Medicare is a maze that takes time and research to understand fully. There are several enrollment periods and penalties to know, along with confusion on what to do if someone is still working past age 65. It can be an overwhelming transition from employer coverage that many parents are used to and comfortable with. Educational resources are available such as webinars, YouTube videos, websites, and more, to help your parents understand Medicare and their options.
What is Medicare?
Medicare is a health insurance program administered by the federal government. It was established in 1965 and only included Medicare Part A and Part B. Since then, other parts and plans have come into the Medicare world to help with the costs and coverage.
Medicare Part A is the hospital coverage for someone admitted as an inpatient. Part A can cover the semi-private room, three daily meals, some medications, lab services, hospice, and more.
For beneficiaries that have worked at least 40 quarters or ten years in the U.S., Part A will be $0 per month. However, there is a $1,484 deductible per inpatient admittance, and after the first 60 consecutive days, there will be a copay for each day.
Medicare Part B. will cover outpatient medical services, such as doctor office visits, surgeries, lab work, tests, and others. There is an annual deductible for Part B services which is $203 for 2021. After the deductible is met, Medicare will cover 80% of approved services, and the beneficiary will be responsible for 20%.
There is no cap to the out-of-pocket expenses that you are responsible for with Original Medicare.
Part D provides prescription coverage for Medicare beneficiaries. These plans are offered through private insurance companies but must follow federal guidelines. Each plan has the same four cost-sharing stages; however, premiums, deductibles, and copays can vary with each plan. Beneficiaries will want to find a plan that covers all their medications at the most cost-effective price.
A Medicare Supplement, also known as Medigap, is sold by private insurance companies and helps pay the gaps in Medicare. There are ten standard Medigap plans to choose from, but the most popular plans are Plan F, Plan G, and Plan N. Coverage and costs vary with each plan. Medigap plans may have a higher premium, but they will leave a beneficiary with little to no out-of-pocket costs. If Medicare pays for a service, then the Supplement plan must pay the balance. One thing to know about these plans is they do not cover prescriptions, so a beneficiary that enrolls in a Medigap plan will also want the Part D plan for full coverage.
An alternative way to receive Medicare benefits is through a Medicare Advantage plan. Private insurance companies offer these plans, which bundle Part A, Part B, and usually Part D benefits into one plan. These plans will have a network of doctors and hospitals the beneficiary must stick to for coverage. The beneficiary will be responsible for the copay or coinsurance associated with each service. The plan will cap the amount a beneficiary can spend in a year with a maximum out-of-pocket limit. The structure of these plans is like a pay-as-you-go plan.
Who is eligible for Medicare?
Most people are eligible for Medicare at age 65. However, there are situations where someone can qualify for Medicare under age 65. The first situation is if they have received SSDI for at least 24 months. The second situation is if they have end-stage renal disease and require dialysis or waiting for a kidney transplant. The third situation is if they have Lou Gehrig’s disease.
Applying for Medicare
Every beneficiary will have an Initial Enrollment Period (IEP) to enroll in Medicare Part A and Part B. An IEP begins three months before the month they turn 65 and will end three months after. When they apply during the three months before, their Medicare benefits will begin the first of their 65th birthday month. However, if they enroll during the three months after, then Medicare coverage is delayed depending on which month they enroll.
If their birthday is on the first of the month, then Medicare benefits will begin the first of the month prior.
Those already receiving Social Security benefits for at least four months before turning 65 will be auto enrolled into Medicare. If they are not receiving Social Security benefits, they can apply over the phone, online, or in person.
If they plan to continue working for a large employer with more than 20 employees and insurance covers them, they can delay Medicare until they retire with no penalty. If they do not have coverage from a large employer, then they will need to enroll in Medicare A and B to avoid the late enrollment penalty in the future.
Applying for additional coverage
If they are leaning towards a Medigap plan, they will have a one-time Open Enrollment window to enroll in a Medigap plan with no health questions. The Open Enrollment window is a 6-month window from their Part B effective date. If they are outside of that 6-month window, they may need to answer health questions when they want to apply.
Medicare Advantage plans and Part D plans have the same election period windows. Their Initial Election Period to enroll in one of these plans starts three months before the month they turn 65 and ends three months after. There are other available election periods throughout the year that allow them to change their plans.
If they plan to continue working past 65, they could qualify for a Special Election Period (SEP) when they lose employer coverage. They would have a 2-month window to enroll in a plan using the Special Election Period.
Failure to enroll when they are first eligible during their Initial Election Period may result in a late enrollment penalty. However, if they have creditable prescription coverage, they can delay Part D and then use the SEP to enroll in a plan down the road.
Monthly Medicare Costs
If the beneficiary or their spouse has worked at least ten years in the U.S. or 40 quarters, they will qualify for premium-free Part A. If they do not qualify for premium-free Part A, they will have to pay a monthly premium.
Part B has a standard base premium of $148.50 this year. However, suppose they are a higher income earner. In that case, they will have an Income-Related Monthly Adjustment Amount (IRMAA), and they will pay more for Part B and Part D. Each year, Social Security will look at their tax return from two years before to determine if they will pay more.
The Part B premium will be automatically deducted from their Social Security check each month. However, if they are not receiving Social Security benefits, they should receive a quarterly bill in the mail. There are several ways to pay the premium online if they do not want to pay a quarterly bill.
Medigap premiums will vary by zip code, age, gender, and tobacco use. Typically, these premiums are automatically deducted from a bank account, but they can be billed in the mail at a different frequency.
Part D and Medicare Advantage plan premiums can be deducted from a Social Security check, bank account, or they can be billed directly in the mail as well.
Medicare can be complex, and knowing what to do and what not to do is important in the decision-making process. It depends on their medical needs, budget, employment status, and more. Researching options and speaking with Medicare experts can help simplify this process.