New to Medicare? Need a refresher? Learn the basics of Medicare.
Understanding the Program
New to Medicare? Need a refresher? We’ve got you covered. Learn the basics of Medicare, including who is eligible, the different parts of the program, what each part covers (or doesn’t), and how to enroll.
Whatever your retirement plan is, chances are it will involve Medicare. After all, healthcare is one of the top expenses you’ll have during your golden years. The average 65-year-old couple today needs about $315,000 to cover their healthcare expenses during retirement.1 Variables like your overall health and where you live could raise or lower that amount.
Bottom line? It pays to do your research and understand your options, so you can choose coverage that fits your lifestyle and meets your health needs. Figuring out what makes sense for you might take some time—you have several options when enrolling. But don’t worry, Silvur Insurance is here to help you navigate the process so you get the coverage that’s right for you.
What Is Medicare and Its Parts?
Medicare is composed of five parts, and each part covers something different.2 This means you can choose the coverage you want and avoid paying for anything you already have or don’t need. There are two options when purchasing Medicare: a la carte or bundled. For an in-depth guide, our Understanding the Different Medicare Parts is a great resource. But in the meantime, here’s a brief overview of each part:
Original Medicare
Original Medicare is the plan first created by the government. It's made up of Part A and Part B. You can add additional plans to Original Medicare, a la carte style, based on your healthcare needs.
Part A. Part A helps cover expenses associated with hospital care, including inpatient stays, skilled nursing facility care, and some home health and hospice care.
Part B. Part B helps cover doctor’s visits, outpatient services, medical supplies and preventive services. Everyone pays a monthly premium for Part B.
A la Carte Plans to Add to Original Medicare
Part D. Part D helps cover prescription drugs and many recommended shots and vaccines. In order to sign up, you must be enrolled in either Part A and/or Part B of Original Medicare.
MedicareSupplement.3 Often referred to as Med Supp or Medigap, Medical Supplement plans are sold by private insurance companies and help cover out-of-pocket costs that Original Medicare doesn’t. Examples include copayments, deductibles and coinsurance. Medigap is only available to people who are covered by Original Medicare.
Medicare Advantage
Part C. There is an all-in-one bundled plan alternative to Original Medicare. That includes all parts along with some extra benefits. Also called Medicare Advantage, Part C is offered through private insurance companies.
Your out-of-pocket costs may also be lower but your choices of doctors and network are more restricted than Original Medicare. It’s important to note that if your Medicare Advantage Plan does not offer a prescription drug plan, you may be eligible to enroll in Medicare Part D. However, it’s best to connect with your plan provider before making a decision.
What’s Not Covered Under Medicare?
While Medicare covers an array of care and services, it doesn’t cover everything.4 Eye exams, most dental care, dentures, hearing aids, cosmetic surgery and routine foot care are not covered under Original Medicare. Same goes for long-term care, which 70% of people5 turning 65 will need in their lifetime.
In fact, nearly 90% of the average retiree’s out-of-pocket expenses include long-term care, doctor’s visits, medical supplies, prescription drugs and dental services. Combined, those expenses can be significant, averaging $5,460 a year.6
Covering Out-of-Pocket Costs
Original Medicare does not put a cap on your out-of-pocket expenses. To help cover costs, you can purchase supplemental plans, like Medigap. Or you can use funds from an existing Health Savings Account (HSA), which is allowed no matter what type of coverage you have.
Pre-existing conditions could also impact how much you’ll pay out of pocket. If you sign up for Medigap outside of your designated open enrollment period, the insurer reserves the right to wait up to six months before covering any health conditions you were diagnosed with or treated for. The insurer also has the right to adjust your premium amount based on your health, or they may deny your policy application if you do not meet certain criteria, outside of your initial election period.
Depending on your healthcare needs, the best way to limit your out-of-pocket expenses is to sign up for a Medicare Advantage plan. The maximum amount you’ll still be responsible for can vary by plan.
Another option is to purchase a Part D plan, which can help shield you from ever-increasing prescription drug costs. Starting in 2025, if you spend $2,0007 out-of-pocket on prescription drugs in a calendar year, you’re entitled to catastrophic coverage. You won’t have to pay a copayment or coinsurance for covered Part D drugs for the rest of the calendar year.
It’s a common mistake to only focus on the premiums when we sign up for a healthcare plan. But as you embark on your retirement healthcare journey, it’s crucial that you factor in not only what's covered but also what’s not covered by your plan. Planning how much you’ll need to spend on out-of-pocket costs is essential.
Who Is Eligible for Medicare?
Medicare is the government-sponsored health insurance program for people 65 and over and those with certain disabilities. In order to be eligible for Part A, or the program’s hospital coverage, you must meet certain criteria.
