Are you getting up in years, facing rising health insurance premiums, and looking forward to the day when you'll be covered by Medicare?
If you are, it's important to know the facts about this benefits program because Medicare isn't always the panacea many people believe it to be -- and it's best to be prepared for the realities.
Fortunately, you can find out five of the most fundamental facts about Medicare right here.
1. Medicare isn't just one kind of insurance
Often, you'll hear people say they can't wait to be covered by Medicare. But what does this mean exactly? The government doesn't just act like a big insurance company and offer a comprehensive policy called Medicare.
Instead, seniors have the option to buy traditional Medicare, often supplemented by a Medigap policy, or to buy Medicare Advantage. If you opt for traditional Medicare, you'll actually get coverage through three different programs:
- Medicare Part A, which covers inpatient hospital treatments
- Medicare Part B, which covers routine outpatient care such as doctor's visits
- Medicare Part D, which covers prescription drugs.
Medicare Part C is the name given to Medicare Advantage plans, which are plans administered by private insurers. These plans replace -- and provide similar coverage to -- Medicare Parts A and B.
Finally, optional Medigap plans are often purchased to provide more comprehensive coverage.
2. You have to pay premiums for Medicare
Many people think Medicare is "free" medical insurance, but in actuality you have to pay premiums for Medicare Part B, Medigap Plans, and Medicare Advantage.
For Medicare Part B premiums, the government establishes costs based on income. For 2018, you'll pay $134 as a standard premium for Medicare Part B. If your income exceeds $85,000 as a single or $170,000 if you file joint tax returns, you'll pay a higher premium.
For many seniors, Medicare premiums are paid out of Social Security benefits. A hold-harmless provision is in place, so if Medicare premiums rise more than your annual Social Security cost-of-living adjustment (COLA), your premium increase is capped.
If your COLA adjustment would raise monthly Social Security income by, say, $50 but there's a $60-per-month Medicare premium increase, you'd pay only $50 of the increase. You'll lose your entire Social Security raise to the higher premiums -- but no more.
If you're paying less than the standard premium thanks to the hold-harmless provision and get a bigger COLA in later years, premiums jump up until you're back to paying the full amount.
For Medicare Parts C and D, as well as for Medigap plans, premiums vary depending on your plan choice.
3. There are deductibles and coinsurance costs
If you're expecting Medicare to cover everything you need as a senior, you're going to be in for a nasty surprise.
- Medicare Part A has a $1,340 deductible for inpatient services per benefit period. If you're in a covered care facility for more than 60 days, you also need to pay a daily coinsurance cost starting at $335 per day and -- after 90 days -- rising to $670 per lifetime reserve day. If you exceed your lifetime reserve, you must pay all costs.
- Medicare Part B has a $183 annual deductible as of 2018, and you pay 20% of the Medicare-approved amount for medical care, including doctor's visits and durable medical equipment.
- For Medicare Part C and Part D, deductibles and coinsurance costs vary by plan.
Medicaid can provide help in covering premiums and coinsurance costs for some lower-income seniors.
4. If you sign up late, you might owe a penalty
Most people become eligible for Medicare when they turn 65. If you're receiving Social Security benefits already, you're typically auto-enrolled. If you aren't, you'll need to enroll online at www.SocialSecurity.gov, at your local Social Security office, or via phone at 800-772-1213.
You can sign up for Medicare Part A at any time after you become eligible, and the start date of coverage is determined based on when you submit your benefits application. However, you generally must sign up for Part B during a specific seven-month period that covers:
- Three months before the month in which you turn 65
- The month you turn 65, although you could experience a coverage gap as you will not be covered immediately
- Three months following the month you turn 65
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