A Medicare Guide (Part 1)

The annual Medicare enrollment period runs from October to December, and we thought it would be good to create a Medicare guide to review both the basics as well as a few lesser-known rules surrounding this benefit.

Eligibility and Enrollment 

If you are age 65 and a US citizen or permanent legal resident, you are eligible for Medicare. Your initial enrollment period starts 3 months before the month you turn 65 and runs for 7 months, ending the third month after you turn 65. 

The annual enrollment period gives you an opportunity once a year (from October to December) to change your coverage or provider. This is not, however, the only time you can sign up for Medicare if you have never been enrolled before.

If you or your spouse continue to work beyond age 65, you have existing health insurance coverage through your (or your spouse’s) employer, and your company has 20 or more employees, you can stay with your current health insurance. If this is true, once you retire, you will have an 8 month window to get enrolled into Medicare.

Many people will physically (well, digitally) sign up for Medicare directly on the government’s website, medicare.gov. However, it is possible to be automatically enrolled if you meet certain criteria.

• If you apply to receive Social Security benefits or Railroad Retirement benefits at least 4 months prior to your age 65 birthday, you will be automatically enrolled in Medicare.

• If you have ALS (Lou Gehrig’s Disease) or End Stage Renal Disease, you will be enrolled in Medicare when you receive Social Security Disability benefits.

• Anyone else who is eligible to receive Social Security Disability is automatically enrolled in Medicare after 24 months of SSDI benefits.

• If you are still employed at 65 and have private health insurance, you may decide not to enroll in Medicare. If you later choose to begin receiving Social Security benefits while still working, you will be automatically enrolled in Medicare Parts A and B. However, you have the choice to opt out of Part B in that situation.

How Medicare is Structured

Original Medicare is run by the federal government and premiums are paid directly to the government (specifically, the Centers for Medicare and Medicaid, part of the Department of Health and Human Services) which in turn makes payment to health care facilities and professionals. Similar to private insurance companies’ “networks”, you can use any doctor or hospital that accepts Medicare, anywhere in the United States.

Let’s dive into how Medicare is structured in Parts:

• Part A. Medicare Part A is hospital insurance. This helps cover inpatient hospital care, a limited amount of skilled nursing care, a very limited amount of long term care, part-time or intermittent home health care, and hospice care.

• Part B. Medicare Part B is medical insurance. This helps cover medically necessary services provided by individual doctors and other health care providers, some types of medical equipment, and some preventative services.

These are the two primary parts of Medicare that you must enroll in. Like every other health insurance plan in America, there are limitations and restrictions in regard to scope and time when it comes to what Parts A and B cover. There are also deductibles and co-insurance amounts.

In addition, there are some options to Medicare that fill in the gaps Original Medicare does not cover.

• Plan C. Better known as Medicare Advantage, Plan C is Medicare-approved plan offered by private insurance companies that bundles Parts A and B with other types of coverage such as vision, dental, hearing, and more. Most Medicare Advantage plans also include Medicare’s prescription drug coverage, known as Part D. Medicare Advantage is no longer sold as of 2020.

• Part D. Medicare Part D is drug coverage. This helps cover the cost of prescription drugs, shots, and vaccines. Part D can be purchased separately or bundled with other Medicare plans.

• Plan E. We don’t talk about Plan E. (Not really – Plans E, H, I, and J have not been available for sale since 2010.  Plan F is no longer available for sale as of 2020.)

• Plans G, K, L, M, and N. These are more commonly referred to as Medigap Plans or Supplement Plans.  These plans are run by private insurance companies and have separate premium payments. These plans are important and useful, because they cover services Medicare doesn’t cover, such as vision and dental care, long term care (such as a nursing home), Part A/B deductibles, foreign travel, and more. Crucially, Medigap plans cover only one person, so if you are married each spouse must purchase their own plan. You cannot buy, and do not need, Medigap plans if you are currently covered by a Medicare Advantage (Part C) plan.

The Cost 

If you have had a health insurance policy at any point in the last few decades, you’ll be familiar with the varying ways in which you will pay for health care. At a basic level, your out-of-pocket costs are broken down into a few buckets: premiums, deductibles, copay and co-insurance. This one-minute video from health insurance company Aetna does a good job of explaining those terms. To keep this blog somewhat shorter, we’ll only discuss the monthly premiums and related items.

Each part of Medicare has its own cost structure. For Part A, the hospital insurance, most people have a $0 monthly premium because they (or their spouse) paid Medicare taxes for at least 10 years while working.  This is the same 10 years, or 40 quarters, needed to receive Social Security benefits. If you (or your spouse) have earned between 30 and 39 Social Security credits, your Part A premium will be $274/month. If you (or your spouse) have earned fewer than 30 Social Security credits, your Part A premium will be $499/month.

For Part B, the standard premium is about $170/month, though this amount can be adjusted upwards significantly due to “late enrollment penalties” and income-based adjustments. Both of those topics will be discussed in a separate blog post.

Part D monthly premiums depend entirely on which plan you sign up for. As mentioned earlier, Part D drug coverage can be purchased as a standalone policy or bundled with other coverage. A recent plan comparison search for standalone plans in North Texas showed monthly premiums ranging from $6 to $108 for 2023.

Medicare Guide 

We covered some of the basics of an often misunderstood but very important government program in this Medicare guide. We discussed how and when you can get into Medicare, what Medicare covers, and we looked at some of the potential out-of-pocket costs for Medicare. In the forthcoming Medicare Guide part two, we will review how your annual income and employment situation can affect Medicare, among other things.

At BentOak Capital, we have employees on staff who have significant experience discussing the ins and outs of Medicare. We also work with a number of insurance and Medicare experts who can answer questions and help you get enrolled with an appropriate plan. Please contact us if you want to know more.