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Medicare Basics

Making Sense of Medicare

Are you about to turn 65, or did you recently celebrate this milestone birthday?

If so, you have probably received promotional mailers – possibly many of them – about signing up for Medicare. It is because you are now eligible for coverage, or you will soon be eligible.

What is Medicare?

Medicare is federal health insurance.

It is primarily for America’s seniors, but also some people under age 65 with certain disabilities and those of any age with end stage renal disease (ESRD). The Centers for Medicare & Medicaid Services administers the program, while the Social Security Administration (SSA) enrolls most individuals.*

Make no mistake – Medicare is complicated.

It has parts and plans that look like alphabet soup, and there are a variety of policy combinations, eligibility guidelines and enrollment periods.

We hope to remove any confusion you may have about Medicare by breaking down the different options and explaining them in detail. Our goal is to provide the information you need to make the choices that are right for you.

*The nation’s railroad workers pay Medicare taxes to the federal railroad administrative system rather than the SSA. These workers and their dependents are enrolled in Medicare through the U.S. Railroad Retirement Board.

Original Medicare

This is the program’s foundation. While it offers significant benefits, Original Medicare does not pay all of a covered person’s health care costs. (More on that later.)

Medicare has four parts:

  • Hospital Coverage
  • Medical Coverage
  • Medicare Advantage Plans
  • Prescription Drug Plan

 

Part A

Also referred to as Hospital Coverage, Part A is free to people who have worked 10 years or more and paid Medicare taxes. Otherwise, you can sign up for Part A at a cost.

There are premiums, copays and coinsurance costs. If you collect Social Security or Railroad Retirement benefits, you will be automatically enrolled when you turn 65. If you were eligible for Part A for two years but did not sign up, you will have to pay the higher premium for four years.

Usually you do not have to pay a penalty if you meet certain conditions that allow you to sign up for Part A during a Special Enrollment Period (SEP).

Part A includes:

  • Hospital stays
  • Skilled nursing facility
  • Home health care
  • Hospice

Generally, people receive their Medicare initial enrollment package three months before their 65th birthday. Included in the package is your red, white and blue Medicare benefits card.

If you choose to accept the required Part A and the optional Part B Medical Coverage, you keep the Medicare card. If not, you return it to indicate you have declined Part B.

Part B

Also part of Original Medicare, Part B medical coverage may be similar to the health insurance you or a loved one may have had while working. You can decline Part B if you are still working and have group insurance coverage. However, we strongly suggest you review Part B benefits before choosing to decline them.

Part B includes but is not limited to:

  • Doctor visits
  • Preventative services
  • Outpatient medical and surgical services and supplies
  • Lab tests
  • Durable medical equipment
  • Diabetic testing supplies

Part C

This refers to Medicare Advantage plans. You can enroll in a Medicare Advantage plan if you have Medicare Part A and Part B.

Private insurance companies approved by Medicare offer Medicare Advantage plans. The plans are required to have everything covered under Original Medicare, Part A and Part B, with the exception of hospice care. Some plans offer additional benefits, such as prescription drug coverage, dental, vision, and more.

In addition:

  • Some have a network of doctors and facilities you must use
  • You may need a referral to see a specialist
  • Members must continue to pay their Part B premium
  • You can only join (or leave) the plan during certain periods

Part D

Medicare’s Prescription Drug Plan (PDP) program – Part D – is optional. However, if you delay enrolling in a Medicare PDP, you may be charged a late enrollment penalty if you decide you want it later.

Criteria for joining a Prescription Drug Program are:

  • Must be entitled to Part A or have Part B coverage
  • Live in the plan service area
  • Live within the United States

Enrollment periods include:

  • Your Initial Enrollment Period (IEP)

This is a seven-month period including the three months before your 65th birthday, your birthday month and the three months following your birthday.

  • The Medicare Annual Election Period (AEP), which is Oct. 15 through Dec. 7
    each year
  • Special Election Period (SEP)

Prescription Drug Plan coverage is also available through Medicare Part C (Medicare Advantage Plans) that offer drug coverage.

Medicare Supplement Insurance

If you hear someone mention Medigap (or Med Supp), these nicknames refer to Medicare Supplement policies.

Private companies sell Medicare Supplement insurance; its purpose is to fill gaps in Original Medicare coverage.

Medicare Supplements offer standardized plans, this means they are all identical coverage if you are comparing the same plan, such as a plan G. However, plan premiums vary from company to company and the zip code you live in.

More details:

  • Open Enrollment Period for a Medicare supplement is from age 64 and a half to 65 and a half, OR when your Medicare Part B first takes effect
  • Companies must sell you a Medicare supplement within the Open Enrollment Period (OEP), you can not be denied for any reason
  • Restrictions may apply to purchasing a Medicare supplement outside of your open enrollment period.