My father-in-law is 65 and is just learning about Medicare, the Federal Health Insurance. As I did the research for him I thought, why not write a blog post about it? I was surprised to learn that there are specific times for signing up and penalties for late sign ups or not signing up at all. When you sign up for Medicare, you have two options. You can sign up for the original Medicare Plan or Medicare Advantage, but more on that later. Below you will find everything you need to know about eligibility, coverage, Medicare options, and more.
Eligibility
- Medicare is a health insurance for those 65 and older.
- You are eligible to sign up for Medicare as early as 3 months prior to turning 65.
- You may also be eligible to sign up for Medicare before 65 if you have a disability.
It is very important to note that the sign up period for Medicare starts 3 months before you turn 65 and ends 3 months after you turn 65. You have a 6 month grace period before you have to face major penalties.
Coverage
Medicare is split into parts. That is Part A (Hospital Insurance), Part B (Medical Insurance), Part C (Medicare Advantage), Part D (Drug Insurance), and Medicare Supplemental insurance (Medigap).
- Part A covers inpatient care in hospital, nursing, and hospice facilities.
- Part B covers outpatient care such as doctors visits, preventative services, medical equipment such as wheel chairs, and home healthcare.
- Part C is a Medicare approved health insurance offered by a private company. This may include additional benefits and lower out of pocket costs than the original Medicare.
- Part D covers prescription drugs and some recommended vaccines.
- Medicare Supplemental Insurance is just extra insurance that you would buy from private insurance companies. This extra insurance can help lower certain costs from Part A and Part B.
Sign Up Option 1 – Original Medicare
For information on when and how to sign up, visit Medicare.gov here.
- Original Medicare includes Part A and Part B.
- If you need Part D prescription drug insurance, you can join a separate Medicare plan.
- You can use any doctor or hospital that takes Medicare in the U.S.
- To help pay your out-of-pocket costs in Original Medicare such as your co-payment you can use Medicare Supplement Insurance (Medigap).
Sign Up Option 2 – Medicare Advantage (Part C)
For information on when and how to sign up, visit Medicare.gov here.
- Medicare Advantage is a Medicare-approved plan from a private health insurance company.
- These plans include Part A, Part B, and usually Part D.
- In most cases, you will need to use in-network doctors.
- These plans may have lower out-of-pocket costs than Original Medicare.
- These plans may offer some additional benefits that Original Medicare does not cover, including vision and dental.
The Difference Between Medicare and Medicaid
While Medicare is a Federal Health Insurance focused on serving those 65 and older, Medicaid is a combined Federal and State Health Insurance for those with limited income or resources. When the Affordable Care Act passed during the Obama Administration, Medicaid became available for all ages. Medicaid offers assistance for paying for Medicare costs as well as nursing home or personal care costs.
The Costs and Penalties of Medicare in 2022
The costs mentioned below typically change each year. Since we are nearing the end of 2021, I will only discuss 2022 costs. You can get an estimate on your premium here with Medicare.Gov
Part A is free for most people who have worked for 10+ years and paid for Medicare taxes through their paycheck. For others, it can cost $274 or $499 per month in 2022. The monthly premium depends on how long you worked and paid for Medicare taxes. The Deductible for Part A is $1,556 in 2022 per benefit period before Original Medicare starts to pay. Below is what you will have to pay for inpatient co-payments.
- Days 1-60: $0 after you pay your Part A deductible
- Days 61-90: $371 each day ($389 in 2022)
- Days 91-150: $742 each day while using your 60 lifetime reserve days ($778 in 2022)
- After day 150: You pay all costs
Part B will cost $170.10 per month in 2022. You may have to pay more if you had a higher income. You may face a penalty if you don’t sign up for Part B when you reach 65. A late enrollment penalty will cost you 10% for each year you could have signed up, but didn’t. That penalty would be added to your monthly Part B premium and you would have to pay that penalty for as long as you have Part B coverage. If you or your spouse are still working and getting health coverage from your employer, can you avoid the 10% penalty. The deductible for Part B is $233 per year before Original Medicare starts to pay. Part B co-payments or co-insurance is 20%.
Part C, Part D, and Medigap costs can vary depending on the plan, coverage, and company. With Part C, you must keep paying your Part B premium to stay in the Part C Plan. Part C plans do have annual out of pocket limits before the insurance starts to cover the rest. You may also face a penalty for not signing up with Part D on time. The penalty is 1% per month (up to 12% per year). Again, you will be forced to pay this penalty for as long as you have the plan. There is no way to remove the fee, even if you switch to a different plan provider. That is why it is very important to sign up on time.
Using Medicare
Once you sign up with Medicare, you will get a Medicare account where you can view and print your Medicare health insurance card, add your prescriptions to compare plans in your area, view your claims as soon as they are processed, review your eligibility for services, and pay your premiums online. You should also call Medicare and add an authorized contact. This person will have the authority to speak on your behalf and handle your Medicare account. This is useful for some older people who may need help from their children when it comes to using the online account. Finally, you can schedule your first preventative doctors visit for free in your first year with Medicare.
Summary
Health Insurance is required by law. You may face permanent penalties if you do not sign up within the 6 month grace period. Medicare exists to help American’s live longer and healthier lives. Know your options and plan for these costs as you reach 65. If you are younger and still have time, open a Traditional or Roth IRA with companies like Betterment, Wealthfront, or M1 Finance. You can use the dividend earnings and growth to help pay for your future healthcare costs. Even better, open a Health Savings Account (HSA) with Betterment here and start growing your invested money to pay for medical costs, tax free. If you enjoyed the content, Subscribe Here for a monthly newsletter on personal finance.
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