At our meetings with our clients, we get a lot of questions about Medicare. With Medicare Open Enrollment season upon us, it’s a good time to review some basic Medicare facts. This topic has a number of complexities, so keep in mind, this is just an overview. If you have additional questions about Medicare, be sure to contact your financial planner.
What is Medicare?
Medicare is a federal health insurance program that provides health insurance to individuals and people who meet the below conditions:
- People age 65 and older regardless of medical condition
- People under age 65 with disabilities
- People with End-Stage Renal Disease
- Certain people with ALS (Lou Gehrig’s Disease)
How do you sign up for Medicare?
You are automatically enrolled in Original Medicare (more information below) when you turn 65 if you're already receiving Social Security benefits, or when you apply for Social Security benefits at age 65. In either case, the SSA will notify you that you're being enrolled.
You enroll in Medicare during one of the enrollment periods.
Enrollment Periods for Eligible Individuals
- Initial Enrollment: When you are first eligible for Medicare, you have a seven-month period to sign up. This seven-month period begins three months before your 65th birthday, includes the month you turn 65, and ends three months after you turn 65.
- General Enrollment: If you miss your Initial Enrollment Period, you can sign up between January 1st through March 31st each year. Your coverage will begin July 1st. You may have to pay a higher premium for late enrollment.
- Open Enrollment: Annual Election Period: The Annual Election Period, which is when you can change your Medicare health or prescription drug coverage, is October 15th through December 7th. Your coverage will begin January 1st of the following year.
- Special Enrollment: If you or your spouse is currently employed and you are covered by a health insurance plan through your employer, you will have a Special Enrollment Period when your coverage ends.
TIP: If you are turning 65 within the next 7 months, contact Social Security to make sure you enroll at the proper time to avoid costly penalties.
What if I am still working and have health insurance. Do I have to enroll in Medicare?
You should talk with your employer to see if they require you to sign up. If you are not required to sign up by your employer, you can delay signing up without penalty as long as you are covered by a group health plan based on current employment. In either case, you will sign up under the Special Enrollment Period.
You also have an 8-month Special Enrollment Period to sign up that starts the month after the employment ends or the group health plan insurance ends, whichever happens first. Usually, you don't pay a late enrollment penalty if you sign up during a Special Enrollment Period.
TIP: If you are currently working and turning 65, talk with your employer and social security office. You may be able to delay enrollment without penalties.
Making Sense of Medicare Terms
Most people get their Medicare coverage one of two ways:
- Original Medicare (Part A and Part B + Part D)
- Medicare Advantage (Part C - Includes hospital, medical and most include drug plans)
Your costs will vary depending on your plan, coverage, services used, and possibly your income.
Part A is Hospital Coverage, and there is no premium for most people. This covers inpatient hospital care and very minimal coverage for skilled nursing facility care, home health services and hospice.
Part B is Medical Coverage, and there is a premium as well as coinsurance and deductibles. This covers medically necessary services, outpatient hospital care, lab tests, physical therapy, ambulance service and preventive benefits. Medicare Part B also covers 100 percent of the cost of many preventative services. You may go to any provider that accepts Medicare. Medical equipment is covered here, but must be purchased through a contracted provider.
Part C, also known as Medicare Advantage Plans is an alternative to Original Medicare. They are private health-care plans that contract with Medicare to provide Part A and Part B benefits. Actually, they must cover everything Original Medicare covers except for hospice care. Most plans include drug coverage and some may offer additional benefits not covered by Original Medicare such as dental and vision.
You can choose to enroll in either Original Medicare or a Medicare Advantage plan but to be eligible for an Advantage Plan you must be enrolled in Part A & Part B. Shop your Medicare Advantage Plan annually during Open Enrollment as plans may change from year to year.
Part D is Prescription Drug Coverage, and there is a premium as well as copays and deductibles. Part D plans can only be offered by companies approved by Medicare. Plans vary in cost and specific drugs covered. It is important to shop your Part D plan annually during Open Enrollment (www.Medicare.gov) as plans may change from year to year.
TIP: Even if you are not currently on prescription drugs, you may want to join a plan if you don’t have creditable coverage. This will help avoid late enrollment penalties.
Medicare Supplemental Plans (also known as Medigap) is insurance that you buy from a private insurance company that helps cover some of the costs that Original Medicare doesn’t cover, such as copayments, coinsurance and deductibles. If you have an Advantage Plan, it is illegal for someone to sell you a Medigap Plan, so you should never have both of these. Individuals enrolled in Medicare Parts A and B are eligible.
Medicare Supplement Open Enrollment Period
This is the six-month period that starts on first day of the month that you are 65 or older and enrolled in Medicare Part B. During this time, you have the guaranteed right to buy any Medicare supplement plan that’s sold in your state, despite any pre-existing health conditions.
If you’d like to explore this area further, please contact Casey via email [email protected] or 513-598-5120.
Date Posted: 12/02/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Wealth Accumulation or Retirement Income Plan with an HCM Wealth Advisor, please give us a call at 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 23 states, and we’d love to help.
This article was co-authored with Lisa Dalga. Lisa is owner of simplified Money Matters, Putting Your Everyday Financial Affairs in Order, and volunteers with the Ohio Senior Health Insurance Information Program – OSHIIP.