Ever since its inception in 1965, Medicare has been a topic of discussion both among those who use the program and the taxpayers who fund it. Even if you don’t know how it works exactly, you probably have a few ideas about what it is, and for whom it’s meant. As you prepare for your retirement years, however, Medicare becomes something that you should more seriously consider. If you’re in that position, we’ve got answers to the most common questions you’re likely to have.
How Does Medicare Work?
As a government-backed program, Medicare is available to all Americans who, by age 65, have worked 40 quarters (a total of 10 years throughout your working life). Parts of this program are free, while others cost money and are optional. You can opt into the program up to 7 months before your 65th birthday, and coverage generally begins on the first day of your birth month. However, if you’ve been collecting Social Security checks by that point, you’ll be automatically enrolled in Medicare Parts A and B. As we mentioned, there are several parts to this program:
- Medicare Part A – This part focuses on hospital-based inpatient care — the time you’ll spend in the hospital. Standard medical procedures, hospital stays, and surgery are all covered in part or in full (depending on the circumstances).
- Medicare Part B – The second part of Medicare expands that coverage outside of the hospital itself. Part B includes ambulance visits, outpatient services, doctor’s visits, and other medical services that don’t involve a hospital. Coverage here is limited to those who participate in the program, so just like an HMO, it’s important to ensure that you find providers who are in the network.
- Medicare Part C – Also called “Medicare Advantage,” Part C bundles together the inpatient and outpatient services while also covering some of the miscellaneous gaps around out-of-pocket expenses. Part C provides additional coverage at an additional cost and will often include the prescription coverage found in the next part. Opting for Medicare Part C essentially turns Medicare coverage into the kind of coverage you’re used to from traditional health insurance providers.
- Medicare Part D – The fourth part of Medicare focuses on prescription drug coverage. You would use this part at your local pharmacy to pick up prescriptions and save lots of money compared to paying a “sticker price” for those expensive medications.
Not everyone benefits from all parts of Medicare, and you may have different options in terms of pension or family programs. Take some time to review what’s available, as you may want to “mix and match” your medicare coverage to reduce your out-of-pocket expenses and maximize your health care.
Does Medicare Cost Money?
There are always going to be costs associated with Medicare. Part A doesn’t have a premium, but there is a deductible that resets every 60 days (as opposed to the common annual deductible for private insurance). The deductible is currently $1,556, and you must pay that full deductible before the plan kicks in and starts covering your expenses. Given how expensive hospital visits can be, however, that coverage still saves you many thousands of dollars if your stay in the hospital is a week or longer.
After 60 days in the hospital, it switches to another tier and a coinsurance cost of $389/day begins to accrue. If your stay is longer than 90 days, it starts to tap into your “lifetime reserve days,” of which you only receive 60. Those days are exclusively for days 91+ of any hospital stay and involve a coinsurance of $778/day.
If your inpatient care is in a nursing facility instead, there’s a different set of costs. The same $1,556 deductible applies, but there is no coinsurance for days 1-20. From days 21 to 100, you will be expected to pay $194.50/day.
Additionally, the other parts of Medicare involve monthly premiums that depend on your income level. Most Americans will be in the standard tier for Part B when they reach age 65, which costs $170.10 per month. If you earn or have recently earned a significantly high income, you may have to pay extra per month. Part B’s deductible is significantly lower at just $233 per year. After you reach the deductible, you must pay a coinsurance of 20% of the total cost, and there is no cap on your out-of-pocket expenditures.
Both Parts C and D cost money as well and have different limits and savings depending on the specific coverage you opt for and your circumstances in life. Given the potential for high out-of-pocket expenses, many people choose supplemental coverage from private insurance providers to fill those gaps. Considering one of those programs can be well worth the time if your family has a history of significant medical expenses after retirement.
Medicare in Brief
Whether you’re already retired or still in the planning stages, Medicare can play a big part in your plans. It can offer the core of your insurance coverage to protect your finances in the event of injury or illness. Depending on your needs, you may want to opt into Medicare Part C or speak with a licensed insurance agent near you to determine the ideal coverage that will protect you and fill in the gaps between Medicare Parts A and B.
Medicare is a big program, so it’s impossible to learn everything about it in such a short time. Hopefully, this information can get you and your family started on the right foot to taking care of your medical needs. For many Americans just like you, understanding Medicare brings peace of mind when facing the uncertain parts of retirement. Protect yourself and your future finances by gathering the information you need today.
By Christopher Gallagher
Christopher has worked as a licensed insurance agent in the state of Pennsylvania. He has used his experience to help family members and friends find the ideal combination of Medicare and private insurance for their needs.