If you’re 65 or older, one of the following must apply:
You or your spouse worked and paid Medicare taxes for at least 40 quarters.
You are a U.S. citizen or permanent legal resident who has lived in the country for at least five years.
You receive or are eligible to receive Social Security or railroad retirement benefits.
Your spouse (living or deceased, including divorced spouses) receives or is eligible to receive Social Security or railroad retirement benefits.
You or your spouse are a government employee or retiree who has paid Medicare payroll taxes while employed.
You are the dependent parent of a fully insured deceased child.
If you’re younger than 65, one of the following must apply:
You have been entitled to Social Security disability benefits for at least 24 consecutive months
You receive a disability pension from the Railroad Retirement Board and meet certain conditions.
You have Lou Gehrig’s disease, also known as amyotrophic lateral sclerosis (ALS), which qualifies you immediately.
You have permanent kidney failure that requires regular dialysis or a kidney transplant and one of the following applies:some text
You’re eligible for or receive monthly benefits under Social Security or the railroad retirement system.
You’ve worked long enough in a Medicare-covered government job.
You’re the child or spouse (including a divorced spouse) of a worker (living or deceased) who has worked long enough under Social Security or in a Medicare-covered government job.
You’re the child or widow(er) age 50 or older of a worker who has been employed long enough under Social Security or in a Medicare-covered government job, and you meet the requirements of the Social Security disability program.
If you don’t meet any of those requirements, you may be able to pay a monthly premium for coverage. Typically, you can only purchase this coverage during designated enrollment periods.The amount you pay depends on how long you or your spouse have worked and paid Medicare taxes. Every three months of work counts as one “work credit,” and Medicare will be free if you’ve accrued 40 credits.
Qualifying for Medicare Part A
To get Medicare Part A in 2024, you will pay a monthly premium of either $505 (if you’ve accrued fewer than 30 credits) or $278 (if you’ve accrued 30 to 39 credits), unless you have 40 credits.8
If you buy Part A, you must enroll in Part B.9 That said, you can get Part B without enrolling in Part A. You would simply pay the same premium amount as anyone else enrolling. In 2024, that’s $174.70 a month for individuals who earn $103,000 or less a year, or couples filing jointly who earn $206,000 or less a year. The rates increase for those with higher incomes.
You can also get Part D if you’re enrolled in either Part A or Part B. The monthly premium varies by plan.
Now that you know who is eligible, let's dive into our next lesson: The Basics of Medicare Enrollment.
The Basics of Medicare Enrollment
When it comes to enrolling in Medicare or changing your plan, timing is key. If you’re already collecting Social Security, you will automatically be enrolled in Medicare Part A and Part B. Alternatively, there are six enrollment periods with different dates. But first, here’s an overview of the enrollment periods to help you determine which dates to mark on your calendar.
If it’s your first time enrolling in Medicare, here are your three enrollment options:
Initial Enrollment Period (IEP). This is the seven-month window when first-time enrollees can sign up for Medicare. Your individual IEP starts three months before you turn 65, and lasts for three months after the end of your month of birth. For example, if your 65th birthday is October 20, your IEP starts July 1 and ends January 31. During the IEP, you will choose whether to enroll in Part A and/or B, a prescription drug plan or a Medicare Advantage plan. The start of your coverage depends on when you enroll:
Enrollment Periods
Special Enrollment Period (SEP). Sometimes, you’ll have extenuating circumstances and need to change your coverage, such as a move or losing insurance through an employer. In those cases, you may qualify for an SEP, which allows you to enroll or make changes to Original Medicare, Medicare Advantage or prescription drug coverage outside of the regular enrollment periods. You can enroll within two months after your special event occurred. Keep in mind that there are rules on what changes you can make and when you can make them.10
Medigap Open Enrollment Period. If you find that Original Medicare coverage doesn’t fully fit your needs, you can purchase a Medigap policy to help cover additional costs. Medigap can help cover things like deductibles and coinsurance payments that can quickly cause your medical expenses to skyrocket.
You’re entitled to a six-month enrollment period that starts the first day of the month you turn 65, and you’ll need to be signed up for Medicare Part B in order to qualify. You can enroll in any Medigap policy sold within your state, even if you have health issues. Although you can purchase Medigap after the enrollment period ends, companies can adjust your premiums or deny you coverage based on your health.
If you’re already enrolled in Medicare, here are your three enrollment periods:
Annual Enrollment Period (AEP). Held once a year between October 15 and December 7, AEP, or open enrollment, is when anyone can make changes to their coverage, switch to a different plan, or enroll in a Medicare plan. All changes made during this time take effect January 1. If you miss AEP, you may be able to make changes during the Medicare Advantage Open Enrollment Period or General Enrollment Period. We’ll cover both below. Depending on your situation, you might also qualify for a Special Enrollment Period.
