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An Introductory Overview to Medicare

Last Updated November 20, 2014

 

by: Retirement Dictionary Staff

 

 

As the results of numerous studies show, healthcare cost during retirement is one of the largest expenses for many retirees, often exceeding $200,000 for some couples. Luckily, those who are at least age 65 may be eligible for Medicare, America’s federal health insurance program.

Certain individuals younger than age 65 may also be eligible for Medicare if they are disabled, as well as those with end-stage renal disease.

In some cases, receiving Medicare coverage is not automatic, and as such, some eligible individuals may need to ensure that they sign up on a timely basis.

What Medicare Covers

Medicare coverage is broken down into four Parts. The following is a high level overview of each:

Medicare Part A

Medicare Part B

Medicare Part C

Medicare Part D

Medicare Part A is hospital insurance, and covers items such as inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care

Medicare Part B is medical insurance and covers certain doctors' services, outpatient care, medical supplies, and preventive services.

Medicare Part C, also known as a Medicare Advantage Plan, is not a type of coverage. Instead, it is Medicare health plan available through a private provider, contracted with Medicare. These include Preferred Provider Organizations (PPO)s ,  Health Maintenance Organizations (HMO)s, private fee-for-service plans, Special Needs Plans, and Medicare Medical Savings Account Plans.

Individuals can choose to between the original Medicare or a Medicare Part D plan

Medicare Part D is prescription drug coverage. These are offered by insurance companies and other private companies approved by Medicare.

 

Some Medicare Advantage Plans include provisions for Medicare Part C (prescription drug coverage).

Medicare Eligibility

Generally, you are required to meet certain requirements in order to be eligible for Medicare. For example:

  • If you are at least age 65 and you qualify for Social Security income, you are eligible for free Medicare Part A (hospital insurance). If you do not meet the requirements for free Medicare Part A, you may be able to get it by paying a monthly premium.
  • If you are eligible for free Medicare hospital insurance, you may enroll in Medicare medical insurance (Part B) by paying a monthly premium. If not, you may purchase medical insurance if you are age 65 or older and you are a U.S. citizen, or a lawfully admitted noncitizen who has lived in the United States for at least five years. In this case, you would not need to buy hospital insurance, unless you want to.
  • If you have Medicare Parts A and B, you can join a Medicare Advantage plan.  And,
  • If you have Medicare Part A, Medicare Part B, or Medicare Part C, you are eligible for Medicare Part D.

These are only some of the requirements. Please contact your financial advisor for additional and alternate requirements that may apply.

Medicare Costs

You may be required to pay for Medicare in some cases. The following table provides a high level overview of Medicare costs for 2015.

2015 Costs at a Glance

Part B premium

Most people pay $104.90 each month

Part B deductible

$147 per year

Part A premium

Most people don't pay a monthly premium for Part A. If you buy Part A, you'll pay up to $407 each month

Part A hospital inpatient deductible

 You pay: 

  • $1,260 deductible for each benefit period
  • Days 1-60: $0 coinsurance for each benefit period
  • Days 61-90: $315 coinsurance per day of each benefit period
  • Days 91 and beyond: $630 coinsurance per each "lifetime reserve day" after day 90 for each benefit period (up to 60 days over your lifetime)
  • Beyond lifetime reserve days: all costs

Source Medicare.gov

 

If you are unable to afford to pay for Medicare, you may be able to get assistance through Governmental programs such as Medicaid.

Signing Up for Medicare

Generally, the sign-up process should be done three months before you reach age 65. Delaying it beyond this timeframe could result in delay of coverage and higher premium costs.

You can sign up for Medicare online here http://www.socialsecurity.gov/medicare/apply.html.

If you receive disability benefits for at least two years, the Social Security Administration will automatically enroll you in Medicare Part A and Medicare Part B.

This is a high level overview.  Please contact your financial advisor to discuss Medicare and your other retirement planning needs.