Everything You Need to Know About Medicare Insurance

If you’re approaching age 65, here’s your guide to getting the healthcare benefits that you need and are eligible for.

Choosing the right plan involves weighing several options, as well as considering cost and what your health needs are.iStock

Turning 65? Medicare is going to play a major role in your healthcare for the rest of your life.

It can be complicated to learn the ins and outs of this federal health insurance program, but the more you know now will help you make better, more informed decisions as you navigate the enrollment process.

Key Takeaways to Be Aware Of

  • You are eligible for Medicare if you are turning 65 or if you are younger than 65 with certain illnesses or disabilities.
  • Original Medicare covers things like skilled nursing care and doctor visits. Prescription drugs are not covered by Original Medicare.
  • If you are concerned about the high out-of-pocket costs of Original Medicare, you can enroll in a Medicare Advantage, prescription drug, or Medicare Supplement plan.
  • Many Medicare Advantage plans offer benefits beyond Original Medicare, like vision, hearing, and dental coverage. A lot of Advantage plans also provide prescription drug coverage.
  • Medicare Supplement plans work with Original Medicare and can help fill coverage gaps. Depending on the plan, you can expect to pay a premium for this kind of coverage. Supplement plans do not cover prescription drugs.

What Is Medicare Insurance?

Medicare is a U.S. federal health insurance program originally designed to provide coverage for retirees over age 65. Medicare coverage has grown to include people younger than 65 with certain illnesses and disabilities.

Who Is Eligible for Medicare Insurance?

In order to enroll in Medicare, you must satisfy specific conditions regarding your:

  • Citizenship or residence status
  • Age, health, or disability

Citizenship or Residence Status

The first aspect of Medicare insurance eligibility relates to your citizenship status. You must be a U.S. citizen or a permanent legal resident to be eligible for Medicare insurance.

If you are a permanent legal resident, you must have lived in the United States for at least five consecutive years.

Age or Health Requirements

If you meet the citizenship or resident requirements, you may enroll in Medicare once you meet one of the following entry requirements:

How Does Medicare Insurance Work?

The basic program is called Original Medicare. This is the coverage you receive if you sign up for the program at a Social Security office or online at the Social Security Administration’s website.

Original Medicare provides the following two types of insurance benefits:

Part A

Part A of Original Medicare provides institutional benefits. You are covered under Part A when you use any of the services listed below:

  • Inpatient hospital visits
  • Hospice care
  • Skilled nursing care
  • Home healthcare

Most people who have worked for 10 or more years do not pay a premium for Part A. Instead, you have paid a tax for Part A benefits during your working career. Your employer paid Medicare tax on your behalf as well.

If you did not work long enough to qualify for premium-free Part A, you may still qualify if you are, or were, married to someone who did.

If you do not qualify for premium-free Part A through work history or marriage, you can elect to enroll and pay a monthly premium.

When you use Part A benefits, you should expect to pay some of the costs out of pocket. It is important to note that Part A does not pay 100 percent of every expense. You must pay the Part A deductible before Medicare begins paying benefits.

For 2021, the Part A deductible is $1,484. You pay this deductible for each benefit period. A benefit period begins when you are first admitted and ends when you have been discharged for 60 days. This means that you could be responsible for paying this amount several times within a single year if you are admitted to an inpatient facility multiple times in one year.

Part B

Part B of Original Medicare provides benefits for outpatient medical services. As such, it covers services and procedures like:

  • Doctor visits
  • Therapy visits (physical, occupational)
  • Diagnostic testing, including lab work, X-rays, and magnetic resonance imaging (MRI)
  • Certain cancer treatments, such as chemotherapy

You pay for Part B coverage by paying a monthly premium. This premium goes to the federal government. Unlike Part A, it is not paid for through taxes.

You begin paying for Part B when you enroll for coverage.

Like Part A, Part B does not cover 100 percent of every expense. Part B expenses that you must pay for include:

  • Part B deductible ($203 for 2021)
  • Part B coinsurance (You pay 20 percent of the Medicare-approved costs for every covered service or procedure.)
  • Part B excess charges (These are amounts that some doctors can charge beyond Medicare-approved maximum caps. Excess charges are somewhat rare and by law cannot be more than 15 percent of the Medicare-approved amount.)

Prescription drugs are not covered by Original Medicare. This means that you must pay for them out of pocket or enroll in a Medicare drug plan.

With this specific plan there is no cap on the maximum you could pay out of pocket in a single year, unlike with private health insurance.

As such, if you undergo many treatments or services in a single year, you could end up paying tens of thousands of dollars in that year.


