What You Need to Know About Applying for Medicare

15 Sep 2024

Turning 65 is a major milestone, both personally and financially. One of the most important changes at this age is becoming eligible for Medicare, the federal health insurance program designed to cover most of your healthcare needs. Understanding how Medicare works is essential for making the right decisions and avoiding costly mistakes. Here are five things you should know as you approach 65 and prepare to apply for Medicare.

1. Timing is Crucial: Don’t Miss Your Initial Enrollment Period

Medicare enrollment isn’t automatic for everyone. Unless you are already receiving Social Security benefits, you will need to sign up for Medicare during your Initial Enrollment Period (IEP). This period begins three months before your 65th birthday, includes the month of your birthday, and extends three months after, for a total of seven months.

Missing your IEP can lead to delayed coverage and penalties. For example, if you miss signing up for Medicare Part B (medical insurance), you may face a 10% penalty for each 12-month period you were eligible but didn’t enroll. Make sure you mark your calendar and understand your deadlines to avoid unnecessary costs and delays.

2. Medicare Isn’t Free—Understand the Costs

Many people assume Medicare is entirely free, but that’s not the case. While Medicare Part A (hospital insurance) is usually premium-free if you or your spouse have paid Medicare taxes for at least 10 years, other parts of Medicare come with costs.

• Part B (Medical Insurance): You will pay a monthly premium for Part B, which covers outpatient care, doctor visits, and preventive services. In 2024, the standard premium is $174.70 per month, though it can be higher based on your income.
• Part D (Prescription Drug Coverage): Part D, which covers prescription drugs, also requires a monthly premium. This premium varies based on the plan you choose.
• Medicare Advantage (Part C): This is an alternative to Original Medicare, where private companies offer bundled plans, sometimes with additional benefits like vision, hearing, or dental. Medicare Advantage plans may have different premium structures.
• Medigap (Supplemental Insurance): If you opt for Original Medicare, you might want to buy a Medigap policy to help cover out-of-pocket costs like copayments, coinsurance, and deductibles.

Understanding these costs and budgeting for them is crucial to avoid surprises.

3. You Have Two Main Coverage Options: Original Medicare or Medicare Advantage

When you enroll in Medicare, you’ll need to choose between Original Medicare and Medicare Advantage (Part C). Understanding the difference is important.

• Original Medicare includes Part A (hospital) and Part B (medical) coverage. You can see any doctor or specialist who accepts Medicare, and you’ll have the option to add Part D for prescription drugs and Medigap for supplemental coverage. However, you will have more out-of-pocket expenses unless you have additional coverage like Medigap.
• Medicare Advantage (Part C) is offered by private insurers and bundles together Part A, Part B, and often Part D. These plans often offer extra benefits like dental, vision, and hearing coverage, but you are typically restricted to a network of providers. Premiums for Medicare Advantage are usually lower than Original Medicare combined with Medigap, but the trade-off is a more limited choice of healthcare providers.

Each option has pros and cons, and the best choice depends on your healthcare needs, preferred doctors, and budget.

4. You May Want (or Need) Supplemental Insurance

Medicare covers many healthcare services, but it doesn’t cover everything. You’ll still be responsible for deductibles, copayments, and coinsurance. To reduce your out-of-pocket expenses, you can purchase a Medigap plan (if you choose Original Medicare) or select a Medicare Advantage plan that covers more services upfront.

Medigap plans help fill in the “gaps” in Original Medicare by covering things like hospital stays beyond what Medicare Part A covers, or doctor visits that are only partially covered by Part B. The best time to buy a Medigap policy is during your Medigap open enrollment period, which is the six-month period that starts the month you turn 65 and enroll in Medicare Part B.

Supplemental insurance can be a valuable investment if you expect to have frequent medical appointments or procedures, as it can provide peace of mind against high out-of-pocket costs.

5. Medicare Does Not Cover Long-Term Care or Certain Other Services

One important fact to understand about Medicare is that it does not cover long-term care services, like nursing home stays or in-home personal care, except in very limited situations. Medicare will cover skilled nursing care for a short time after a hospital stay, but for long-term custodial care, you’ll need to look into Medicaid or private long-term care insurance.

Additionally, Medicare does not cover dental, vision, or hearing care in most cases, unless you are on a Medicare Advantage plan that offers these benefits. If you want coverage for these services, you may need to look into separate insurance policies or savings plans.

Plan Ahead and Know Your Options

As you approach 65, taking the time to understand Medicare can save you money and help you determine what coverage aligns with your needs. Start early, learn about your options, and make sure you enroll on time to avoid penalties. While Medicare offers extensive healthcare coverage, it’s important to know what it doesn’t cover and consider whether supplemental insurance or long-term care planning is necessary for your situation.

 

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