Learning the In-Betweens of Medicare

Medicare has come a long way since it was first introduced as a federal social insurance program in 1965. The United States has spent $640 billion on the program in 2015 and more changes are being implemented to provide better services to its beneficiaries.Doctor with a stethoscope

Now, if you’re planning your retirement, one of the first things that you need to tackle is Medicare. But with the complexities of the program, it’s so easy to get lost in Medicare plans, premiums and additional costs. To make things a little less stressful, here are some of the most important things you need to learn about how Medicare works:

  • Medicare Plans are divided into four parts.

Part A covers medical care in a hospital, nursing facility, nursing home, hospice, and other types of home health services. Part B pays for the services or supplies needed to diagnose your medical condition. This includes outpatient services, doctor’s visits and some limited outpatient prescription drugs. It may also cover preventive services for certain illnesses like the flu.

Medicare Advantage or Part C are offered by private insurance companies and comes in two varieties: PPO and HMO plans. They offer extra coverage such as dental, vision, hearing aids and other wellness services. Part D, on the other hand, covers prescription drugs from a formulary. Medicare prescription plans have their own list and are priced differently according to their tiers.

  • You need to enroll within a specified period.

Initial enrollment for Medicare begins three months before your 65th birthday and ends three months after your birthday month. If you fail to sign up during this seven-month window, you can enroll from January 1 to March 31 and your coverage will begin on July 1. Failure to enroll in the initial period, however, may result to permanently higher premiums.

You are automatically enrolled to Parts A and B if you have Social Security benefits. You can choose to get rid of Part B, however, if you don’t want to pay extra. If you have group health insurance due to employment, you may delay enrollment. But make sure that you sign up within eight months after your coverage has expired or you will be penalized.

You can take advantage of the open enrollment period for Medicare Advantage and Part D every October 15 to December 7 each year. You can also switch to traditional Medicare from a Medicare Advantage plan during the disenrollment period from January 1 to February 14.

  • You need to pay Medicare premiums.

Here’s the truth: Medicare is not entirely free. While you can take advantage of Part A after ten years of paying for Medicare payroll taxes, you still need to pay a standard premium of $134 a month for Part B and $35 a month for Part D.

In addition, you will need to pay for a deductible of $183 for Part B and $1,340 for Part A for each benefit period if you are hospitalized. Additional costs also apply for hospitalization lasting more than 60 days.

  • You have the option to enroll in Medigap.

Depending on your plan and medical condition, you may have to spend extra for deductibles, co-payments and other out-of-pocket expenses. And since you can’t predict Medicare costs, one of the best ways to get more security is through a Medigap plan. With 10 standardized policies, Medigap offers a good variety of options to help cover the extra costs of traditional Medicare. The only catch is, Medigap plans don’t cover prescription drugs, so you may need Part D if you choose to purchase one.

With all this information, sorting out the right sign-up options may prove to be very confusing, but you need to choose plans that will suit your needs best. Most people sign up for Parts A, B and D, and some add Medigap policies for extra coverage. Others choose Medicare Advantage over Parts A, B and D. If you decide on this option, however, you need to make sure that your MA plan covers drug prescription or you might need to add Part D in your coverage.

To make the best decision, try to specify your health situation, do more research and ask advice from people who know Medicare well.