General Enrollment Period (GEP). If you missed signing up for Part A and/or Part B during your IEP, you can do so during this three-month window (January 1 to March 31). Your coverage starts the month after you sign up.
Medicare Advantage Open Enrollment Period (MAOEP). If you have a Medicare Advantage plan and want to switch to a different plan or Original Medicare, this is your chance to make a one-time plan change. MAOEP runs from January 1 to March 31 every year. Coverage begins the first day of the month after your new plan receives your request for coverage.
Thinking about Delaying Enrollment?
Generally speaking, unless you have another source of qualifying coverage, you must sign up for Medicare when you turn 65 or face late-enrollment penalties. Those surcharges can be steep: your monthly premium can increase by 10% for each year-long period you were eligible but didn’t sign up. Your partners at Silvur Insurance can help you understand the penalties for delaying enrollment if you don’t have another source of qualifying coverage.
More often than not, you’ll have to pay this penalty every time you pay your premiums, for as long as you have Part B, and it increases the longer you go without that coverage.
Still Working When You’re Eligible for Medicare?
You can enroll in Part A when you turn 65 even if you’re covered under an employer-sponsored plan, but may not want to if you are contributing to an HSA. Part A is free if you’ve worked the required number of quarters. However, you may be able to delay enrolling in Part B if you’re eligible for a Special Enrollment Period. But before you decide, contact your benefits administrator to see whether your insurance would work with Medicare.
In general, if you have health insurance from a previous employer and retiree coverage, Medicare recommends enrolling in Part A and Part B when you’re first eligible. If you have health insurance through your or your spouse’s current employer, the guidance depends on the size of your employer. If the company has 20 or more employees, you may be able to delay enrollment without being penalized. If the company has fewer than 20 employees, you must enroll in Medicare Part A and Part B when you’re first eligible.
In addition, you should consider enrolling in Medicare Part B if your spouse’s employer requires covered dependents to enroll in Medicare when they turn 65 or if you’re not married but living in a domestic partnership, and covered by your partner’s employer health insurance. Unfortunately, these cases do not qualify you for a Special Enrollment Period where you may face late enrollment penalties.
We're Here to Help
It can be overwhelming to keep up with all these terms, dates and deadlines. But we have you covered. It can be very helpful to work directly with an agent in Michigan who is licensed and educated in the Medicare market and can help you choose the plan that is right for you.
Your partners at Silvur Insurance are here to help and can meet with you one-on-one in your local MSU Credit Union Branch, over the phone, or even virtually - all, at no cost to you! To schedule a meeting with one of our agents, click HERE or call (888) 372-3999.
SOURCES
“Fidelity Releases 2023 Retiree Health Care Cost Estimate: For The First Time In Nearly A Decade, Retirees See Relief As Estimate Stays Flat Year-Over-Year.” Fidelity Investments, 21 June 2023, preview.thenewsmarket.com/Previews/FINP/DocumentAssets/645024.pdf. Accessed 18 October 2023.
“Medicare & You Handbook.” Medicare, www.medicare.gov/Pubs/pdf/10050-medicare-and-you.pdf. Accessed 7 December 2023.
“Get Medigap Basics” Medicare, www.medicare.gov/health-drug-plans/medigap/basics. Accessed 7 December 2023.
“What's Not Covered by Part A & Part B?” Medicare, www.medicare.gov/what-medicare-covers/whats-not-covered-by-part-a-part-b. Accessed 1 May 2021.
Johnson, Richard W. “What Is the Lifetime Risk of Needing and Receiving Long-Term Services and Supports?” ASPE, 4 Apr. 2019, aspe.hhs.gov/basic-report/what-lifetime-risk-needing-and-receiving-long-term-services-and-supports. Accessed 1 May 2021.
Cubanski, Juliette, et al. “How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care?” KFF, 4 Nov. 2019, www.kff.org/medicare/issue-brief/how-much-do-medicare-beneficiaries-spend-out-of-pocket-on-health-care/. Accessed 12 July 2022.
Catastrophic coverage, Medicare www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/catastrophic-coverage. Accessed 7 December 2023.
“Part A (Hospital Insurance) costs.” Medicare, www.medicare.gov/basics/costs/medicare-costs. Accessed 7 December 2023.
“Part B (Medical Insurance) costs.” Medicare, www.medicare.gov/basics/costs/medicare-costs. Accessed 7 December 2023.
“Special Enrollment Periods.” Medicare, www.medicare.gov/basics/get-started-with-medicare/get-more-coverage/joining-a-plan/special-enrollment-periods. Accessed 7 December 2023.
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