Seniors who are aged 65 and older and people with specific disabilities can qualify for Medicare. Medicare is America’s federal healthcare program, and it can be quite the maze to understand fully. When you near Medicare eligibility, there are certain things to consider when applying for Medicare. For example, if you are working past 65, do you need Medicare? Or if you are offered retiree coverage, should you enroll in Medicare?
The government expects you to do your Medicare research and be aware of all your available options before enrolling. However, it is not always that easy. So here are five things to consider when applying for Medicare.
1. Costs of Medicare
Medicare Part A and Part B are the two parts the government provides you. Many Medicare beneficiaries believe that Medicare is free, and that is, unfortunately, not the case. However, if you have worked ten years (40 quarters) in the United States and paid payroll taxes, you will have a $0 premium for Part A.
However, if you have not worked 40 quarters in the United States but still qualify for Medicare, you can still purchase Medicare Part A for around $458 a month. As you near Medicare eligibility, you will want to prepare for this high premium if you do not have the qualifying work history.
Medicare Part A has a $1,408 deductible for inpatient services, such as a semi-private hospital room, meals, and lab services. The Part A deductible is per benefit period, so there is a chance you can pay the Part A deductible more than once a year.
In 2020, the Part B base premium is $144.60 per month for outpatient coverage, such as doctor’s visits, some vaccinations, and ambulance rides. Most Americans pay the standard Part B premium. However, if you fall in the high-income bracket, you may pay a higher Part B premium.
You must meet the annual Part B deductible ($198 in 2020) before Medicare cost-sharing applies. Once you have met the $198 deductible, Part B will cover 80% of your Medicare-approved services, leaving you responsible for the remaining 20% coinsurance.
Since Medicare does not cover 100% of your services, consider purchasing a Medigap or Medicare Advantage plan to lower your out-of-pocket costs.
2. Medigap vs. Medicare Advantage
Medigap (Medicare Supplement) and Medicare Advantage plans are sold through private insurance companies, and many Medicare beneficiaries purchase these plans to help with cost-sharing expenses. You must have Medicare Part A and Part B to buy these plans, and you will still pay the Part B premium when enrolled in a Medigap or Medicare Advantage plan.
Medigap plans help cover the “gaps” in your Medicare coverage, such as the 20% coinsurance for Part B services. Medigap plans work alongside Medicare, so Medicare will pay first, and your Medigap plan will pay second for Medicare-approved services. If a doctor accepts Medicare, then they must accept your Medigap plan, regardless of carrier.
Like Original Medicare, Medigap plans do not have network restrictions, and referrals are not required when visiting a specialist. There are ten Medigap plans on the market, and each plan offers a different set of benefits. Medigap plans ensure predictable healthcare costs throughout the year, and it is a type of plan to consider if you often visit the doctor.
When purchasing a Medicare Advantage plan, you opt to receive your Part A, Part B, and Part D (drug coverage) through that carrier. There are a few different Medicare Advantage plans, but the two most popular plans are HMOs and PPOs.
With an HMO plan, you will obtain all your healthcare needs through the plan’s network, except for emergency cares. If you receive care outside your network and it is not an emergency, you will pay 100% of the bill. You may also need a referral from your doctor to see a specialist.
PPO Medicare Advantage plans tend to be more flexible than HMOs. With a PPO plan, you will have lower copays when you visit a doctor inside your network. However, you can go outside your network to obtain care, but you will pay a higher copay.
3. Delaying Medicare
Medicare beneficiaries typically enroll in Medicare during their Initial Enrollment Period (IEP). The IEP is a seven-month period that begins three months before your 65th birthday and ends three months after your birth month. During this time, you will enroll in Medicare Part A and Part B. However, if you plan on working past age 65, you may be able to delay Medicare until retirement.
If you, or your spouse, work for a large employer with 20 or more employees, and you have group health insurance, you can delay Medicare until you retire. If you were to enroll in Medicare with large employer coverage, your employer insurance would be primary, and Medicare would be secondary.
If your employer has less than 20 employees, you need to enroll in Medicare during your IEP. Medicare will be your primary insurance and if you keep your employer coverage, it will pay after Medicare. If you don’t enroll in Medicare, your employer plan does not have to pay your health claims.
4. COBRA vs. Medicare
COBRA is a way to extend your health coverage once you are no longer employed. An employer maty extend COBRA for retirees. Unfortunately, COBRA is not considered creditable coverage for Medicare, so, once you retire, you must enroll in Medicare to avoid late enrollment penalties. You can keep your COBRA coverage if you like, but it will be in addition to—not in place of—Medicare.
5. Whether or Not to enroll in Part D
Original Medicare does not cover prescription drugs. Therefore, if you have Original Medicare or a Medigap plan, you will want to enroll in a Part D plan to have drug coverage. The majority of Medicare Advantage plans include a Part D plan, so you wouldn’t need to enroll in a separate Part D plan.
You typically enroll in a Part D plan during your Initial Enrollment Period. If you fail to enroll in Part D during your enrollment period, you will likely be subject to a late enrollment penalty. However, retiree coverage, such as COBRA or Veterans Affairs (VA) benefits, is generally considered creditable coverage for Part D.
If you have retiree coverage, reach out to your Human Resources department to find out if your current coverage is considered creditable for Medicare Part D. If so, then you can likely delay your Part D enrollment.
Medicare can be a complicated subject to learn, which is why research is necessary to ensure you enroll in a plan that fits your healthcare needs and budget. There are many things to consider when applying for Medicare, and you can contact a trusted Medicare broker or visit Medicare.gov for more information.