Last Updated: November 2019
Turning 65? Need to understand the basics of Medicare in a clear, concise way?
This Medicare guide will help you understand your options and answer the most frequently asked questions about Medicare.
We’ll cover the following (click below to skip to a specific section):
- What is Medicare Insurance
- What Medicare Insurance Covers
- Who Needs Medicare Insurance
- What Is Medicare Supplement Insurance
- What is Medicare Advantage Insurance
- What Type of Medicare Insurance Product Is Right For You?
- How to Compare Medicare Insurance Quotes
- The Medicare Insurance Application Process
What is Medicare Insurance?
Medicare insurance is a federal health insurance program administered by the Centers for Medicare and Medicaid Services (CMS). Medicare was designed for retirees but also offers benefits to individuals with certain disabilities and medical conditions.
It is funded by a combination of employer and employee taxes, as well as general tax revenues. A person covered by Medicare care is known as a Beneficiary. Beneficiaries typically become eligible the year they turn 65, and can enroll during the month of their birthday.
Medicare Insurance helps protect seniors from the high cost of health care, and is accepted by more than 90% of doctors across the country.
Medicare is often known by it’s A to Z program letters. Medicare insurance coverage consists of:
- Part A – Inpatient Hospital and Skilled Nursing Benefits (with some restrictions)
- Part B – Outpatient Services (doctors visits, diagnostic tests, etc)
- Part B also covers infusion-based (chemotherapy) cancer treatments
- Part C – Medicare Advantage (health plans providing all the benefits of Parts A and B, but through private, non-government insurance companies)
- Part D – Prescription Drug coverage
- Medicare Supplement Insurance (not officially part of Medicare, but works in conjunction with it)
Beneficiaries generally become eligible for coverage by working for a minimum number of years, being married to an individual who worked for a minimum number of years, or a combination of both.
Beneficiaries who don’t qualify for Medicare coverage based on work history can pay for coverage at a rate that is less than private health insurance.
After your initial enrollment in Medicare, you are able to make changes to your coverage during the Annual Enrollment Period (AEP). This enrollment period runs from October to December of each year, and allows you to change your Plan effective January 1st of the next year.
You may also make changes to your coverage during Special Election Periods (SEP). These election periods arise when certain circumstances change, like moving out of a Plan’s service area, moving into a nursing home, gaining or losing Medicaid coverage, and other situations.
What Medicare Insurance Covers
Taken as a whole, Medicare Insurance covers most aspects of health care for Beneficiaries. It is a replacement for private coverage typically received from employer group or individual private health insurance.
Emergency or catastrophic types of events, leading to hospitalizations and surgeries, are covered by Medicare Part A.
Routine doctor’s visits, treatment for illnesses both mild and severe, and diagnostic testing are all covered by Medicare Part B
Parts A and B together are known as Original Medicare. Beneficiaries receiving Part A generally, though not always, have no ongoing premium payment, while they do pay a monthly premium for Part B coverage.
Original Medicare insurance, Parts A and B, feature deductibles which must be met before coverage begins. Additionally, Part B only covers 80% of outpatient service costs. Importantly, under Original Medicare there is no out of pocket maximum (OOPM).
Since most treatments for cancer are covered by Part B, and those treatments are extremely expensive, it is crucial to know that your 20% Part B co-insurance responsibility is not capped under Original Medicare, and you can be responsible for large medical bills.
Prescription drugs are not covered by Original Medicare, and Beneficiaries must either pay out of pocket for prescription medications, or enroll in a Part D Prescription Drug Plan.
Parts A and B together cover around 7,000 services and procedures, ranging from treatment for the common cold to battling aggressive cancers. It is important to note that Original Medicare doesn’t provide:
- Coverage outside the United States
- Long term care
- Routine foot care
- Most dental care
- Coverage for cosmetic procedures
In all, Medicare pays for over one billion procedures and services each year, and covers nearly 60 million Americans.
Who Needs Medicare Insurance?
The Affordable Care Act (ACA) requires every American to have health insurance. For those meeting the eligibility requirements, Medicare Insurance is a more affordable option than private insurance.
Enrollment in Medicare is often automatic for seniors, especially if they are also receiving Social Security benefits, and health care laws generally make it difficult or illegal for Medicare Beneficiaries to purchase private health insurance.
Due to the high cost of private health insurance for Americans 65 and older, and the requirements of the Affordable Care Act, seniors will find that they need Medicare Insurance.
Regardless of the requirements of the ACA, it makes sound financial sense to utilize Medicare Insurance to minimize money spent on both routine and emergency medical services.
Not everyone needs Medicare Insurance, however. If you have coverage through the VA or through an employer’s retirement package, you may not need Medicare coverage.
