Understanding Medicare: Your Comprehensive Guide to Coverage Options

Women doctor talking to patient.

Are you approaching retirement age and feeling overwhelmed by the multitude of Medicare options available?

Medicare is a hefty subject, and understanding your options can feel like you’re navigating a maze. In this introductory guide, we break down your coverage options, provide insights into cost savings, inform you of key dates, and more. It’s critical to understand your options so you can make informed decisions about your future. We’re here to help you make sense of Medicare.

What is Medicare and who is eligible?

Medicare is health insurance for people 65 and older; however, there are some people under the age of 65 that are eligible for Medicare. Individuals with certain disabilities such as ALS (Lou Gehrig’s Disease) or end-stage renal disease (ESRD) may be eligible for Medicare with no waiting period, regardless of age. Another exception is granted to individuals who have been receiving Social Security Disability Insurance benefits for at least 24 months. To receive Medicare, you must be a United States citizen or lawfully present in the United States. You also must reside in the United States for 5 continuous years.

Can I be automatically enrolled in Medicare?

There are a few circumstances in which you can be automatically enrolled in Medicare:
  • You are age 65 or older and you receive Social Security or Railroad Retirement Board (RRB) retirement benefits. Your Part A and Part B benefits begin the first day of the month you turn 65. 
  • You are under age 65 and you have received Social Security disability benefits for at least 24 months. Your Part A and Part B benefits begin the first day of your 25th month of collecting Social Security disability benefits.
  • You are under age 65 and have a qualifying condition such as ALS (Lou Gehrig’s Disease). Your Part A and Part B benefits begin the month your disability benefits begin.
Three months before your 65th birthday, or the twenty fifth month of your disability benefits, you will receive a package in the mail that says, “Get Ready for Medicare” and it will explain your options for coverage and include a red, white, and blue Medicare card.

How do I sign up for Medicare if I’m not automatically enrolled?

Some people must take action to enroll in Medicare. If you are 65 years of age, and you haven’t already signed up to receive your Social Security benefits (and you don’t have to, you can delay), then you need to sign up for Medicare. You can accomplish this one of three ways:
  • You can enroll with Social Security by visiting their website, socialsecurity.gov. They have an online application you can fill out from the comfort of your home. 
  • If you’d like to enroll over the phone, you can call the Social Security National Office and get enrolled that way. The phone number for the Social Security Nation Office is 1-800-772-1213. TTY: -1-800-325-0778 
  • You may want to get assistance in person. To do this, make an appointment at your local Social Security Office and they will enroll you in person.
If you’re retired from the railroad, you can enroll through Railroad Retirement Benefits or call your local RRB office at 1-877-772-5772. TTY:1-312-751-4701

You can apply for your Medicare coverage 3 months before your 65th birthday. The coverage will not be effective until the first of the month of your 65th birthday. For example, if you turn 65 on June 25th, your benefits will be available on June 1st.

It’s important to note that although the age for full Social Security retirement benefits is increasing, Medicare eligibility age is still 65.

Medicare Coverage Options: Parts A, B, C, and D

Medicare is made up of four parts: Part A, Part B, Part C, and Part D. Each of these Parts is either run by the federal government or run by a private carrier contracted by the government.

Original Medicare

If you are automatically enrolled in Medicare, you will receive Part A and Part B benefits, commonly known as Original Medicare. Original Medicare covers around 80 percent of your medical costs. This means you are responsible for roughly 20 percent of your healthcare expenses.

Part A provides medical insurance for inpatient care and hospital coverage. Part A also covers up to 100 days in a Skilled Nursing Facility, hospice, and some home health care. Part B provides medical insurance for doctor’s visits, outpatient care, outpatient surgeries, lab work, durable medical equipment (DME), and more.

Medicare Advantage

Part C, also known as Medicare Advantage, is provided by private companies contracted by the federal Centers for Medicare and Medicaid Services (CMS). Medicare Advantage plans combine doctor, hospital, and outpatient care in one plan. With Medicare Advantage, beneficiaries will typically pay one premium and the premium covers both the medical side of the plan and the prescription drug side of the plan.

Often during open enrollment, you might see advertisements for an all-in-one plan; this is an ad for a Medicare Advantage plan. A lot of these plans have an out-of-pocket maximum of roughly $7,500. Your prescription drug maximum will be a separate maximum. There are also additional benefits like dental, vision, hearing, etc.

If you are automatically enrolled in Medicare, you will receive the default benefits of Original Medicare (Part A and Part B). If you would like to join Part C or Part D, the best time to enroll is in your Initial Enrollment Period.

Prescription Drug Coverage

Part D is your coverage for prescription medication and is provided by private insurers who are contracted with the CMS. You can enroll in Part D through a Medicare Advantage plan, or this service is also available as a standalone plan.

