Most people understand that they can enroll in Medicare at age 65, but beyond that our nation’s health insurance program for seniors is a mystery. Navigating the Medicare waters can be stressful because there isn’t any frame of reference for it unless you’ve had prior experience helping a parent or a friend.
Fortunately, Medicare can be broken down into some simple pieces, and once you get a handle on them, it makes the rest pretty simple. Let’s take a look:
You will generally hear people refer to Original or Traditional Medicare. This means Medicare Parts A and B, which have been the basic building blocks of Medicare coverage since 1965. These parts cover your hospital expenses and your outpatient expenses, respectively. You could enroll in just one or the other, but unless you have other insurance coverage, you really need both.
By the time you retire, most citizens have what is called “paid-up” Part A. That simply means that you won’t have to pay for Part A now because your taxes during your working years have already paid for it as long as you or your spouse has worked 10 years in the United States. Part B, on the other hand, has a premium that you must pay monthly. For most people it is around $105 in 2013, but it could be higher based on your income. This doesn’t mean you should it skip it though – Part B covers outpatient things like doctor visits but it also covers life-saving treatments like chemotherapy. Going without it is similar to being uninsured.
Part D Drug Plans
For over 50 years we had no decent retail drug coverage for people on Medicare. Finally in 2006 our nation rolled out the Medicare Part D program. The best way to think of this program is as a prescription card that you can use at the pharmacy so that you pay only a copay instead of full price for a medication. There are several ways to enroll in Part D, but for purposes of our discussion here, let it suffice.
Though Medicare Parts A &B do provide some coverage for your hospital and outpatient costs, there are some significant costs in which you share, such as deductibles. You are also responsible for 20% of the cost of your outpatient coverage, and that can be a lot if you have a medical condition that requires expensive treatments. This is where supplemental coverage comes in. You can buy a Medigap insurance policy that will pay for some or all of these things.
There is also an alternative type of coverage called Medicare Advantage which you can join instead of Medicare. These plans usually require you to use a network of physicians and pay co-pays for your services. Plans are generally less expensive than Medigap, but you need to check with your physicians to see if they participate in any of these plans before considering one.
Until such time that the Centers for Medicare and Medicaid Services starts offering courses to teach people about all things related to Medicare, we hope this article can serve as a frame of reference for you. Remember that there are licensed insurance agents out there to help you navigate all this and find suitable coverage for yourself. Once you are all set up, you can move on to pondering more exciting things about retirement!