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Medicare is a government-run program primarily designed to provide health insurance to individuals who have reached the age of 65, though it also supports younger individuals who have qualifying disabilities. Its purpose is to ensure access to healthcare coverage for eligible participants, referred to as beneficiaries, without considering their income level, health condition, or prior medical history.

As of 2020, the program served more than 62 million Americans, with approximately 54 million of them being seniors. It’s important to note that Medicare is different from Medicaid, which is a joint initiative of the state and federal government that assists individuals with low income and limited financial resources in covering healthcare expenses.

Traditional Medicare includes two main components, commonly referred to as Original Medicare.

Part A – Hospital Insurance

Generally, Medicare Part A helps with the costs of care you receive when you are admitted officially to a hospital as an inpatient, or when you are admitted to a skilled nursing facility after a related hospital stay, as long as the care is deemed medically necessary. It’s important to note that Part A typically does not cover visits to the emergency room or situations where you are in the hospital for observation but haven’t been formally admitted as a patient – those expenses usually fall under Part B coverage.

If you do not qualify for Part A without a premium, you have the option to buy it, and in 2024, this could cost you up to $505 each month. Keep in mind that even if you are eligible for Part A without a monthly premium, you will still have out-of-pocket expenses like deductibles, co-pays, and coinsurance. For instance, in 2023, the initial amount a beneficiary pays out-of-pocket when admitted to a hospital as an inpatient is $1,632 per benefit period.

Part B – Medical Insurance

Medicare Part B is primarily intended to assist with the costs of medical care you receive outside of a hospital setting as an inpatient. This can encompass routine visits to your physician, trips to the emergency room, and a broad spectrum of other standard and urgent medical treatments. Furthermore, Part B aids with expenses related to long-lasting medical equipment, healthcare services provided in your home, and certain services focused on preventing illness.

The average monthly cost for Part B coverage in 2024 was $174.70. While the majority of enrollees pay this standard amount, individuals with higher incomes, as indicated on their IRS tax filings from two years prior (above $103,000 for individuals or $206,000 for those filing jointly), will be required to pay a greater monthly premium.

Aside from the monthly premium payments, beneficiaries must also meet a $240 annual deductible. Following the satisfaction of this deductible, you will generally be responsible for 20% of the amount approved by Medicare for most services covered by Part B.

It’s essential to note that not all medical expenses are covered by Original Medicare. Beneficiaries are still responsible for monthly premiums and out-of-pocket expenses like copayments, coinsurance, and deductibles.

Part C – Medicare Advantage

Beyond Original Medicare, private insurance companies offer additional Medicare options designed to either replace or enhance standard coverage.

Part C presents a comprehensive, ‘all-inclusive’ option that replaces Original Medicare. It integrates all the benefits of Part A and Part B, and often includes extra advantages such as prescription drug coverage, dental and vision care, and wellness programs. Typically structured as managed care plans, like HMOs and PPOs, Medicare Advantage has gained popularity due to these supplementary benefits not typically offered by Original Medicare.

Upon enrolling in a Medicare Advantage plan, you will need to utilize healthcare services according to that plan’s specific rules, which may include using doctors and facilities within the plan’s network to receive care.

Part D – Prescription Drugs

Medicare Part D provides assistance with the expenses related to prescription medications. This coverage is offered by private health insurance companies and is available to anyone who is eligible for either Medicare Part A or Part B. You can obtain this drug coverage as an individual Prescription Drug Plan (PDP), which works in conjunction with your Original Medicare benefits to provide supplemental coverage for medications.

Furthermore, benefits for prescription medication can also be included within a Medicare Advantage plan. These comprehensive plans, often called ‘MA-PD’ plans, bundle your medical and prescription drug coverage together.

