Understanding Medicare is not as simple as many seniors thought it would be. There are different Medicare parts, plans, costs, enrollment periods, and they can all begin to run together. Medicare can look like a maze for many, which is why it’s recommended to start researching Medicare before you reach 65 years old. If you are lost in the Medicare maze, here is what to know about Medicare in 2021.
You must enroll yourself in Medicare
Many senior citizens turn 65 years old and are confused why they have not received their Medicare card in the mail. There is only one circumstance where you will be automatically enrolled in Medicare. When you receive Social Security benefits at least four months before your Initial Enrollment Period (IEP) or you have received Social Security Disability Insurance for 24 months, you will be automatically enrolled in Medicare and your benefits will begin on the first of your 65th birthday month.
If you have not received Social Security benefits for at least four months before your IEP, you must enroll in Medicare yourself. The IEP is different for every Medicare beneficiary, as the timeframe is based around the individual’s 65th birthday.
The IEP begins three months before your 65th birthday month and ends three months after your birthday month. For instance, if your birthday is on June 20, your IEP starts on March 1 and ends on September 30. If you do not have creditable coverage and fail to enroll in Medicare during your IEP, you will be charged a lifelong late enrollment penalty.
Medicare has two parts
Medicare comes from the United States government. It provides senior citizens with inpatient and outpatient benefits, also known as Part A and Part B. Part A covers inpatient hospital expenses, such as a semi-private room, hospital meals, lab services, and medication you receive as an inpatient.
Part A also includes skilled nursing coverage, hospice, social services, and palliative care whenever deemed medically necessary. Part A does not cover outpatient services, as Part B is outpatient coverage.
Medicare Part B covers services such as doctors’ visits, durable medical equipment, ambulance rides, home health care, lab testing, and more. There are certain situations where Medicare Part B will cover you when at the hospital, such as chemotherapy and radiation.
Medicare has a cost
There is a common misunderstanding about Medicare being free, and, unfortunately, that is not true. Medicare has costs that come in the form of premiums, deductibles, and coinsurance.
You can get Part A for $0 if you or your spouse worked ten years (40 quarters) in the United States and paid payroll taxes. However, if you have between 30-39 quarters, you will pay the Part A premium of $259 in 2021. If you and your spouse have less than 30 quarters, you will pay $471 for Part A in 2021.
You must meet the Part A deductible before Medicare provides cost-sharing. In 2021, the Part A deductible is $1,484 per 60-day benefit period.
Social Security sets Medicare Part B premiums, and they base the premium off your modified adjusted household gross income. Most people new to Medicare pay the standard Part B premium, which is $148.50 in 2021. However, if you are in a high-income bracket, you will pay more for Part B and Part D.
In 2021, the annual Part B deductible is $203. Once you have paid the deductible, Medicare covers 80% of Medicare-approved services. You will pay a 20% coinsurance for your services, which can be pricey if you have surgery or kidney dialysis. There is not an out-of-pocket maximum with Medicare, which is why many beneficiaries purchase a Medigap or Medicare Advantage plan.
Medigap vs. Medicare Advantage
Many Medicare beneficiaries purchase either a Medigap or Medicare Advantage plan for help with out-of-pocket costs. These types of plans are sold through private insurance carriers or Medicare brokers.
Medigap plans (Medicare Supplement) help cover out-of-pocket costs, such as deductibles and coinsurance. These types of plans work alongside Medicare; therefore, you would not have any network restrictions for your care. You can visit any United States doctor that accepts Medicare and use your Medigap plan.
If you receive a Medicare-approved service, Medicare will pay its share first, and then the Medigap plan will pay second. There are ten Medigap plans, and they all provide a different amount of coverage. So, depending on your Medigap plan, your out-of-pocket costs might only be the Part B deductible for the whole year.
Medicare Advantage plans (Part C) are very different from Medigap plans. When you purchase a Medicare Advantage plan, you will receive Part A, Part B, and Part D benefits from the carrier and not the government. Medicare Advantage plans have networks. Therefore, depending on your plan, you might only be able to see doctors that are in-network.
The carrier sets the cost-sharing amount for each plan. For example, one Medicare Advantage plan might have a small copay at the doctor’s office and a higher copay at a specialist, while a different plan will charge you a 20% coinsurance for both visits. Medicare Advantage plans typically offer ancillary benefits, such as dental, vision, and hearing benefits, which Medicare does not include.
Don’t skip Medicare Part D
Medicare provides coverage for inpatient and outpatient services but does not cover prescription drugs. If you only have Medicare or a Medigap plan, you will want to purchase a Medicare Part D plan for prescription drug coverage. Many Medicare Advantage plans include Part D coverage.
Private insurance companies sell Part D plans, just like how they sell Medigap and Medicare Advantage plans. However, if you fail to enroll in a Part D plan during your Initial Enrollment Period and you do not have creditable coverage, you will be charged a late enrollment penalty for Part D, as you would with Part A and Part B.
Trying to understand Medicare on your own can be confusing at times. If you wish to know more about Medicare or are contemplating which plan to enroll in, contact an established Medicare broker for professional advice.