Medicare is a federal health insurance program designed for only people who are 65 or older. People who are under 65 are not able to join Medicare unless they have been on Social Security disability for more than 24 months and have surpassed the waiting period for Medicare coverage. Additionally, people who can also benefit from this program are people with certain disabilities such as end-stage renal disease and other permanent disabilities.
Like Social Security, Medicare is an entitlement program that most U.S. citizens become eligible for by working and paying taxes for a minimum period of time, typically 40 quarters (10 years). As a result, most people join the Medicare program after turning 65 years old or retiring and leaving their group health insurance.
Medicare coverage has four parts: Part A, Part B, Part C, and Part D.
What is Medicare Part A? • Part A of Medicare is commonly known as hospitalization insurance. This part of Medicare primarily covers the cost of your time in the hospital (inpatient care), skilled nursing facility care, hospice care, home health care, and more.
What is Medicare Part B? • Medicare Part B helps cover the costs of your doctor’s visits and other outpatient services, including outpatient procedures, x-rays, lab tests, preventative services, and more.
What is Medicare Part C? • Medicare Part C plans, commonly known as “Medicare Advantage Plans,” are offered by private insurance carriers who have a contract with Medicare and are required to provide at least the same benefits as Original Medicare. You may enroll in a Part C Advantage plan to replace your “Original Medicare” (Part A and Part B) coverage.
What is Medicare Part D? • Medicare Part D, also known as your “Prescription Drug coverage,” is sold by private insurance companies and can vary in cost & by the drugs they cover. Part D drug plans are available to anyone enrolled in Medicare and are offered either as a stand-alone plan or built into a Medicare Advantage Plan.
Part A and Part B of Medicare provide the foundation for your Medicare coverage. When combined, these two parts of Medicare are known as “Original Medicare.“ Part A provides “hospitalization insurance,” which mostly assists with the cost of inpatient care. In contrast, Part B provides “medical insurance” for services, including doctor’s visits, outpatient procedures, x-rays, lab tests, and preventative services.
Medicare Part A is often referred to as your “hospital coverage” since it covers your care while in a hospital. This includes your semi-private room, your hospital bed, your meals while in the hospital, etc.
Medicare Part B is also known as “medical insurance” since it covers several different outpatient medical services – both in and out of the hospital. This includes services such as doctors, x-rays, lab tests, flu shots, etc.
It’s important to know that Part A & B are the only parts of Medicare you will need to enroll in via the Social Security office.
If you are receiving Social Security benefits at least (4) months before your 65th birthday, you will be automatically enrolled into Medicare Part A and Part B. You should receive your red, white & blue Medicare card in the mail about approximately (3) months before your birth month.
If you are NOT receiving Social Security benefits, you will not be automatically enrolled and will need to enroll through the Social Security office when you turn 65. To learn more about enrollment, visit how to apply for Medicare.
If you fail to enroll in Medicare Part B during your enrollment window when you are first eligible to sign up, it’s important to know you will be subject to pay a late enrollment penalty. Your monthly premium may go up 10% for each 12-month period. This is because you should have had Part B, but didn’t sign up. In most cases, you’ll have to pay this penalty each time you pay your premiums, for as long as you have Part B. And, the penalty increases the longer you go without Part B coverage.
Typically, there is no cost associated with Medicare Part A. As long as you (or your spouse) have worked and paid taxes for at least 10 years (or 40 quarters), you will be entitled to Part A at no cost. Occasionally, you will hear people refer to this also as “premium-free Part A.” Additionally, you may also be eligible for Part A at no cost if your spouse has met the previously mentioned requirements.
An easy rule of thumb we like to tell our clients is that if you are eligible for Social Security Benefits, then you should be eligible for Medicare Part A at no cost. However, if you have to buy Part A and have worked & paid taxes for at least 30-39 quarters (approximately 7-9 years), the standard Part A premium would be $259 in 2021. If you worked & paid taxes for less than 30 quarters (approximately 7 years or less), the standard Part A premium would be $471 in 2021.
Most people will get premium-free Part A when turning 65 if:
• You already get retirement benefits from Social Security or the Railroad Retirement Board.
• You are eligible to get Social Security or Railroad benefits but have not filed for them yet
• You or your spouse had Medicare-covered government employment
Any expenses you incur while an inpatient in the hospital would fall under Part A of Medicare. You will have to pay a $1,484 annual deductible in 2021 before your Medicare Part A hospitalization coverage begins. Additionally, if applicable, you will be responsible for some cost-sharing for extensive hospital days. See the chart below for the exact breakdown in costs:
Your Medicare Part A will cover a significant amount when it comes to costs; however, there will be some costs that you will be responsible for. Each year, CMS determines the Medicare Part A coinsurance and deductible that you will be responsible for during the following year. The chart to the right is the cost-sharing amounts you must pay when using your Part A benefits.
After you met your annual deductible, Medicare pays 80% of any Part B-approved services. You are responsible for paying the remaining 20%. Medicare Part B covers your outpatient services, such as doctor visits, lab tests, x-rays, and other services listed above. One essential thing to remember is there is no cap on your out-of-pocket costs under Medicare Part B, which means if your total bill were $100,000, you would owe $20,000 or more as the bill rises. Medicare will deduct your Part B premiums from your Social Security check if you are already enrolled to receive your Social Security benefits. If not, they will bill you quarterly.
You must pay a monthly premium for your Medicare Part B coverage. In most cases, people will pay the Part B premium of $148.50 per month in 2021 if you are already enrolled in your Social Security income benefits. However, if your income is over $88,000 (single) or $176,000 (married couple), you may pay a higher premium. This is because Medicare will automatically deduct your Part B premiums from your Social Security check if you are already enrolled and receiving your Social Security benefits. However, there are some exceptions some people should be aware of:
• If you are NOT enrolled in SS and have to buy Part A, you typically will be required to pay for a Medicare Part B, and pay monthly premiums for both. In this case, Social Security will bill you quarterly.
• If your annual income is greater than $88,000 (single) or $176,000 (married), then your premium will be higher. (Reference the table below to find out how much your monthly premium will be based on your income bracket).
• AVOID PART B PENALTIES! • It is important to know that if you enroll late into Part B, your monthly premium may go up 10% for each 12-month period you should have had Part B. In most cases, you’ll have to pay this penalty each time you pay your premiums, for as long as you have Part B. And, the penalty increases the longer you go without Part B coverage. So it is important not to miss this initial enrollment window!
Social Security will contact some people who have to pay more depending on their income. The amount you pay can change each year depending on your income. If you have to pay a higher amount for your Part B premium and disagree (for example, if your income goes down), use this form to contact Social Security.
You will be responsible for a percentage of the medically necessary Part B services. These costs can include:
• Your annual Part B deductible ($203 in 2021). However, if your annual income was over $88,000, it may be more. Reference the graph to the right.
• 20% of your remaining costs (without a cap)
• Any excess charges that a provider may charge that Medicare does not reimburse for.