When you first enroll in Medicare and you’re eligible to enroll in a prescription drug plan, it’s important to consider enrolling in a prescription drug plan even if you’re not currently taking any medications. If you choose to not enroll in a prescription drug plan when you’re first eligible, you can be penalized 1% of the cost of the average drug plan for every month that you were not enrolled (when you could’ve been enrolled). Because your needs for medication will change over the course of your life, it’s wise to consider enrolling in prescription drug coverage from the very beginning – even if you choose the least expensive plan.
  • There are two ways to get prescription drug coverage:  Standalone Medicare Prescription Drug Plans add drug coverage to Original Medicare. This means you will need to enroll in Part A, Part B, and a standalone prescription drug plan. There are many plan options and you want to do research to confirm the medications that you’re currently prescribed are covered by whatever plan you choose to enroll in. 
  • Medicare Advantage Prescription Drug Plans (MA-PDs) provide drug coverage too, but their formularies are broader than standalone drug plans. Because you don’t get to pick your plan – it’s just one plan for everyone enrolled in Medicare Advantage – it’s important do your research to ensure the medications you take are covered under that plan.
If you are automatically enrolled in Medicare, you will receive the default benefits of Original Medicare (Part A and Part B). If you would like to join Part C or Part D, the best time to enroll is in your Initial Enrollment Period.

What are Medigap plans and how do they work?

To reduce the impact an unlimited 20 percent liability can have on your finances, you can enroll in a Medicare Supplement, commonly referred to as Medigap Insurance. Medicare Supplements can help pay your out-of-pocket costs. There are many options for Medicare Supplement Insurance plans – some are more comprehensive than others.

All Medicare Supplement plans are standardized, meaning no matter which company you enroll through, you will receive the same coverage. There may be extra benefits and perks depending on the insurance company, and the cost may vary depending on your age and the region you live in, but the coverage is the same.

It’s important to understand that Medicare supplements do not cover prescription drugs, so you will need to obtain a prescription drug plan (Part D). If you enroll in a Medicare Supplement, you have to be enrolled in part A, part B, a Medicare Supplement, and a standalone prescription drug plan.

What is not covered in Part A and Part B?

You can always ask your healthcare provider if a service is covered by Medicare. Some of the items not covered by Medicare are:
  • Most dental care (routine exams, dentures, braces, etc.)
  • Eye examinations in relation to prescribing glasses
  • Cosmetic surgery
  • Massage therapy
  • Routine physical exams
  • Acupuncture for any condition other than chronic low back pain
  • Hearing aids and exams for fitting them
  • Long-term care
  • Concierge care (also called concierge medicine, retainer-based medicine, boutique medicine, platinum practice, or direct care).

Some of these services may be covered if you have coverage outside of Original Medicare, like Medicaid or a Medicare Advantage Plan that covers these services.

Maximizing Your Medicare Coverage

Your Initial Enrollment Period (IEP) is the 7-month window structured around your 65th birthday where you’re eligible to enroll in Medicare. You can enroll 3 months before you turn 65, during the month of your 65th birthday, and up to three months after you turn 65. During your Initial Enrollment Period, you can enroll in Part A, Part B, Medicare Advantage (if you enroll in Part A and Part B), and Part D (if you have Part A and/or Part B) with no late enrollment penalties.

The Annual Enrollment Period (AEP) is a 7-week period each year where existing Medicare beneficiaries can enroll in, dis-enroll, or switch Medicare Advantage Plans and Medicare drug plans. The Annual Enrollment Period starts on October 15th and ends on December 7th, with your new elections taking effect January 1st.

The Medicare Advantage Open Enrollment Period (OEP) runs from January 1st to March 31st each year, with coverage beginning the first of the month after you enroll. This OEP is for beneficiaries enrolled in a Medicare Advantage plan (with or without drug coverage) and is the opportunity to switch to another Medicare Advantage plan (with or without drug coverage). You can also drop your Medicare Advantage Plan and return to Original Medicare, and/or join a Medicare drug plan.

During the Medicare Advantage Open Enrollment Period, you can only make one change to your benefits. You cannot switch from Original Medicare to a Medicare Advantage Plan. Additionally, you can not join a Medicare Prescription Drug Plan if you’re in Original Medicare. Lastly, you cannot switch from one Medicare drug plan to another if you’re in Original Medicare.

Ready for Medicare?

Understanding the fundamentals of Medicare can empower you to make informed decisions about your healthcare coverage. Choosing the right Medicare plan is a crucial step towards ensuring your financial and physical well-being during retirement. For more information on Medicare including income-related adjustments, frequently asked questions, and expert guidance, visit our Women & Wealth Webinar: The A, B, C, and D’s of Medicare.

Contact one of our Wealth Advisors to schedule a personalized consultation. We’re here to help you make the most of your retirement years with comprehensive financial planning and guidance.

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