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Medicare Basics

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  • Medicare Basics
    Welcome

    Whether you're new to Medicare or you're looking for a refresher on the basics, you've come to the right place.

    For the next 7-10 minutes, we'll cover what Medicare is, the costs associated with coverage, and how you can sign up.

    Click the arrow to the right to get started

  • WHAT IS MEDICARE?

    Medicare is a federal health insurance program created for individuals age 65 and older, as well as individuals with certain medical conditions or disabilities.

    Medicare is made up of parts. Each part provides a different type of health care coverage. Let's take a closer look at each of these parts, starting with Original Medicare: Part A and Part B.

  • Original Medicare

    The federal government provides Part A and Part B to help cover general health care services received from a qualified health care provider (such as a doctor or a specialist).

    Note: You must be enrolled in Original Medicare before you can sign up for add-on coverage or Medicare Advantage.

    Part A is hospital insurance. It helps cover:

    • Inpatient hospital care
    • Skilled nursing facility
    • Hospice care
    • Home health care

    Part B is medical insurance. It helps cover:

    • Doctor visits
    • Ambulance services
    • Durable medical equipment

    What does it cost me?

    Original Medicare is a lot of things, but free isn't one of them. Part A and Part B each have a monthly premium, plus deductibles and coinsurance. Most people don't have to pay the Part A premium, thanks to the Medicare taxes they paid during their employment--but everyone pays the Part B premium. This amount changes yearly, varies based on income, and if you enroll late in Part B, you could face a penalty. The monthly fee you pay to be in a health insurance plan. A fixed amount you pay out of your own pocket for covered services before your Medicare coverage begins to pay your medical bills. The percentage you pay for a service you receive. Generally, you pay 20% of a covered service’s cost and Medicare pays 80%. Coinsurance usually comes into effect after you’ve met your plan’s deductible limit.

    What's not covered?

    While Original Medicare provides coverage for hospital and medical services, it doesn't cover everything.

    In general, Original Medicare pays for only 80% of covered health care costs. It's up to you to pay the remaining 20%.

    Plus, Original Medicare doesn't cover prescription drugs or other benefits such as vision, dental, or hearing services.

  • Additional Coverage

    Many choose to buy additional insurance to help cover the 20%. Some choose a Medigap plan and/or a Part D prescription drug plan, while others choose a Medicare Advantage plan.

    Let's take a closer look at additional coverage by starting with Medigap and Part D.

  • Add-on plans

    Medigap (also known as Medicare Supplement) and Part D prescription drug plans (PDP) work alongside Original Medicare. These plans are made available through private health insurance companies, although they are regulated by the government.

    In other words, you keep Original Medicare and add either (or both) of these for more comprehensive health care coverage.

    Medigap plans help pay your share of health care costs, such as copays, coinsurance, and deductibles. They also have their own monthly premium.

    Your share of the cost of a doctor's visit or prescription drug. Copays don't count toward your deductible. The percentage you pay for a service you receive. Generally, you pay 20% of a covered service’s cost and Medicare pays 80%. Coinsurance usually comes into effect after you’ve met your plan's deductible limit. A fixed amount you pay out of your own pocket for covered services before your Medicare coverage begins to pay your medical bills. The monthly fee you pay to be in a health insurance plan.

    Part D prescription drug plans (PDPs) are stand-alone plans that help pay for medications you buy from a pharmacy or through a mail-order pharmacy service.

    PDPs have their own monthly premium, plus a yearly deductible, copays, and coinsurance.

    The monthly fee you pay to be in a health insurance plan. A fixed amount you pay out of your own pocket for covered services before your Medicare coverage begins to pay your medical bills. Your share of the cost of a doctor's visit or prescription drug. Copays don't count toward your deductible. The percentage you pay for a service you receive. Generally, you pay 20% of a covered service’s cost and Medicare pays 80%. Coinsurance usually comes into effect after you’ve met your plan's deductible limit.

