By Frankie Merritt, HIA, LTCP, CLTC.
Trying to understand the basics of Medicare can give you a headache, and even experienced Medicare recipients may have questions about their coverage. In this article, I’ll try to answer the most common questions I hear about Medicare. I’ll break down:
- How does Medicare work?
- What are the four parts of Medicare and what do they cover?
- How much does Medicare cost?
- What does Medicare not cover?
- How is Medicare funded?
- …And more!
What Is Medicare?
Simply put, Medicare is federal health insurance for people 65 or older or have been on Social Security Disability for 24 months. It was created to help people who fall into one of those groups cover their hospital, medical, and other health care bills.
How Does Medicare Work?
Medicare is made up of four parts that cover different healthcare expenses: Part A, Part B, Part C, and Part D. Part A and Part B are also referred to as “Original Medicare,” because they were established first. You may also hear Part C referred to as “Medicare Advantage.”
Medicare Part A: Hospital Insurance
Medicare Part A provides coverage for:
- Hospital inpatient care
- Recovery care in a skilled nursing facility
- Hospice care
- Limited home health care
How Much Does Medicare Part A Cost?
Your out-of-pocket costs for Medicare Part A include a benefit-period deductible, which is $1,556 in 2022.1
According to Medicare.gov, most people don’t have to pay a monthly premium for Medicare Part A.2 Whether or not you’ll need to pay monthly premiums for Medicare Part A depends on how long you or your spouse were in the workforce, and how much either of you paid in Medicare taxes. If you’ve been employed and paid Medicare taxes for ten years or more, your monthly premium is free.
Medicare Part B: Medical Insurance
Medicare Part B provides coverage for:
- Services from doctors and health care professionals
- Preventative care including screenings, shots, vaccines, and wellness visits
- Outpatient care
- Home health services
- Wheelchairs, walkers, hospital beds, and other necessary durable medical equipment (DME)
How Much Does Medicare Part B Cost?
Your out-of-pocket costs for Medicare Part A include a benefit-period deductible, which is $1,556 in 2022.3 You will also need to use coinsurance or pay for services that exceed the amount allowed by Medicare.
According to Medicare.gov, the standard Part B premium is around $170—but could be higher based on your income.4
Medicare Part C: Medicare Advantage
Medicare Part C includes:
- Provisions and services included in Parts A and B
- Usually the prescription drug coverage covered by Part D (below)
- Usually additional benefits such as vision, dental, and hearing services
- Possibly lower out-of-pocket costs
How Much Does Medicare Part C Cost?
The costs for Medicare Part C vary based on many factors. You can start to compare costs for your Part C plan by entering your zip code here.
Medicare Part D: Prescription Drug Coverage
Medicare Part D provides coverage for a wide range of prescription drugs. It can also help you save money on insulin each month.
How Much Does Medicare Part D Cost?
According to Medicare.gov, your actual drug costs will vary depending on things like:5
- Your prescriptions and whether they’re on your plan’s list of covered drugs
- What “tier” the drug is in
- Which pharmacy you use
The premium for Medicare Part D is dependent on your level of income.6
How Is Medicare Funded?
For your entire time in the workforce you may have seen a line on your pay stub that says, “Medicare,” with a dollar amount next to it. That money helps fund the program, but it’s not the only source of funding.
The Medicare program is paid for by several different sources, including: income taxes, self-employment taxes, general revenues, and premiums paid by those enrolled in the program.
The Centers for Medicare & Medicaid Services (CMS) is a federal agency that runs the Medicare Program. CMS is under the U.S. Department of Health and Human Services.
What Does Medicare Not Cover?
With Medicare Part A and Part B, there will be some significant gaps in your healthcare coverage. For example, Medicare Part A and Medicare Part B won’t cover:
- Co-pays and deductibles
- Long-term care
- Prescription drugs*
- Most dental exams
- Eye exams related to prescribing glasses
- Cosmetic surgery
- Hearing aids
- Routine foot exams
*To get coverage for your prescriptions, you can sign up for Medicare Part D.
Now, Medicare Part C and Part D—aka Medicare Advantage—make up for some of these gaps. However, an April report from the Inspector General’s Office revealed that people enrolled in Advantage may still be denied certain coverage. You can read more on that here.
Who Can Help Me Choose a Medicare Plan?
Choosing the right plan for you can be complicated, confusing, and stressful. After all, the plan that worked best for you last year may not be the best choice for the year ahead. Your doctors or drugs may have changed. Or the Medicare rules may have changed.
Whatever the case, it’s a good idea to have someone on your team who’s well-versed in the nitty gritty details of not only the Medicare program, but your unique healthcare situation. A healthcare specialist, like myself, can help.
If you’re in Tennessee, I can help you make the right choices about Medicare. I’ve walked hundreds of seniors just like you through this process. I hold licenses for insurance in the areas of life, health, disability, and long-term care, among others.
A healthcare specialist can help answer questions like:
- Which Medicare plan is the best fit for you?
- How will rising healthcare costs affect you in retirement?
- Will you have long-term care expenses?
- Do you have adequate life insurance coverage?
When Is the Best Time to Sign Up for Medicare?
If you’re already enrolled in Medicare, the Annual Enrollment Period is October 15 – December 7. This is your opportunity to switch your plan and make changes if you wish.
If you’re not enrolled yet, but you’re approaching your 65th birthday, it’s time to start the process. In fact, you’ve probably started getting an avalanche of Medicare-related advertisements in the mail. They all scream different messages: Buy this plan! Get that plan! Sign up today!
When you first become eligible for Medicare, you have seven months to complete initial enrollment. That period begins three months before the month you turn 65, runs through your birthday month, and ends three months after the month you turn 65. For example, if your birthday is April 23, your enrollment period begins in January and ends in July.
Once you’ve enrolled, coverage starts the first day of the next month. If you miss the enrollment deadline when you’re first eligible, you’ll pay a late enrollment penalty. For more information on the ins and outs of your enrollment period, download our free Medicare Solutions Guide below.
Get our FREE Medicare Solutions Guide:This PDF will answer a variety of questions, including: ∙ How much will premiums cost? ∙ Will I still be able to see my doctor? ∙ Which part covers what services, and why am I paying separately for them?
How Do I Enroll in Medicare?
For Medicare Part A and Medicare Part B, you can enroll through the Social Security Administration online here.
For Medicare Part C and Part D—also known as Medicare Advantage—you’ll need to sign up through a private insurance company or healthcare specialist like myself.
How Does Medicare Work in My Overall Retirement Plan?
Here at Beacon Capital Management, we understand that healthcare is a critical pillar of your retirement plan. Let us help you make sense of Medicare and find the option that fits best with your overall financial plan. Schedule a one-on-one appointment with us today!
1, 2, 3, 4 Medicare.gov. 2022. “Medicare costs at a glance.” https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance. Accessed June 13, 2022.
5, 6 Medicare.gov. 2022. “Costs for Medicare drug coverage.” https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage. Accessed June 13, 2022.