Medicare is America’s federal health insurance program that covers those age 65 and older and others that meet the eligibility requirements. Medicare can be complex at times, which is why it’s easy to be misinformed about the coverage, different plans, and enrollment periods. Medicare research is necessary as you near Medicare eligibility, so here is how to plan for Medicare in 2021.
Become familiar with Medicare
The Medicare program is divided into two parts, Part A and Part B. Each Medicare part provides a different set of medical benefits, and it’s important to know which part will provide cost-sharing for your services.
Medicare Part A gives you inpatient coverage; in other terms, it covers your room and board for an inpatient stay in the hospital. Part A doesn’t only cover hospitalization, but it also provides coverage for post-hospital care, such as short-term stays in a skilled nursing facility or hospice. Medicare does not cover long-term custodial care in a nursing home. If you need long-term care, you will want to look at purchasing additional insurance.
Most beneficiaries do not have to pay anything for Part A. If you have worked ten years (40 quarters) in the United States and paid payroll taxes, then you have funded your Part A benefits and do not have to pay anything monthly. However, if you worked 30 quarters in the United States, you would pay $259 a month for Part A.
When you receive inpatient services, you must pay the Part A deductible before Medicare starts covering 100% of your stay. The Part A deductible in 2021 is $1,484 per benefit period.
Part B gives you access to many outpatient medical services, such as ambulance rides, doctor’s visits, vaccinations, durable medical equipment, and more. However, Part B does not cover most prescription drugs. For prescription drug coverage, you would need to purchase Medicare Part D from a private health insurer.
Although Medicare Part B is your outpatient coverage, it can sometimes cover services you receive in the hospital. For example, Medicare Part B covers surgeries, radiation or chemotherapy for cancer, and dialysis for failing kidneys.
Medicare Part B does come with a monthly cost. In 2021, the Part B premium is $148.50, which is only $4 more than 2020’s premium. You will also have a Part B deductible each year which is $203 in 2021.
Medicare Part B does not cover 100% of your outpatient services. Medicare Part B only covers 80% of the allowable charges; you are responsible for the remaining 20% coinsurance. There is no maximum out-of-pocket spending limit for Part B, so that 20% coinsurance could be high if you need a lot of healthcare services.
Since Medicare does not pay 100% of your costs, many beneficiaries purchase an alternative Medicare plan for cost-sharing help.
You have additional coverage options
You will have out-of-pocket costs with Original Medicare as it does not cover all your services fully. There are private insurance companies that sell Medicare alternatives to help with cost-sharing expenses.
Medigap (Medicare Supplement)
Medigap plans, also known as Medicare Supplement plans, help cover the gaps in your Medicare coverage, such as deductibles, coinsurance, and copayments. If you purchase a Medigap plan from a private insurance company, the plan will help cover those out-of-pocket costs for you.
Medigap plans work alongside Medicare. When you have a Medigap plan and receive a Medicare-approved service, Medicare will pay first, and your Medigap plan will pay second. Medigap plans make it easy to know your annual out-of-pocket costs, therefore leaving you with no surprise medical bills.
Medicare Advantage plans are very different from Medigap plans but still provide cost-sharing help. When you purchase a Medicare Advantage plan from a private insurance company, you will receive your Part A, Part B, and Part D (drug coverage) benefits from that carrier.
There are different types of Medicare Advantage plans, but HMO and PPO plans tend to be the most popular. When you purchase an HMO or PPO plan, you’ll need to use your plan’s network providers to minimize your out-of-pocket costs.
Each Medicare Advantage plan sets its own cost-sharing. For instance, you may have a high copay to see a specialist but a smaller copay for a primary physician. In 2021, the federal out-of-pocket limit for Medicare Advantage is $7,550, although many insurers set their limits below the government maximum.
There are enrollment periods
Some people believe you are g automatically enrolled in Medicare once you turn 65, which is false. The only way you can be automatically enrolled in Medicare is if you have received Social Security benefits for at least four months before your 65th birthday. If this does not apply to you, then you must enroll in Medicare yourself.
Initial Enrollment Period
Every Medicare beneficiary has an Initial Enrollment Period, which is their specific time to enroll in Medicare. The Initial Enrollment Period (IEP) is a seven-month-long period that begins three months before your 65th birthday and ends three months after your birth month. For example, if you turn 65 in May, your IEP will start on February 1st and end on August 31st.
This gives you plenty of time to enroll in Medicare, and if you fail to enroll during your IEP, you can be assessed late enrollment penalties for Part A (if you pay for Part A) and Part B.
Your Initial Enrollment Period is also the time for you to enroll in a Medicare Advantage or Part D plan. If you do not enroll in a Medicare Advantage or Part D plan, you will have to wait until the Annual Election Period to enroll.
Annual Election Period
The Annual Election Period (AEP) is only for current beneficiaries. The AEP gives beneficiaries a chance to enroll in, drop, or change Medicare Advantage or Part D plans.
For example, during the AEP, you can enroll in a Medicare Advantage plan if you failed to do so during your IEP. You can also drop your Medicare Advantage plan to return to straight Medicare. The AEP is not another Medigap Open Enrollment Period, however, and you can’t avoid a late penalty if you sign up for Original Medicare during the AEP.
Medigap Open Enrollment
The preferred time to enroll in a Medigap plan is during your Medigap Open Enrollment. The Medigap Open Enrollment begins the day your Part B becomes effective and lasts for six months. When you apply for a Medigap plan during this six-month timeframe, a carrier cannot ask you health questions or deny coverage for a pre-existing condition.
However, if you apply for a Medigap plan outside your Medigap Open Enrollment, you likely will have to pass medical underwriting. If you have underlying health conditions, you could be denied a Medigap plan or get charged a much higher premium due to your pre-existing health conditions.
There is a lot of vital information to learn about Medicare to ensure you enroll on time and purchase a plan that meets your healthcare and budget needs. If you are unsure of which Medicare plan is the best for you, contact a trusted Medicare brokerage or visit Medicare.gov for more information.