Medicare is a government-run health insurance program. There are various parts of
Medicare, each offering a different type of coverage, and there are supplemental plans as well as private insurance plans you can get instead of Medicare.
Key points
Medicare is a federal health insurance program for people age 65 and older or those who have special qualifying situations like Medicare disability which are under age 65. It’s one of several social safety nets in place to help provide for seniors in their retirement years.
If you have certain disabilities, like end-stage renal disease or ALS (Lou Gehrig’s disease), you may be able to qualify for Medicare before age 65.
You can sign up for Medicare during your initial enrollment period, the annual general enrollment period or a special enrollment period.
What is Medicare?
Medicare is a federal health insurance program for people age 65 and older. It’s one of several social safety nets in place to help provide for seniors in their retirement years.
Medicare was created alongside Medicaid in 1965. Both programs were signed into law by President Lyndon B. Johnson. The original program included two parts, known as Original Medicare. The program has since expanded to increase the services covered and create additional parts of the program.
Today, Medicare is one of the largest social programs in the United States. Nearly 65 million seniors are enrolled in Original Medicare, and at least 28 million are enrolled in the Medicare alternatives that are available.
How Medicare works
Similar to Social Security retirement benefits, Medicare is funded in part through payroll taxes. Workers pay 1.45% of their wages in Medicare taxes and their employers pay another 1.45%. Once you reach age 65, you’re eligible to sign up for Medicare. Depending on how many years you worked, you may be eligible for certain parts of Medicare for free.
Some of the parts of Medicare are run by the federal government, while others are run by private companies (but still regulated by the federal government).
Parts of Medicare
The Medicare program consists of Medicare Part A, Medicare Part B, Medicare Advantage Part C and Medicare Part D. Medigap is available to supplement Parts A and B of Original Medicare.
Medicare Part A
Medicare Part A, which is half of Original Medicare, is known as hospital insurance. It provides coverage when you receive inpatient care from:
A hospital.
A skilled nursing facility.
A nursing home.
Hospice care.
You have to be admitted by a doctor’s order and the hospital must accept Medicare for you to be covered for inpatient hospital care. While there is no cap to the number of benefit periods you can use, there is an initial $1,600 deductible for each hospital admission per benefit period before Medicare will start paying. Medicare Part A covers services such as semi-private rooms, meals, nursing care, drugs and other hospital services. It applies in acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities and long-term care hospitals. If you qualify for a clinical research study, Medicare Part A may also cover your inpatient care during participation. Medicare Part A generally doesn’t cover very long-term stays in a hospital or nursing facility. After you meet your deductible, it will cover everything for the first 60 days, part of your stay for the next 90 days and an even smaller part of your stay for what is known as “lifetime reserve days” after the first 90 days. After that, you must pay for everything out of pocket. These costs may vary slightly for different types of care, such as in skilled nursing facilities or hospice care.
What Medicare Part A costs: As long as you meet the work requirements that apply to Social Security retirement benefits, you won’t pay a monthly premium for your Medicare Part A coverage. If you don’t qualify for premium-free coverage, you will pay either $278 or $506 per month, depending on how long you or your spouse worked and paid Medicare taxes.
Medicare Part B
Medicare Part B, the other half of Original Medicare, is medical insurance similar to a health insurance plan. It covers:
Medical services and supplies needed to diagnose or treat a medical condition.
Preventive services such as annual wellness visits and vaccines.
For preventive care, you won’t pay anything out of pocket, as long as your doctor or provider agrees to accept Medicare’s payment. If not, or if other services or tests are performed, you may owe the $226 annual deductible. For other services, you’ll have a deductible as you would with traditional health insurance. If you’ve met the deductible, then you’ll pay 20% coinsurance for covered expenses.
What Medicare Part B costs: Unlike Medicare Part A, Medicare Part B isn’t free. Instead, you will pay a monthly premium. The premium can be deducted from your Social Security retirement or Railroad Retirement Board check or billed to you directly.
The standard premium is $164.90 per month for those who earned $97,000 or less (or $194,000 or less for a married couple) as reported on your IRS tax return from two years ago. However, the premiums increase with your income and go up to $560.50 per month for individuals who earned $500,000 or more and couples who earned $750,000 or more.
Medicare Part D
Medicare Part D is a later addition to Medicare and is designed to cover prescription drugs. While it’s regulated by the federal government, Medicare Part D is offered by private companies and there are many plans to choose from. Each Medicare Part D plan has what’s called a formulary, or a list of the drugs that are covered. The formulary must include at least two drugs in the most commonly prescribed classes and categories, and there will often be at least one generic and one name-brand version.
Medicare Part D plans have tiers of prescription drugs. Those at the lowest tiers are most affordable, while those in the higher tiers are more expensive. The generic versions of drugs are likely to be found in the lower tiers. If, for some reason, the drugs in your plan or those in the lowest tiers don’t work for you, your doctor may request an exception from your plan. To request an exception — either for a drug in a higher tier or one that isn’t included in the formulary — the doctor should submit a written request to the plan, along with supporting information about why they believe it’s necessary. Like many insurance plans, Medicare Part D requires premiums, a deductible and copayments/coinsurance.
