Medicare 101: The Essential Guide to Getting Started

 

 

What is Medicare?

You might think Medicare 101 is simple enough: Medicare is a federal health insurance plan that provides medical care for people over 65, right? Well, it is — but it's also much more than that.

Modern-day Medicare has evolved quite a bit since its debut in 1965 when President Lyndon B. Johnson signed it into law as an addition to the Social Security Act. Back then, Medicare provided much-needed insurance coverage for the hospital and medical expenses of people over 65. By 1966, 19 million people had signed up.

More than a half-century later, Medicare has expanded both in what and who it covers. In addition to people over 65, Medicare also insures people with disabilities and with certain chronic health conditions. As the Kaiser Family Foundation Opens in new window reports, it now provides some 60 million people with hospital, medical and prescription drug insurance. If you're hoping to become one of them, this Medicare 101 guide is for you.

 

How does Medicare work?

Medicare is made up of different parts that, together, provide insurance coverage just like any other health plan available through an employer or on the Healthcare.gov Opens in new window marketplace. With Medicare, as with other health insurance plans, you still have premiums, copays, deductibles and coinsurance — but these costs can be much lower than what you'd pay on a private plan.

Medicare is also more piecemeal than a standard health insurance plan. Whereas a major employer-sponsored health plan may help cover the costs of hospitalization, doctor's visits or prescription medication, you have to combine different parts of Medicare to get that same coverage — which lots of people do.

That may sound like a complex game of mixing and matching, but it's easier to understand than you might think. Plus, it's divided up that way for a reason: Most people will get free premiums for Medicare Part A, so by separating the different pieces, you can better understand the costs to build the right plan for you.

 

Who's eligible for Medicare?

When Medicare began, only U.S. citizens ages 65 or older could sign up. But now, the enrollment criteria have expanded so that many more people can benefit, including:

• Noncitizen permanent residents: Green card holders ages 65 and up can get Medicare if they've lived in the U.S. for at least five years or if they've been married to a fully insured U.S. citizen or permanent resident for at least one year.
• People with disabilities: People of any age with disabilities also qualify for Medicare, as long as they've received Social Security disability benefits for at least 25 months.
• People with certain health problems: People with end-stage renal disease or Lou Gehrig's disease may be able to get Medicare benefits immediately.

 

What are the different parts of Medicare?

It can be helpful to think of Medicare as a set of puzzle pieces that fit together to create a well-rounded health insurance picture. Here are the components of Original Medicare, what President Johnson originally signed into law in the 1960s:

Medicare Part A

Known as Medicare's hospital insurance, Part A covers more than just hospitalizations; it also covers home health, hospice, mental health stays and skilled nursing facilities.

Medicare Part B

Known as Medicare's medical insurance, Part B covers both preventive health care — such as flu shots and cancer screenings — as well as medically necessary services, like seeing a doctor for a health problem. It also covers services like ambulance rides, clinical research and durable medical equipment.

Medicare Parts A and B also cover mental health, with inpatient stays covered under Part A, and family counseling, psychotherapy and psychiatry covered under Part B. You also get one free depression screening per year.

Since the start of Medicare, the government has added several more choices so that people can build the right plan for them. Two of the biggest additions include:

Medicare Part C

Also known as Medicare Advantage, Medicare Part C is a bundled plan offered through Medicare-approved private insurance companies. It combines Parts A and B into one health plan — usually a preferred provider organization (PPO) or health maintenance organization (HMO). It often includes prescription drug coverage, too. While Medicare Part C offers the same benefits as Parts A and B, there are some trade-offs, including a potentially limited choice of doctors.

Medicare Part D

Part D adds prescription drug coverage to Parts A and B. Part D is also offered through Medicare-approved companies, such as private insurers.

