Medicare 101: Understanding the Basics

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Medicare….what is Medicare all about? Some common thoughts are that:

  • it is basic health insurance for those over 65
  • it is run by the federal agency Dept. of Health and Human Services (HHS)
  • it has several parts–Part A, Part B, Part C, and Part D

All of the above are true, but it is a bit more complicated. For those of us who are closer to retirement age, now is the time to find out what you need to know about Medicare so that common mistakes can be avoided and the right choices can be made. Continue reading so you will not be in the dark in regards to how Medicare works.

Medicare’s Puzzle Pieces

Before discussing the common misconceptions about medicare, I want to give you a brief description about the 4 components (parts) that make up the total Medicare package.

Medicare

Part A

This portion of Medicare is the one that pays for hospital stays, skilled nursing facilities, and hospice stays. Monthly premiums are not required as long as sufficient funds were paid through Medicare payroll taxes. Otherwise, Part A premiums can be purchased with monthly premiums.

Part B

This portion helps pay for doctors’ services both inpatient and outpatient as well as lab services, medical equipment and supplies. You must pay monthly premiums for Part B unless your income qualifies you for state assistance. Medicare usually pays 80% of the cost while you pay for 20%, unless you have supplemental insurance which covers these expenses.

Part C

This portion provides an alternative way to receive Medicare services. The services are provided through Medicare Advantage, which is run by private managed-care plans such as HMO’s and PPO’s.  These plans are required to cover the same services as the traditional Medicare (Parts A and B), but charge lower copayments. Some of these plans may also offer prescription drug coverage (Part D) as well as dental, vision, and hearing care. However, Medicare Advantage plans may restrict your choice of doctors and other providers by requiring higher copayments if you choose providers that are out of network.

Part D

This portion pays for your prescription drugs that are for home use. This coverage can be received in one of two ways:

  • by joining a private stand-alone Part D plan for an additional monthly premium if you are enrolled in the traditional Medicare plan, or
  • by joining a Medicare Advantage plan that includes Part D coverage in its benefits package

 

Common Misconceptions Regarding Medicare Enrollment

As our population is aging, Medicare enrollment will become (if it isn’t already) important for hundreds of people to know how and when to enroll. The problem is that many people who have already enrolled in Medicare end up either paying more than they should, or in some cases forced to go without coverage for several months– simply because they did not know all of the rules regarding Medicare.  Here are some common myths and misconceptions about Medicare and what can be done to avoid any problems down the road.

red circle signMyth #1: You don’t qualify if you have not worked long enough

40 credits (equivalent to 10 years of work) are needed to get Part A coverage without having to pay any  premiums.  You earn the 40 credits through payroll taxes from work instead. Work credits are not needed for Parts B and D coverage. However, you need to be age 65 or older AND a US citizen or legal resident who has lived in the US for at least 5 years. In addition, you can also qualify for Part A on your spouse’s work record, or you can choose to pay the premiums. If you decide to wait until you have 40 credits before signing up for Medicare, you may end up paying permanent late penalties.

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Myth #2: Failing to enroll in Part B at the right time

It is very important that you sign up for Part B at the right time because if you do not, you may end up paying late penalties in the form of surcharges on your premiums for all future years. Coverage can also be delayed for several months before becoming active. However, you may delay–without penalty–signing up for Part B if you are still working after age 65 for an employer that is providing health benefits. Otherwise, the critical time to sign up for Part B is during your seven-month initial enrollment period–this includes the month you turn 65 years old, 3 months before and 3 months after.

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Myth #3: Medicare Part B is not needed if you have either COBRA health or retiree coverage

Remember that Part B is optional; you do not have to enroll. However, you should check your retiree plan to see how it fits in with Medicare. In other words, your plan may have Medicare listed automatically as the primary coverage and the plan may also pay for a few other services that Medicare does not cover. If you have a plan like this and fail to sign up for Part B when you are required to, then you will not have Part B coverage. COBRA allows you to continue receiving health benefits from your former employer for 18 months after your job ends. As soon as you are no longer working, COBRA coverage does not allow you to delay Part B enrollment without incurring late penalties. Therefore, you should sign up for Part B before the end of your initial enrollment period at age 65 (if your job ended after that period) or no later than 8 months after you stopped working.

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Myth#4: You must wait until you reach full retirement age to sign up for Medicare

Full retirement age for most people is 66. However, this will increase to 67 for those who were born after 1959. To avoid being charged late penalti es, you should sign up for Medicare at age 65, unless you are still working and are covered by your employer’s health plan or your spouse’s current place of employment. It is not necessary to wait until you actually retire and start collecting Social Security before enrolling in Medicare.

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Myth #5: Part D is not necessary if you are not taking any prescription drugs

That may be true today, but what about tomorrow? Next week or next year? How do you know that in the future you won’t be afflicted with an illness that requires an expensive drug for treatment? As with any insurance, it is best to get it when you don’t need it. Otherwise, Part D does not allow you to sign up for it when the need becomes urgent without incurring late penalty fees being added to the premiums–unless you have creditable coverage elsewhere (such as retiree benefits) that Medicare considers comparable to what Part D covers. If you do not have retiree benefit coverage, the best solution would be to choose a plan with the lowest premium so you will be covered with the least cost. Bottom line–it’s better to be safe than sorry.

