare Works
Medicare offers their members access to doctors, health care specialists and hospitals that, accept Medicare payments. Medicare is referred to as a “fee-for-service plan”.
A “fee-for-service plan” means that the Medicare client pays a minimal fee up to a certain amount for each service. Medicare pays the remaining balance.
What Services Does Medicare Pay For?
Medicare has varying plans for different benefits that are identified with a different letter. For example, Medicare Part A pays for hospital stay costs, some nursing facility fees, and home health care expenses. Medicare Part B pays for doctor’s visits, diagnostic tests, and expenses for medical equipment.
Medicare Part A members do not pay any monthly premiums. Part B plan members usually pay a $134 monthly premium. Premium costs are modified for households with annual incomes that range from $170,000 for couples and $85,000 for individuals.
Medicare Parts A and B are considered the basic components of the first Medicare program. These parts are still available to any eligible Medicare enrollee today.
Supplemental or “Gap” Plans
Medicare members can also choose to access a system of additional or supplemental coverage called Medi“gap” plans. There are eight Medigap plans that enrollees can choose from to boost the coverage they receive from Medicare Parts A and B. Each of these Medigap plans are identified by a specific letter; C, D, F, G, K, L, M, N.
Some Medicare members get these Medigap Plans confused with the original Medicare Parts A and B coverage. You’ll hear people refer to these Medigap plans as “parts” like you see in the phrasing “Part A” or “Part B.” Original Medicare itself is called “part” while the Medigap plans are distinguished as “plans.”
Each of these plans help defray their own unique out-of-pocket health care expenses beyond what original Medicare Parts A and B pay for. Some of these expenses include extra help with prescription drug costs or medical fees when traveling outside the US. You should be prepared to read each of these supplemental plan descriptions thoroughly to make sure you know what costs Medicare can cover for you.
Two of the most popular supplemental plans are Plan C and Plan D. Plan C gap plans can help provide coverage for additional health care costs we will sometimes forget about like dental or vision exam fees. Plan C can also pay for other costs that original Medicare Parts A and B can’t pay for like routine hearing exams.
Plan C, however, is scheduled to undergo significant changes. Starting in 2020, Plan C will not be available to new Medicare members. Medicare members who enrolled before this year will still be eligible to sign up for Plan C benefits. New members in the Medicare system after that year, won’t be able to.
Before 2006, Medicare members had to pay for their medication prescriptions out of their own pockets. Plan D changed all that. Plan D can pay for these prescription drug expenses as well as pay for many common vaccines, such as flu shots, to avoid future sickness.
Medigap policies only cover a single individual. If married couples want Medigap coverage, they purchase separate policies. Medigap insurance can be bought from insurance companies that are licensed in your state to sell these policies.
Medicare Advantage Plans
Medicare Advantage Plans, are a comprehensive alternative to Medigap. You can sign up for Medicare Advantage coverage through private insurance companies approved by CMS. These companies might include preferred-provider organizations (PPOs) or health maintenance organizations (HMOs.)
Differences Between Medigap and Medicare Advantage Plans
The main difference between Medigap and Medicare Advantage plans is the payment method. Medigap members pay for health care services as they need them. Medicare Advantage members pay monthly premiums (whether they use these health care services or not.)
Another difference is in where members can receive health care services. Medigap plans allow members to visit any facility or doctor that accepts Medicare. Medicare Advantage plan members are limited to the facilities or doctors within their individual PPO or HMO.
Medigap or Medicare Advantage Plans: Factors to Consider
Medigap and Medicare Advantage plans can offer different coverage for different health care needs. If you’re trying to decide which coverage works best for you, here are some aspects you should consider:
Plans for Frequent Travel
If you’re planning a robust traveling schedule during your retirement, be sure to remember your plan’s restrictions on where you can receive medical care if you need it. Medicare Advantage plans will restrict its members to visiting physicians within their same network. This could make finding health care services problematic when you’re out of town.
Medigap doesn’t have these restrictions. Medigap plans won’t confine members to specific doctors or facilities as long as they both accept all Medicare patients.
Service Provider Preferences
Since Medicare Advantage plans operate in a similar manner as PPO’s and HMO’s, members are expected to see specialists or physicians within the same network. Medigap plans are accepted in all places where Medicare is accepted. Therefore, members can see any doctor of their choice.
Medicare Advantage plans cover all prescription drug costs for their enrollees for no extra fee. Medigap plan members don’t have automatic prescription drug coverage. Medigap members must sign up for supplemental Plan D for this coverage.
No matter how close you are to retiring, understanding Medicare can help you make informed decisions on your future medical insurance coverage needs. Prepare yourself today when you hit that well-deserved milestone.
Refer to this Medicare supplement plans comparison chart. It digests some of the benefits of each Medigap plan. Check in with your retirement financial planning advisor. They can help you plan for the necessary steps to sign up for the health care coverage that’s right for you when you reach this important life milestone.
Don’t forget to check out our website for more help on Medicare and what’s involved with the Medicare claim process. We’re here to give you all the answers you need to enjoy this benefit you’ve worked your entire career to earn.