Supplement Plans

Medigap represents a form of extra coverage marketed by private health insurers to assist with the costs that Original Medicare doesn’t fully cover. It’s important to note that Medigap policies can only be used alongside Original Medicare; you cannot enroll in a Medigap plan if you are already enrolled in a Medicare Advantage plan. The purpose of a Medigap policy is to help cover the out-of-pocket expenses, such as deductibles, copayments, and coinsurance, that you might otherwise have to pay with Original Medicare, in exchange for a monthly premium.

Medigap has 10 standardized plans. By law, these plans are consistent in their benefits. Consequently, the benefits you receive from a Plan G offered by one insurance provider will be precisely the same as those provided by a Plan G from a different insurance provider. Consequently, when choosing a Medigap plan, your decision primarily comes down to the cost of the plan and the reputation of the insurance provider.

To qualify for Medicare Part A and B upon reaching the age of 65, individuals must be a citizen of the United States and older than 65, or be a lawful permanent resident who has resided continuously within the U.S. for a minimum of 5 years.

While the majority of individuals qualify for Part A coverage without needing to pay a monthly premium, enrollment in Part B necessitates the payment of a premium by all Medicare beneficiaries. The Centers for Medicare and Medicaid Services establishes the Part B premium amount annually. The specific premium an individual pays is determined by their income as reported to the IRS from two years prior. For the year 2024, the standard monthly premium for Part B is $174.70 for individuals whose income was below $103,000 (or $206,000 for those filing jointly) based on their tax return from two years prior (the 2022 tax year).

No-Premium Part A

The majority of individuals qualify for Medicare Part A coverage without a required monthly payment. If either you or your spouse has a work history that includes at least 10 years (or 40 quarters) of paying Medicare taxes, you are entitled to receive Part A benefits without a premium. Should you or your spouse not meet this Medicare tax contribution period, you will need to pay a premium to obtain Part A coverage.

It’s important to note that even if you are eligible for premium-free Part A, you will still encounter some personal expenses in the form of deductibles, co-payments, and coinsurance responsibilities.

Typically, the monthly costs for Part B (and Part A, if applicable) are automatically subtracted from your Social Security benefits. If you are enrolled in Medicare but are not currently receiving Social Security payments, you will be invoiced for your premium on a quarterly basis.

Under 65

Individuals younger than 65 who have disabilities may also be eligible for Medicare under the following circumstances:

• Social Security Disability Insurance (SSDI) Recipients: Those who have been receiving SSDI benefits for a minimum of 24 months.
• End-Stage Renal Disease (ESRD) Patients: Individuals diagnosed with ESRD (permanent kidney failure necessitating dialysis or a transplant). Medicare benefits usually commence on day one of the fourth month of treatment
• Amyotrophic Lateral Sclerosis (ALS) Patients: For those diagnosed with ALS, Medicare benefits typically begin as soon as the individual starts receiving SSDI benefits.

Depending on your present circumstances, your enrollment in Medicare might occur automatically.

Should you be reaching the age of 65 and have been a recipient of Social Security payments for a minimum of four months leading up to your Medicare eligibility date, you will be registered automatically for Parts A and B. This coverage will commence on the first day of your birth month. If you were born on the first, your coverage will begin on the first day of the month that precedes your birthdate. Generally, your official Medicare card will be sent to you via the postal service approximately three months before you reach 65 years of age.

Conversely, if you are turning 65 and are not currently receiving Social Security benefits, it will be necessary for you to actively enroll in Medicare during your Initial Enrollment Period (further explained below) by getting in touch with the Social Security Administration. This requirement applies to all individuals who have not been receiving Social Security benefits for at least four months prior to becoming eligible for Medicare.

Furthermore, if you are under the age of 65 and qualify due to a disability, you will be automatically enrolled in both Part A and Part B after you have been receiving disability benefits through Social Security Disability Income for a period of 24 months, unless your qualifying condition is End-Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS).

How to Sign Up for Medicare?

The responsibility of handling enrollment applications for Original Medicare (Parts A and B) and managing premiums and penalties rests with the Social Security Administration (SSA).

