From the alphabet soup of plans to the donut hole, here are tips on navigating Medicare’s health care options.
Medicare is the government’s health coverage for people age 65 or older, and younger people with disabilities or certain health conditions. Today Medicare provides health insurance for 54 million Americans, a number that is expected to grow in the coming years.
If you’re approaching age 65, you may have many questions about Medicare. Here’s a guide to finding the right coverage and figuring out your costs.
What Are Medicare Parts?
Medicare has four parts: A, B, C and D. Parts A and B are also called original Medicare.
Part A covers basic inpatient hospital stays, tests, treatments and care in nursing facilities.
Part B covers outpatient medical care, including doctor visits, outpatient hospital treatment, tests and medical equipment such as crutches or canes.
The government provides parts A and B through the Medicare taxes you or your partner paid while working.
Part C is a type of optional plan, known as a Medicare Advantage Plan, which is provided by a private health insurance company, such as Humana or Aetna. You’ll have to pay an extra premium for a Medicare Advantage Plan, but in return, you’ll get coverage for services regular Medicare may not cover – such as hearing, vision, or dental care. More than 30 percent of Medicare members have a Medicare Advantage Plan. Many of these plans also include Medicare Part D prescription drug coverage. Costs and coverage with a Medicare Advantage Plan can vary, so research the benefits or consult an insurance agent before deciding on a plan.
Part D is Medicare’s prescription drug coverage plan. Everyone on Medicare is eligible for prescription drug coverage, which is provided by private insurance companies. If you’re enrolled in Medicare Parts A and B, you can just add Part D to your coverage. Or, if you’re enrolled in a Medicare Advantage (Part C) Plan, it may offer drug coverage.
How Do I Sign Up for Medicare?
Here’s how Medicare enrollment works:
- People who already receive Social Security benefits will automatically receive a Medicare card three months before their 65th birthday, and will start receiving Part A and B benefits on the first day of the month they turn 65.
- Those who are on disability will automatically start getting Medicare after they’ve been on disability for 24 months.
- If you’re 65 and still working (and not receiving Social Security benefits), or you have end-stage kidney disease, you’ll need to sign up for Medicare online, visit your local Social Security office or call the Social Security office: 800-772-1213.
- To sign up for a Medicare Part C or D plan, you can use Medicare’s Plan Finder, or call 1-800-MEDICARE (1-800-633-4227).
How Much Does Medicare Cost?
Medicare costs are broken down into premiums, deductibles, and coinsurance.
- A premium is a monthly fee you pay for coverage.
- A deductible is the amount you must pay for all health services or medicines before your insurance takes over and starts paying.
- Coinsurance is the share you must pay for each health service after you’ve paid your deductible. It’s usually expressed as a percentage (for example, 20 percent of the cost for a diagnostic test).
In 2015, Medicare costs are:
- Premium. If you or your partner paid Medicare taxes while you were working, or you’ve been getting disability payments for at least two years, you won’t pay any premium for Medicare Part A. If these conditions don’t apply to you and you have to buy Part A, you’ll pay $407 a month.
- Deductible. You’ll pay $1,260 per hospital stay for each benefit period (this period restarts once you haven’t been in a hospital for 60 days in a row).
- Coinsurance. Your portion of hospital services can range from $0 to $630, depending on how long you stay in the hospital during each benefit period.
- Premium. Most people pay $104.90 per month.
- Deductible. You’ll pay $147 a year.
- Premium, deductible and coinsurance. Your out-of-pocket costs will depend on the plan you choose. You can compare costs for the different Part C plans on the Medicare website.
Premium, deductible and coinsurance. Your costs will depend on the drug plan you choose. You can compare costs for the different Part D plans on the Medicare website.
What is the Donut Hole?
Most Medicare drug plans include a temporary coverage gap known as the donut hole. When you fall into the donut hole, you pay all out-of-pocket costs for your drugs until you reach the spending limit.
In 2015, once you and your plan pay $2,960 for the total retail cost of covered drugs, you’ll be in the donut hole. Then you’ll pay 45 percent of the cost for brand-name drugs and 65 percent of the price for generic drugs until you reached the $4,700 maximum out-of-pocket spending limit. After that, you’ll get catastrophic coverage, which means you’ll pay only a small coinsurance or copayment amount for a covered drug.
The 2010 Patient Protection and Affordable Care Act will gradually shrink the donut hole over time. By 2020, you’ll pay only 25 percent for covered brand-name and generic drugs once you’ve reached the gap. For more information on the drug coverage gap, go to Medicare.gov.
People with very limited financial resources may apply for a Social Security program called Medicare Extra Help. If you qualify, you’ll pay no more than $2.65 for each generic drug and $6.60 for each brand name drug (in 2015). For more information on eligibility, click here.
If you have traditional Medicare coverage but need treatments or services that aren’t covered, you may purchase supplemental insurance policies called Medigap plans. Private insurers sell Medigap policies, which are termed “Medicare Supplemental Insurance.” These policies help with some of the costs original Medicare doesn’t cover, such as copayments and deductibles.
What If I Don’t Want Medicare?
Even if you’re eligible, you don’t have to use Medicare. If you or your spouse is still working full-time at 65 and insured by an employer’s group plan, you can stay on that policy. “Typically, group insurance prescription drug coverage is better,” says Suzy Alberts, a health underwriter in Detroit. Medicare plans have copayments and a coverage gap for drug costs. “Some drugs for arthritis, such as Enbrel, are very expensive. So people need to understand their prescription drug plan.”
However, Cathy Daugherty, a health underwriter in Irvine, Calif., highly recommends that people who are turning 65 get on Medicare. “Some people put this off for different reasons, but there could be some lesser benefits in the future. Once you lock in your benefits, you are set,” she says. If you do decide to enroll, do so during one of Medicare’s set enrollment periods. Otherwise, you could pay higher premiums.
To get more information on your Medicare options, visit these resources:
Center’s for Medicare & Medicaid Services’ free publication Medicare & You
The U.S government’s health care information site
The American Association of Retired Persons (AARP) Medicare Starter Kit