There are also different types of Medicare Advantage plans. These options generally make the most sense for people with special health needs or preferences for how they get and pay for health insurance. These plans include:

• Medicare private fee-for-service plan: This type of plan designates the fees it pays providers for health care services and the costs you'll pay those providers.
• Medicare special needs plan (SNP): This plan provides specialized coverage to people with specific health conditions. It might be of interest to you, for example, if you have cancer and need to see certain doctors or have certain treatments. This type of plan is only offered in some places.
• Medicare medical savings account (MSA): This is a high-deductible plan that comes with a special savings account for health care costs. It doesn't cover prescription drugs; you'd have to buy Part D to get that benefit.

You may have other Medicare coverage options, too — such as Program of All-Inclusive Care for the Elderly (PACE), special pilot plans or Medicare Cost Plans. Not everyone qualifies for these plans, and they vary based on where they operate.

 

What is Medigap?

You may have seen commercials or heard radio ads about Medigap, a type of supplemental insurance you can buy through private insurance companies. As an extra policy to help pay your portion of health care costs, Medicare supplement plans are designed to go along with Original Medicare, rather than replace it. You can't buy a Medigap plan if you have Medicare Advantage, and it doesn't include prescription drug coverage. To buy a Medigap plan, you must have Medicare Parts A and B.

 

What does Medicare not cover?

While Medicare covers many different health care services, it doesn't cover everything. Take heed if you expect to need any of these types of care:

• Long-term custodial care
• Eye exams, dental care and dentures
• Cosmetic surgery
• Acupuncture
• Hearing aids and hearing aid fitting
• Regular foot care

If you want to purchase Medicare but need any of these health care services, be sure to make financial preparations to pay for them.

 

How much does Medicare cost?

Between premiums, copays, deductibles and coinsurance, what you pay for Medicare Opens in new window depends on multiple factors. Here are the costs you can expect, from Part A to Part D.

Medicare Part A

Premiums: If you paid into Medicare taxes — such as those deducted from your paycheck — for at least 10 years, you can get Medicare Part A with zero premiums, regardless of your income. If you didn't, expect to pay up to $252 or $458 monthly in 2020, depending on how long you paid into the system.

Care: For hospitalizations and mental health stays, you'll need to pay up to a $1,364 deductible, and then pay coinsurance afterward. For hospice and skilled nursing facilities, you'll pay nothing at first, and then more as the stay gets longer. All home health is covered, except for a 20% coinsurance for durable medical equipment.

Medicare Part B

Premiums: Depending on your income, you could pay as little as $144.60 or as much as $491.60 for monthly premiums in 2020.

Care: You'll need to pay up to a $185 deductible for medical care, though certain preventive services are free Opens in new window. After you reach the deductible, expect to pay a 20% coinsurance for many types of care, like doctor's visits, as well as for durable medical equipment.

Medicare Part C

Since Medicare Part C or Medicare Advantage plans are offered through third-party companies, premiums and out-of-pocket costs can vary quite a bit from plan to plan, just as they do with traditional insurance. As you shop your options, make sure to compare premiums, deductibles and other costs.

Medicare Part D

As another plan offered through third-party insurers, Medicare Part D premiums can also vary widely. If you make $85,000 or more Opens in new window, you'll need to pay an extra cost in addition to the premium.

 

How can I sign up for Medicare?

If you aren't already receiving Social Security benefits, you'll need to sign up. Then you can enroll in Medicare Parts A and B by contacting the Social Security Administration.

To add Medicare Part D or a Medicare Advantage plan, you can shop and compare plans at the Medicare Plan Finder Opens in new window. Just keep in mind that if you have Medicare Advantage with drug coverage and you buy a separate Part D plan, you'll automatically go back to Original Medicare.

After you enroll, keep this Medicare checklist Opens in new window handy. It'll help you through your first year of Medicare, with reminders to schedule your first preventive checkup and save your Medicare card.

And of course, don't forget to prepare for out-of-pocket costs. Getting a Medigap plan can help a great deal, as can smart financial planning as you move into your golden years.

 

Footnotes

 

Bana Jobe is an Austin-based health writer and editor with more than a decade of content experience for brands, agencies and digital media. She loves turning complex concepts into empowering stories.

 

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