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Myth #6: You can only enroll during “open enrollment” periods

You might have heard several times the phrase “open enrollment” for Medicare and assume that this is the only time that you can enroll in Medicare for the first time. Not true–this enrollment period ( Oct. 15th to Dec. 7th each year) only applies to those who are already enrolled in Medicare and wish to change their coverage for the following year. First time Medicare enrollees have their own separate enrollment periods:

  • around the time you reach age 65
  • throughout the time you have health coverage from either your employer or your spouse’s employer
  • eight months after your employment ends

Waiting for open enrollment will increase the risk of incurring delayed coverage and permanent late penalties. There are some special circumstances where there are different enrollment periods for those who qualify for Medicare due to disability or for legal immigrants.

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Myth#7: Choosing a Part D plan just because of its premium or it’s what other people chose

The best way to select the best Part D plan is according to what specific prescription drugs you are taking. You must be aware that not all Part D plans cover all drugs and the copays can vary widely among plans even for the same drugs. Go to medicare.gov website’s plan finder program to compare the coverage and costs for Part D plans. Or you can call Medicare at 1-800-633-4227.

Summary

It is my sincere hope that whether or not you either already have Medicare or are ready to enroll in Medicare, you now have more information at your fingertips to make the best decisions. Having as much information as you possibly can is the best offense in terms of making wise choices regarding Medicare. However, don’t become a victim of “analysis paralysis” when you gather so much information that you end up confusing yourself to the point that you end up doing nothing. Remember, you can always go to the following websites for assistance:

Medicare-SSA

Medicare.org

Source: “Medicare Mistakes” by Patricia Barry, AARP Bulletin/Real Possibilities, April 2016, Vol. 57, No.3, pp.16-17.
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8 thoughts on “Medicare 101: Understanding the Basics

  1. Adam The Aspirational Vegan says:

    For someone outside of the states seeing stuff about your medical system is so confusing. I’m so grateful to have the free healthcare that I have over in the UK.

    I spent a few weeks in Florida a couple of months back and a friend had to have surgery… so confusing and scary to see the costs mount up if you don’t have a plan.

    • Deidre says:

      Hi Adam,

      Thanks for commenting.

      Yes, you are definitely lucky to have free healthcare in the UK; I wish the US could also provide the same. I think this should be done in the US but some issues would have to be resolved first, such as having everyone (doctors, hospitals, pharmaceutical companies,etc.) agree to it. Also, how would it be distributed fairly to everyone so that there is no discrimination regardless of race, gender or immigration status? Until the government figures this out, healthcare will continue to be costly for US citizens. By the way, exactly how is free healthcare provided in the UK? Who actually pays for the costs?

      Deidre

  2. JoW says:

    Hi Ladyluck2013! This was a most informative, well written, and engaging site! Your grammar and spelling were excellent, as well as the organization of the information you conveyed. You had me the whole length of the page and I understood what you wrote. I can see where you would get traffic on this page as the baby boomers come into the age for Medicare. I actually am going to use some of the information for my husband! Thank you for the good read, and I look forward to reading on in your site.

    • Deidre says:

      Hi JoW,

      Thank you! I really appreciate your kind comments regarding my article. I am glad that I was able to provide information that is useful. It remains to be seen how much traffic I get to this page as I am still working on getting traffic in general to my blog. Best of luck to you always.

      Deidre

  3. Garrick Breaux says:

    I was blown away with your information on this article. Great set up to lead your guest into the meat of your topic of Medicare.

    These subjects are very new to me as far as understanding how Medicare work. I really did not know any of these things.

    All of the myths are pretty much what most people think when it comes to Medicare.

    Again thanks for clear up these misconceptions for me as well as your other visitors.

    I will definitely like and share with my social media network.

    • Deidre says:

      Hi Garrick,

      I am glad that I was able to provide important information regarding Medicare that you found useful. When I receive comments such as yours, it makes me feel glad that I was able to clear up basic misconceptions about Medicare–this was my sole purpose for writing this article. I learned a lot myself while writing this article. Thank you also for sharing this with your social media network.

      Deidre

  4. renan says:

    Hi Deidre,
    Thank you very much Deidre, excellent information about the myths of medicare that already have almost become a truth, due to misinformation acquired over time.
    Do I have to hire any medicare plans through private companies or have to be through the government service? Are these state plans we have to compulsorily hire?
    renan

    • Deidre says:

      Hi renan,

      Thanks renan for commenting on my article. To answer your questions in regards to hiring Medicare plans through either private companies or government service, I am not sure. I would suggest that you go to the website links I listed at the end of my article to get the answer. Or, you can call the Medicare hotline at 1-800-633-4227. Hopefully they will provide the answer to your questions. Have a great day,

      Deidre

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