    While Part D is technically "optional" add-on coverage, if you sign up late for a PDP, you'll face a permanent late enrollment penalty tacked on to your premium.

    If you decide to go the path of Original Medicare plus add-on coverage, sign up for Part D as soon as you become eligible.

    What does it cost me?

    Health insurance companies set the prices for these types of coverage. Costs can be determined by things such as age, whether you use tobacco, and your location (ZIP Code).

    Original Medicare and supplemental plans aren't the only option available to you. There's one more we'll cover and that's Part C, also known as Medicare Advantage.

  • Medicare Advantage

    Health insurance companies provide Medicare Advantage plans that are regulated by the government. These plans are sometimes referred to as an "all-in-one" option. They combine Original Medicare services with benefits such as vision, dental, hearing, or prescription drug coverage.

    These plans don't replace Part A and Part B. You still need to enroll in Original Medicare before you enroll in a Medicare Advantage plan.

    What does it cost me?

    Medicare Advantage costs and coverage can differ from plan to plan. Most plans have a monthly premium (although some are as low as $0), deductibles, copays and out-of-pocket maximums. The monthly fee you pay to be in a health insurance plan. A fixed amount you pay out of your own pocket for covered services before your Medicare coverage begins to pay your medical bills. Your share of the cost of a doctor’s visit or prescription drug. Copays don’t count toward your deductible. The total amount you have to pay out of your own pocket each year before Medicare coverage pays 100% of your covered services. Original Medicare (Part A & Part B) doesn’t have an out-of-pocket maximum, but some Medigap plans and most Medicare Advantage plans do.

    With a Medicare Advantage plan, you still have to pay your monthly Part B premium.

  • Choosing additional coverage

    While Medigap/Part D and Medicare Advantage help pay the health care costs Original Medicare doesn't cover, they differ quite a bit.

    We'll explain some of these differences to help you understand which Medicare coverage might be your best match.

    Choosing add-on plans means:

    Add-On Plans (Medigap/Part D)
    • Separate monthly premiums for Medigap and Part D
    • Limited out-of-pocket costs for hospital and medical care
    • No network restrictions seeing a doctor or going to the hospital
    • Extra benefits (dental, vision, hearing, etc.) purchased separately

    These may be good for those who:

    • Are comfortable paying higher monthly premiums in order to limit out-of-pocket spending on health care
    • Want the freedom to access doctors/hospitals throughout the US
    • Can afford to buy extra benefits separately

    Picking a Medicare Advantage plan means:

    Medicare Advantage
    • Premiums as low as $0
    • A maximum out-of-pocket limit for hospital and medical care
    • Network restrictions for seeing doctors or going to the hospital
    • Prescription drug coverage and extra benefits are often included

    These may be good for those who:

    • Want a lower monthly premium and are comfortable paying copays and deductibles for health care services
    • Are comfortable seeking care within a defined provider network
    • Want prescription drug coverage and extra benefits (dental, vision, hearing, etc.) included
  • Enrollment

    Let’s move on to another important topic: how (and when) you should sign up for Medicare.

    Most people become eligible to sign up for Medicare 3 months before and 3 months after their 65th birthday. As you near 65, you should ask yourself "Do I need Medicare coverage right now?"

    Some individuals may still have health insurance through an employer and want to continue that coverage. Others may be coming off their health insurance and need to switch to Medicare.

    If you plan to make Medicare your primary source of health insurance, you should enroll in Part A and Part B as soon as you become eligible and start considering the additional options we've covered.

    We recommend you contact Social Security to enroll in Part A and Part B and determine how you'll pay for it (usually the premiums are deducted from your Social Security check, although direct bill is another option).

  • Learn more about Medicare

    Now that you've explored the basics, we recommend these resources for a deeper dive into Medicare:

    Make your Medicare decisions with confidence.

    How signing up on time can save you money in the long run.

    The official reference website for all things Medicare.

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