Understanding Medicare Understanding Medicare is easier said than done. Every year you receive a Medicare & You Handbook in the mail, full of terms you’ve probably never heard before. Not only that, but you get tons of mail trying to gain your interest. How do you know which mail should go in your “KEEP” pile and which mail to throw away? Medicare can feel a little scary when it’s entirely new to us. Historically, most people spent their lives working for an employer who selected the insurance plan for his/her employees. An employee would go to an annual benefits meeting and sign up for the plan that was chosen. Once a person ages into Medicare at 65, he or she is typically clueless about Medicare and its dozens of plan options. Perhaps you are new to Medicare, and it will be your primary insurance. Maybe you are still working and not even sure if you need Medicare, but you want to make sure you don’t unknowingly get a late enrollment penalty. One thing is for certain: if you feel lost, you are not alone in not understanding Medicare! 1) Understanding Medicare Basics First Who can get Medicare? If you are at least 65 in America including permanent residents who have lived here at least 5 years, you can get Medicare. People who have qualified for 24 months of Social Security disability also become eligible. For people aging into Medicare at 65, it doesn’t matter if you are taking Social Security benefits yet. Once you’ve confirmed that you qualify for Medicare, start with the basics. People get confused when jumping right into figuring out Medigap plans and Medicare Advantage plans before they even understand how their Original Medicare benefits work. That’s putting the cart before the horse, so let’s set that aside for now. Before you worry about all that, I want you to first familiarize yourself with the Medicare basics. Your Original Medicare consists of Part A and Part B. These are provided to you by the federal government…in fact, you will enroll in these two parts (and only these two parts) through the Social Security office. Anything in your mailbox that comes from the Social Security office or the Centers for Medicare & Medicaid Services is mail you want to keep, so don’t throw away that Medicare & You Handbook! The Parts of Medicare Medicare itself has PARTS (not plans). Part A is your Hospital Coverage. This coverage pays for your room and board in the hospital or in a skilled nursing facility. Part B is your Outpatient Coverage. This includes pretty much everything else: doctor visits, equipment, lab-work, surgeries, durable medical equipment, diagnostic tests, etc. Part D is your drug coverage. This is a pharmacy card which will allow you to purchase your prescriptions at a much lower price than retail. It is insurance you buy for present AND future medication needs. It’s pretty important to have unless you can afford to pay for all your medications out of pocket. You are eligible for these 3 parts of Medicare on the first day of the month in which you turn 65 (or earlier if you have qualified for Medicare due to disability). Once you understand these 3 basic parts, you are well on your way to understanding your Medicare Options. 2) Understanding Medicare Costs for these Parts Alright, so we know you are eligible for the 3 parts of Medicare at age 65. Now you’ll need to know what you can expect to pay for each of these parts. This is especially important if you are deciding whether to stay working past age 65 for an employer who offers health benefits or whether you will retire and go onto Medicare as your primary insurance. Medicare Part A is free for most people, as long as you or your spouse worked at least 10 years in the United States (You will often see this requirement written as 40 quarters). Costs for Part B Medicare Part B depends on your income. People new to Medicare 2020 have a base rate projected to be $144.30/month. However, people in higher income brackets will pay an “Income Adjustment.” Really that’s just a fancy government term for explaining that people who earn higher incomes pay higher costs for Medicare. (As soon as CMS announces 2020 Part B costs, I will update this article). Understanding Medicare Costs: Your Part B premium is based on your income from 2 years prior. Social Security bases your income adjustment on your income as reported on your tax returns. They are usually looking at your income tax return from two years prior to now. If your income has decreased since then, you can file a reconsideration request. You’ll present proof of your lower income and ask Social Security to lower your Part B premium. They will reconsider your premium and notify you if it can be lowered. Once Social Security has determined what you’ll pay based on your income, they will deduct your Part B premiums from your monthly income benefits. If you have delayed enrollment into your Social Security income benefits, then they will invoice you for Part B on a quarterly basis