Options Beyond Original Medicare

Many people are concerned about the potential for high out-of-pocket costs under Original Medicare. To combat these expenses, private insurance companies offer several remedies.

Medicare Part C

Medicare Advantage plans are also known as Medicare Part C. Unlike Medicare Supplement or prescription drug plans, Medicare Advantage is an alternative to Original Medicare.

When you enroll in Part C, you are no longer in Original Medicare.

Medicare Advantage plans are run by private insurers that have contracts with CMS (Centers for Medicare and Medicaid Services, the government office that oversees Medicare). Medicare Advantage plans must provide benefits that are at least as comprehensive as those of Original Medicare Parts A and B.

Medicare Advantage plans may offer benefits beyond Original Medicare, like vision, hearing, and dental coverage. Some Part C plans provide fitness programs and transportation benefits, too.

Many Part C plans also provide prescription drug coverage. These plans are known as MAPD plans, and they satisfy the requirement for Part D coverage.

Medicare Advantage plans may have some or all of the following expenses:

  • Monthly premium (although many plans have no premium)
  • Annual deductible for medical services (many plans have no deductible)
  • Annual deductible for drug coverage (many plans have no deductible)
  • Copays or coinsurance for medical or hospital services or procedures

Medicare Advantage plans must provide a fixed out-of-pocket maximum for medical services. This is one reason why people choose to enroll in them, as you know ahead of time the maximum that you will have to pay for medical services, no matter what health issues you might develop.

Part C plans work like employer-provided health insurance. You generally pay a small copay or coinsurance for every service you receive. For example, you might pay a $25 copay to see a doctor, or pay a $20 copay for lab work.

Most Medicare Advantage plans are either Health Maintenance Organization (HMO)– or Preferred Provider Organization (PPO)–based. With these plans, you will often receive medical services through networks of preferred (PPOs) or required (HMOs) providers. You may also need to have your care managed under an approved primary care physician (PCP).

To enroll in a Medicare Advantage plan, you must be enrolled in Parts A and B of Original Medicare. You also must continue to pay your Part B premium. There is no minimum age requirement as long as you are enrolled in Parts A and B.

Medicare Part D

Prescription drug plans are also known as Medicare Part D (this coverage was added to Medicare in 2006). These plans are issued by private insurance companies.

In exchange for a monthly premium, this type of plan pays for a large portion of your prescription drugs.

You may have to meet an annual deductible (no more than $445 in 2021) before your plan will begin covering the cost of your drugs. After you pay the deductible, if your plan has one, you will pay a copayment or coinsurance for your drugs, then your plan will pay the rest.

It is important to note that your share of costs can increase during the year. If total drug costs exceed $4,130 in 2021, you will enter the coverage gap, or what is also referred to as the “donut hole” stage. If total drug costs (what you have paid plus manufacturer discounts) exceed $6,550, you will pass into what is known as the Catastrophic Coverage Stage and your costs will be capped at 5 percent.

To be eligible for Part D, you must be either entitled to Part A or actively enrolled in Part B.

Every Medicare-eligible American should enroll in a Part D plan when they first become eligible. Otherwise, you will have to pay a late enrollment penalty if you enroll later.

You can avoid this penalty by enrolling in a standalone Part D plan or a Medicare Advantage plan that also offers drug coverage.


Medicare Supplement Insurance

Medicare Supplement plans are issued by private insurers. They work with Original Medicare and cover some or all of the costs you would normally pay. For example, these plans may cover your share of Part A and B deductibles, and Part B coinsurance.

Because they cover, or fill in, many of the “gaps” in Original Medicare, these plans are often called Medigap plans. Medigap plans are issued in standardized plans, each with varying amounts of coverage.

You can expect to pay more for those plans with more comprehensive coverage.

When you use Medigap with Original Medicare, you can see any physician in the country as long as they accept Medicare patients.

You also are not restricted to certain medical networks and generally will not need referrals.

Medicare Supplement insurance plans do not cover prescription drugs either. You will likely need to get drug coverage from a prescription drug plan (PDP).

To enroll in a Medicare Supplement plan, you must be (and stay) enrolled in Part A and B. Depending on which state you live in, you may be required to be age 65 or older, even if you qualify for Medicare at an earlier age.

Next Steps

As you approach eligibility for Medicare insurance, you will want to review all of your options for coverage. Additional questions can be answered by visiting www.medicare.gov and www.cms.gov.

To enroll in Medicare, contact Social Security at 800-772-1213. You may also apply online or in person at your local Social Security office.

If you would like expert help with deciding among your Medicare options, you can connect with a licensed Medicare expert. They can help make sure that any coverage choice you are interested in will benefit your health as well as your wallet.