If you are not currently receiving Social Security benefits but are automatically enrolled in Medicare, you can submit your application for Part A and B coverage through the Social Security Administration’s official website, accessible at ssa.gov/benefits/medicare.

Enrollment Periods

Initial Enrollment

Upon reaching the age of 65, you are given seven months, known as your ‘Initial Enrollment Period’, to register for Part A and/or Part B coverage.

This Initial Enrollment Period commences three months prior to the month of your 65th birthday, encompasses the month when you reach 65, and concludes three months following your 65th birthday month.

Should you enroll in Medicare Part A and/or Part B prior to the month of your 65th birthday, your coverage will take effect on the first day of your 65th birthday month. An exception to this is if your birthdate falls precisely on the first day of the month. In such cases, coverage will start on the first day of the preceding month.

Enrolling either during your birthday month or afterwards will lead to a delay in the start of your coverage, potentially extending up to three months from the date of your enrollment.

General Enrollment

If you don’t sign up for Medicare Parts A and B during your Initial Enrollment Period, there’s still a chance to enroll during the General Enrollment Period, which takes place annually from January 1 to March 31. Keep in mind that if you register during this time, your coverage will start day one of the month after your enrollment.

Other Enrollment Periods

Once your Medicare coverage has begun, it’s important to be aware of additional ‘enrollment periods’:

Yearly Election Period: Annually, Medicare’s open enrollment period occurs from October 15th to December 7th. During this timeframe, all current Medicare beneficiaries have the opportunity to freely change between different Medicare coverage options if they choose to modify or update their existing plan.

Specific Enrollment Periods: After you have enrolled in Medicare, the majority of beneficiaries will not be able to switch plans outside of the Yearly Election Period unless they encounter a ‘qualifying life event’. These qualifying events can include occurrences such as a permanent change of residence, loss of employer-sponsored coverage, retirement from employment, changes in Medicaid eligibility, or the onset of a significant chronic health condition.

When you are approaching the age of 65, it’s generally recommended to sign up for both Medicare Part A and Part B during the initial enrollment window. This proactive step can help you avoid potential late enrollment surcharges if any of the following situations pertain to you:

• Your health insurance is provided through your employer or your spouse’s employer, and that company employs fewer than 20 individuals.
• Your current coverage is through COBRA or a retiree health plan from a past job.
• You are enrolled in a personal health insurance policy, such as one obtained through the Affordable Care Act marketplace.
• You are covered by a short-term health insurance policy or have no health insurance at all.
• You are a recipient of VA health benefits.
• You have TRICARE coverage due to retirement from military service.

Typically, if the company providing your health benefits has 20 or more employees, you have the option to postpone enrolling in Medicare Part A and B without incurring any late enrollment penalties. You also have the choice to discontinue your employer-sponsored coverage and use Medicare as your primary insurer, or you can maintain both Medicare and your employer’s plan concurrently.

It’s important to understand that COBRA or other retiree health coverage offered by a former employer does not qualify you to delay Part A and B enrollment without potential penalties. To defer your enrollment without penalty, either you or your spouse must be actively employed.

Penalties for Late Enrollment

Should you opt out of enrolling in Part A and B when you initially become eligible and do not meet the criteria for delaying enrollment, you may incur late enrollment penalties if you decide to sign up for Medicare at a later date. These penalties for delayed enrollment are as follows:

Part A Penalties: If you are not eligible for premium-free Part A and choose not to purchase it during your initial enrollment period, your monthly premium could increase by 10%. Furthermore, you will be required to pay this elevated premium for a period that is double the number of eligible years but not enrolled.

Part B Penalties: If you did not enroll in Part B when you were first eligible and did not qualify for a deferral, your standard monthly premium may increase by 10% for every full 12-month period that you could have been enrolled in Part B but chose not to sign up. In the majority of cases, you will be obligated to pay this penalty each time you pay your Part B premiums, for the entire duration that you have Part B coverage.