One important thing to note is that Medicare Part D has a coverage gap — known as a donut hole — where your plan will cover less of your expenses. In this gap, which occurs after you and your plan have spent $4,660 on drugs in a year, you’ll pay 25% of your prescription drug costs.
You can get out of the donut hole when you reach catastrophic coverage, which means you’ve spent at least $7,400 in out-of-pocket drug costs. Once you reach catastrophic coverage, you’ll pay the greater of 5% of your drug cost, $4.15 for generic drugs or $10.35 for name-brand drugs.
What Medicare Part D costs: You’ll have to pay a monthly premium for Medicare Part D. The amount you’ll pay depends on the plan you choose, with the average premium being $31.50 per month. You may also pay an additional monthly amount if your income exceeds $97,000 for a single filer or $194,000 for joint filers. The highest earners will pay an additional $76.40 on top of their premiums.
Medigap
Medicare meets many of the health care coverage needs of seniors, but it does have some gaps. That’s where Medigap, or Medicare Supplement Insurance, policies come in. These policies, offered by private companies, are designed to supplement your existing Medicare coverage.
Medigap plans cover many of the same services, but above and beyond the amount that Original Medicare covers. Some Medigap policies also cover additional services like emergency medical care when you travel outside of the U.S.
Medigap won’t cover:
Long-term care.
Hearing aids.
Glasses.
Dental care.
Vision care.
Private nursing services.
What Medigap costs: The cost of a Medigap plan depends on the plan you choose. Some plans are priced based on your age or the age you were when you bought the policy. Plans can range from less than $50 to several hundred dollars per month.
Medicare Advantage
Medicare Advantage, often known as Medicare Part C, is essentially all of the different parts of Medicare wrapped into one. Unlike Medigap policies, which you would purchase to supplement your Medicare coverage, a Medicare Advantage plan would replace your Medicare coverage.
Medicare Advantage plans look very similar to traditional health insurance plans. They cover preventive and outpatient medical care, hospital care and prescription drugs. They also often cover services not covered by Original Medicare, including dental, vision and hearing services.
These plans are similar to traditional health insurance plans in other ways as well. They usually have medical networks you must stay in to have your care covered. They also have deductibles, copayments and coinsurance.
What Medicare Advantage costs: You’ll pay the Medicare Part B premium and may also have a Medicare Advantage premium.
Medicare eligibility
Medicare is designed to provide health insurance coverage to people age 65 and older. Since the program was created, it has been expanded to cover those with disabilities and those with permanent kidney failure. Everyone age 65 is eligible for Medicare. Whether you’re able to receive Part A for free depends on your work history, or the work history of another qualifying person like your spouse or a former spouse. Just like the qualifications for receiving Social Security retirement benefits, you or your spouse must have worked a certain number of years (usually at least 10) and paid the Medicare payroll tax to receive free coverage. Otherwise, you should expect to pay a premium for each part of Medicare you sign up for.
How to sign up for Medicare
There are a few different ways you can sign up for Medicare.
When you apply for Medicare usually depends on whether you (or your spouse) are still working and covered by an employer-sponsored plan as you approach age 65.
Initial enrollment period
The three months before and after your 65th birthday are your initial enrollment period and when most people sign up for Medicare Part A and Part B. If you fail to sign up and aren’t covered by another health insurance plan, you may be subject to a late enrollment penalty.
General enrollment period
Each year, there is a general enrollment period for anyone who didn’t sign up for Medicare during their initial enrollment period. This period lasts from Jan. 1 through March 31, with coverage starting July 1.
Special enrollment period
If you didn’t sign up for Medicare because a different plan covered you, you may be eligible for a special enrollment period when you lose your coverage. This period will last for eight months after you lose your other group health insurance plan.
The easiest way to enroll in Part A and Part B is online on the Social Security Administration’s website. Before you enroll, feel free to contact us at Johnson Insurance Co to have any questions answered. Even when you feel like you have an understanding of how Medicare works, we can sometimes share previous experiences that you may need to know in order to get it done right.
The enrollment process is a bit different for signing up for Medicare Part D, Medigap or Medicare Advantage. To sign up for those, you’ll do so during open enrollment periods in the fall and spring. From Oct. 15 through Dec. 7, switch from Original Medicare to Medicare Advantage, switch from Medicare Advantage back to Original Medicare, switch from Medicare Advantage plan to another or sign up for a Medicare drug plan.
The Medicare Advantage open enrollment period for people already in a Medicare Advantage plan is Jan. 1 through March 31. During this time, you can switch Medicare Advantage plans, join a drug plan or switch from Medicare Advantage to Original Medicare. You can also make these changes if you are within the first 90 days of getting Medicare.
Our team at Johnson Insurance Co serves both Georgia and South Carolina with our home office in Hartwell, Georgia. From a simple question to assisting you through the enrollment process, feel free contact us.
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