Original Medicare is health insurance coverage for American citizens who are 65 years and older and those who qualify due to their specific disability. Although you or your spouse have likely paid Medicare taxes for many years while working, you will still have out-of-pocket costs for many of your healthcare services. There are Medicare Parts, such as Part A and Part B, and Medicare Plans, such as Medicare Plan G and Medicare Plan N. But do you need all the Medicare parts and plans? Here are the Medicare basics.
Original Medicare
Medicare consists of two parts: Part A and Part B. The federal government offers these coverages to cover your inpatient (Part A) and outpatient (Part B) services. When you enter your Initial Enrollment Period (IEP), which begins three months before your 65th birthday month and ends three months after, you will want to enroll in Part A and Part B through the Social Security office.
You can only delay your Medicare enrollment when you or your spouse actively work for a large employer and are covered by their group health plan. If this does not apply to you, you will want to enroll in Medicare during your IEP. If not, you will be charged with a lifelong late enrollment penalty once you enroll in Medicare.
As mentioned above, Medicare Part A covers your inpatient services. These services include your room and board at the hospital when you are admitted, three square meals, medications, and lab services. Part A also covers skilled nursing, home healthcare, and hospice.
Medicare Part B covers your outpatient services, such as ambulance rides, durable medical equipment, certain vaccinations, doctor’s visits, and more!
With all that said, Medicare Parts A and B do not cover many of these services at 100%. Medicare has gaps such as deductibles, copays, and coinsurance. Many beneficiaries purchase additional Medicare plans to cover these gaps in coverage.
Medicare Part D
You might have noticed prescription drugs are not listed under Part A or Part B services. Original Medicare does not include prescription drug coverage for medicines you pick up at the pharmacy. Therefore, you will want to enroll in a Part D drug plan for drug coverage. However, Part D plans are sold by private insurance carriers and are not offered by the government.
Although private insurance companies sell Part D drug plans, you will be charged with a late enrollment penalty if you fail to enroll in a plan during your IEP. However, suppose you are covered by creditable coverage, such as employer insurance, FEHB, or VA. In that case, you can delay Part D and not be charged a penalty. Without a Part D plan or creditable coverage, you will pay the total cost for your medications when you pick them up from the pharmacy.
Medicare Supplements
Considering Medicare has gaps in coverage, many beneficiaries purchase a Medicare Supplement, also known as a Medigap plan. Private insurance companies sell Medigap plans to help cover those gaps and help lower your annual out-of-pocket costs. Medigap plans do not have network restrictions, as they work alongside Original Medicare as secondary coverage. If a doctor accepts Medicare, they must take a Medigap plan.
There are ten Medicare Supplements on the market and two high-deductible plans. Medigap plans are 100% optional to purchase! You will not be charged any fee if you decide not to enroll in this plan. However, if you don’t enroll in a Medigap plan during your one-time Medigap Open Enrollment, you may not be able to purchase one in the future if you cannot pass a series of health questions. So, keep this in mind whenever you decide to delay your Medigap enrollment.
Medicare Advantage
Private insurance carriers also sell Medicare Advantage plans which are entirely optional. However, Advantage plans work entirely differently than Medigap plans. When you enroll in a Medicare Advantage plan, you will receive your Part A and Part B benefits through the private insurance carrier, and the government pays the company to take on your health risks.
The carrier will create a network of doctors you can visit for your healthcare services. The two most purchased Medicare Advantage plans are HMO and PPO plans.
Besides the carrier creating a network for you, they will also set your cost-sharing amounts. For example, one carrier might charge a flat copay of $30 for a doctor’s visit and a $60 copay for a specialist. In contrast, another carrier might set a 20% coinsurance for your doctor and specialist visits.
If you decide not to enroll in one of these plans, you will not be charged any penalty. However, you would need to wait until an election period, such as the Annual Election Period (October 15 – December 7), to enroll in one of these plans if you didn’t enroll during your IEP. The carrier will not ask health questions on the application.
Summary
When you first become eligible for Medicare, you will want to be sure you enroll in Medicare Parts A, B, and D, if you do not have creditable coverage. If not, you will be charged with a late enrollment penalty when you enroll in the future. But, you don’t have to go at this alone! Reach out to a reputable Medicare broker for help throughout your Medicare journey.