What Is Medicare?
Medicare is a federal health insurance program for people ages 65 and older, and aims to provide affordable and comprehensive health insurance. Medicare is also open to people younger than 65 in some circumstances, which we’ll review in more detail below. Americans appreciate Medicare because it can reduce the cost of health care. We know Medicare can seem complex, with many moving parts, so we’ve done the hard work of simplifying it for you.
Two key things to remember:
- There are two “Parts” – Part A, which is hospital insurance, and Part B, which is medical insurance. These are known as Original Medicare.
- Medicare doesn’t cover 100% of your costs – you will have to pay certain deductibles and co-insurance, which we’ll review in a moment.
Unlike other health insurance, Medicare is only available for certain people. Most people enter Medicare by turning 65, which is called “aging in”. However, you can enter at a younger age if you have certain health conditions, or if you’re disabled.
Who Is Eligible For Medicare?
There are two types of eligibility for Medicare. The first relates to your citizenship. In order to have Medicare, one of these must be true:
- You are a U.S. Citizen, or
- You’ve been a permanent legal resident for at least 5 years
The second part of eligibility has to do with when you actually enter the program and start using your benefits. Assuming you meet the citizenship or resident requirements, you’ll enter Medicare when:
- You turn 65 years old
- You receive disability income for 24 months
- You’re diagnosed with ALS (Lou Gehrig’s disease)
- You have End Stage Renal Disease (ESRD)
- When you no longer have qualifying employer or union health insurance, if you delayed Part B beyond age 65
How Do I Enter Medicare?
In many cases, your enrollment into Medicare is automatic. This will be the case if you elect to receive Social Security at or before age 65. You’ll also be automatically enrolled in these situations:
- You enter due to disability (you’ll enter on the first day of your 25th month of disability payments)
- As soon as your disability payments start, if you have ALS
- After four months of dialysis, if you have ESRD
If you don’t qualify for automatic enrollment, you’ll need to enroll manually. You can do this in a number of ways, including:
- Online at ssa.gov
- By phone
- By mail
- By fax
- In person at a Social Security office (when they re-open)
How to tell if you’re eligible
If you’re younger than 64
If you’re younger than 64, you’re eligible for Medicare if:
- You’ve received disability payments from Social Security or the Railroad Retirement Board for 24 months
- You have ESRD and you’ve received dialysis for four months (you may enter earlier in some circumstances)
- You have ALS, and you receive Social Security disability income
If you’re age 64
If you’re age 64, you’re eligible for Medicare three months before the month you turn 65 (this is the start of your Initial Election Period, or IEP).
If you’re age 65 or older
If you’re age 65 or older, you’re eligible for Medicare:
- The month you turn 65 (IEP)
- Three months after you turn 65 (end of your IEP)
- As soon as your employer or union coverage ends if you delayed Part B beyond age 65
Basics Of Medicare Coverage
Part A is known as Hospital Insurance. You can think of it like major medical coverage. If you have to stay in the hospital, this is the coverage you’ll use. Part A will cover:
- Inpatient hospital stays
- Skilled Nursing services
- Home Health
Under Medicare Part A, you’ll have out of pocket costs when you use these services, including:
- Part A deductible - $1,484 for 2021
- Hospital stay co-insurance of $371 per day for stays longer than 60 days
- Skilled Nursing co-insurance of $185.50 for days beyond 20
- Home Health
It’s important to know that there is no annual cap on your spending under Medicare Part A.
Medicare Part B is for outpatient services. You’ll use Part B for routine care that is either medically necessary or preventative in nature. You’ll use Part B for things like:
- Doctors and specialist visits
- Outpatient surgeries
- Durable medical equipment
- Some cancer treatments
Just like with Part A, you’ll have to pay a share of these costs out of pocket, including:
- Monthly premium for coverage, starting at $148.50 per month (higher for high wage earners)
- Part B deductible - $203 for 2021
- Outpatient surgeries
- 20% co-insurance
- 15% Part B excess charges
There are no annual out of pocket caps on your spending under Part B either. In fact, there is no provision in Original Medicare that will limit your spending; your costs are potentially unlimited.
Services Not Covered By Medicare Part A and B
Original Medicare provides pretty comprehensive coverage, but there are some things that aren’t covered. This includes services or procedures that aren’t medically necessary, anything cosmetic in nature, and:
- Prescription drugs, except in very limited circumstances
- Any kind of custodial or long term care
- Most vision, hearing, and dental care
- Routine foot care
- Emergency coverage outside the US, with limited exceptions
Should I Enroll When Eligible, Or Delay Medicare?
The general rule is that unless you have qualifying health insurance from another source, you should enroll in Medicare when you’re first eligible. This avoids a lapse in coverage, and also helps you avoid penalties for late enrollment.
Even if you have qualifying coverage from another source, you’ll probably want to enroll in Part A when you become eligible. Most people don’t pay an additional premium for it based on their work history so you likely have nothing to lose.
If you have qualifying coverage from an employer or through a spouse’s employer
You can delay Part B without penalty as long as your employer, or spouse’s employer, has more than 20 employees.
If you have VA or TRICARE for life
If you have VA benefits, consider enrolling in Medicare. This will give you more options for coverage.
If you have TRICARE for life, enroll in Medicare Parts A and B as soon as you’re eligible.
If You Have Retiree Health Insurance Coverage
You may want to consider adding Part B, so talk to your employer or union to determine your options.
If You Have No Other Health Insurance
Enroll in Part A and B as soon as you’re eligible.