What Is Medicare Supplement Insurance?
Because Original Medicare (Parts A and B) require various deductibles to be met, and because Part B covers only 80% of expenses with no annual maximum, many seniors choose to purchase Medicare Supplement policies.
Supplement policies coordinate with Original Medicare by filling in the gaps (deductibles and the 20% of Part B expenses not covered by Medicare) in Parts A and B. Because of this function, they are commonly referred to as “Medigap” Plans.
Medicare Supplement Policies are provided by private insurance companies and subject to regulation by CMS and the fifty States. Supplement Insurance is offered in 11 standardized Plans, known as Plans A, B, C, D, F, High Deductible F, G, K, L, M, and N.
Each Plan (A through N) offers different levels of coverage. For example, Plan A covers 100% of Part A and B co-insurance, but doesn’t cover deductibles or skilled nursing stays. Plan F covers 100% of Parts A and B deductibles, co-insurance, skilled nursing stays, and more.
Using a Supplement Plan for Medicare Insurance has several benefits:
- You will have known Out of Pocket Maximums
- You can use any doctor that accepts Medicare, nationwide
- You may have emergency coverage outside the United States
Supplement Plans have some drawbacks as well, including:
- No Prescription Drug Coverage- You’ll also need a standalone Part D Plan
- Monthly Premiums can be high, and can increase each year
Everyone eligible for Medicare, age 65 and older, is entitled to enroll in a Supplement Plan with Guaranteed Issue Rights during their Open Enrollment Period. Your Open Enrollment Period generally lasts 6 months and begins the month you are both age 65 and enrolled in Part B.
The law prohibits an agent from selling a Medigap Plan to you if you have a Medicare Advantage Plan. If you’re able to switch from Medicare Advantage to a Supplement Plan, you must disenroll from your Medicare Advantage Plan.
You must be enrolled in both Parts A and B to obtain Medicare Supplement Insurance. You must also stay enrolled in A and B to keep coverage under your Medicare Supplement Plan.
If you work beyond age 65, and stay on your employer health insurance, delaying Part B, your 6 month Open Enrollment Period doesn’t begin until you actually enroll in Medicare Part B.
If you want to switch to a Supplement Plan after your Open Enrollment Period, you may be asked about your health history and pre-existing conditions, and can be denied coverage or charged a higher premium based on your health status.
The private insurance companies that offer Supplement Policies set monthly premiums for each Plan type, and these can be based on age, as well as the comprehensiveness of coverage.
Supplement Plans function well for those who want the freedom to see any doctor who accepts Medicare, or don’t want to pay co-pays and co-insurance. They also appeal to those who want to know in advance the most they might have to spend on medical services.
A major advantage of using a Supplement Plan is protection against large medical bills under Part B, particularly for cancer treatment. Treatments for cancer can cost over $100,000, and without Supplemental coverage, your responsibility will be 20% of the total under Part B.
Medicare Supplemental Insurance Companies
Companies that offer Medicare supplemental insurance include:
What is Medicare Advantage Insurance?
Medicare Advantage Plans, also known as Part C, are an alternative to Original Medicare. These Plans, by law, must provide all the benefits of Original Medicare.
Medicare Advantage Plans must also have a predetermined annual Out of Pocket Maximum; Beneficiaries cannot be responsible for covered expenses beyond the annual OOPM.
Medicare Advantage Plans provide a hard Out of Pocket Maximum by breaking your Part A and B deductibles, and Part B cost-sharing, down into specified co-payments and co-insurance. In this way, your Medicare Insurance functions like most private health insurance Plans.
Some Part C Plans have been created specially for Beneficiaries with special needs. These Plans are tailored to those with chronic conditions like heart disease, those who live in nursing homes, or those who are also enrolled in Medicaid (dual-eligibles).
Chronic and Special Needs Plans offer benefits not available to most Medicare Advantage Plan members, as well as lower costs. These Plans make excellent Medicare Insurance for those with chronic conditions or lower incomes.
A huge benefit of a Medicare Advantage Plan is that it protects you from high medical bills under Part B, particularly relating to cancer treatment. You can have confidence that even in the worst case, you’ll never pay more than the Plan’s Annual Out of Pocket Maximum.
Beneficiaries choosing Part C Plans for their Medicare Insurance generally receive benefits beyond Original Medicare. Many Medicare Advantage Plans offer:
- Vision and Hearing coverage
- Chiropractic benefits
- Fitness benefits
- Dental coverage
- Worldwide emergency coverage
It is important to note that Medicare Advantage Plans are not required to provide these additional benefits, but many of them do so.
Medicare Advantage Plans operate within a specified region, usually a County within a state. While they provide nationwide emergency coverage, Beneficiaries are typically restricted to seeing a doctor within the region they live in for normal medical services.
Medicare Advantage Plans typically operate as HMOs or PPOs, making them similar to health insurance you have through an employer or other private health insurance.
Part C Medicare Advantage Plans may or may not have a monthly premium. A Beneficiary must also continue to pay their Part B premium to receive coverage under their Part C Plan.
Many, but not all, Medicare Advantage Plans offer Prescription Drug Coverage. These Plans, commonly called MA-PD Plans meet the minimum requirement for Drug Coverage under Part D.
With very limited exceptions, a Medicare Beneficiary may not be enrolled in a Medicare Advantage Plan and a Standalone Part D Plan at the same time. Therefore, an enrollee should make sure their MA-PD Plan will meet their prescription drug needs.
What Type of Medicare Insurance Product is Right for You?
Selecting a Medicare Insurance Plan is a critical decision for a Beneficiary. Choosing between Original Medicare, Medicare Advantage, or using a Medicare Supplement Plan, will come down to a combination of affordability and comprehensiveness of coverage.
An enrollee will want to weigh:
- Comprehensiveness of coverage
- Can you afford to cover 20% of Part B costs, as well as Part A deductibles under Original Medicare?
- Are you likely to travel internationally?
- Do you mind an HMO medical group, or do you want to see any doctor, anywhere?
- Are prescription drug costs a concern to you?
- Can you afford a monthly premium beyond your Part B premium?
- Can you afford the co-payments and co-insurance of a Medicare Advantage Plan?
You will want to know which Plans your current doctors accept, unless you’re willing to change doctors. Also, your current medications should be compared to a Drug Plan’s official Formulary (list of covered medications), to ensure they are covered by the Plan.
An independent agent will be able to show you the networks of providers (for Medicare Advantage Plans) and the drugs covered and their costs under any Plan you are interested in (Part D Drug Plans or Medicare Advantage Plans with drug coverage).
After you develop a feel for your needs and budget, you may want to speak with an agent to confirm your requirements for Medicare Insurance. An independent agent, one who is able to work with multiple carriers, can be an invaluable tool for you.
How to Compare Medicare Insurance Quotes
It pays to compare coverage options and costs. There are several ways to compare quotes for Medicare Insurance. Medicare.gov allows you to compare the monthly premiums, co-pays, and formularies of Prescription Drug and Medicare Advantage Plans.
For Medicare Supplement Insurance, you’ll need to contact insurance companies directly, either by phone or through their websites.
Alternatively, you can work with an independent insurance agent, who is licensed and certified for Medicare Insurance Plans. If you’ve already come up with a list of companies and Plans, or if you want help from the very beginning, an independent insurance agent can assist you.
An independent agent can help you compare benefits, features, and premiums for any Plan you are interested in. It is important to note that you pay the same premium for a Plan whether you use an agent or not. And, they’re compensated by insurance companies, not by you.
Here’s a list of independent agents that specialize in medicare:
The Medicare Insurance Application Process
Applying for coverage is simple. Regardless of whether you want a Medicare Advantage Plan, or Supplement Insurance, you must first enroll in Parts A and B. For many people, enrollment in Parts A and B is automatic. This will be the case if you draw Social Security at age 65.
If enrollment is not automatic for you, you’ll need to manually sign up. If you sign up during the 3 months prior to your entry month, you can usually enroll in Parts A and B online through the Social Security Administration.
For example, if you turn 65 in June, you can sign up for Medicare online beginning in March.
If you are a naturalized citizen, or if you wait until the three months after your 65th birthday, you may have to go to a Social Security Office to enroll. You also may need to enroll at an office if you’ve worked beyond age 65 and were covered by your employer’s health Plan.
To avoid late enrollment penalties, you’ll need to enroll no later than the third month after the month you turn 65, unless you continue to be covered by an employer Plan.
Once you’re enrolled in Parts A and B, you’ll need to enroll in your selected Medicare Advantage Plan (if desired), or Medicare Supplement and Prescription Drug Plans.
To enroll in these Plans, you’ll need your red, white, and blue Medicare Card. You can work with your agent to enroll in a number of convenient ways:
- Paper applications
- Over the phone
If enrolling during your Initial Coverage Election Period, a seven month window centered around the month you turn 65, you won’t have to answer health questions, and your coverage is guaranteed unless you have certain kidney conditions.
If you choose to work beyond age 65, and have qualifying coverage from your employer, you’ll need to enroll in Parts A and B as well as your chosen Advantage or Supplement and Drug Plan within 8 months of retirement in order to avoid a late enrollment penalty.
Insurance companies records systems integrate directly with Medicare, so regardless of which method or Plan you choose, you’ll receive confirmation of your Medicare Insurance enrollment quickly, usually within a few days.