The ABCD’s of Medicare

If turning 65 is on the horizon, you’re probably starting to think about what will happen to your health insurance once you reach that milestone. For many people, their 65th birthday marks the transition from a commercial health insurance plan, such as one offered by their employer, to enrolling in the federal Medicare program.

Medicare offers a lot of options and the number of choices may feel overwhelming. In this article, we’ll break it down for you and explain the various options available to you. We’ll also provide some tips and links to websites where you can read more. 

Medicare vs. Medicaid

Some people may confuse Medicare with Medicaid. Their names are similar, and they are both government programs, but Medicare and Medicaid are different.

• Medicaid provides health care coverage for low-income people. Medicaid is typically regulated by state government, consistent with federal law.
• Medicare is health insurance run by the federal government. It is available for people 65 or older, and younger people who are disabled or on dialysis.

Some people who are eligible for Medicare also qualify for Medicaid. The rules about who is eligible for Medicaid are different in each state.

Medicare Has Four Parts

There are more parts to the Medicare program today than when it was created in 1965. While having more choices is good, it also means the program is now more complex.

Originally, Medicare covered hospital bills and doctor visits, but not prescription medications. Over the years, Medicare has been expanded to include prescriptions and a wide range of other services. What’s covered depends on which parts of Medicare you are enrolled in. 

Original Medicare consists of:

• Part A, which helps pay for inpatient hospital care, hospice care, home health care, and care at a skilled nursing facility. 
• Part B, which helps cover doctor visits, lab tests and x-rays, outpatient hospital care, durable medical equipment, and some preventive care and immunizations.

The two more recent parts are Part C (Medicare Advantage) and Part D (prescription drug coverage). Part C and Part D are administered by insurance companies that contract with the federal government’s Centers for Medicare & Medicaid Services (CMS).

• Part C provides coverage to replace Original Medicare through enrollment in a Medicare Advantage plan. This type of plan includes Medicare Part A and B benefits, and may also cover prescription drugs, vision, hearing, and dental benefits.
• Part D provides prescription drug coverage. You can hold this coverage through a stand-alone Part D prescription drug plan or through a Medicare Advantage plan. While Part D is optional, by not purchasing a prescription drug plan when you are eligible to do so, you may have a penalty later on when enrolling in Part D.

How Much You Pay

When you are enrolled in Medicare, there are expenses you will need to pay, like your Part B monthly premium. You may also have to pay for a portion of the health services you receive. 

• Part A (hospital insurance) does not have a monthly premium for most people. However, there are deductibles and copayments when you receive services under Part A. For example, a hospital stay can be subject to a deductible and a copay.
• Part B (medical insurance) has a monthly premium which is based on your income. There is an annual deductible. You’ll generally pay 20 percent of the cost for many services, after your Part B deductible, with Medicare generally paying 80 percent.
• Part C: If you have chosen to enroll in a Medicare Advantage plan, your out-of-pocket costs for services will vary from plan to plan.
• Part D: If you have chosen to enroll in a stand-alone prescription drug plan, or drug coverage is included in your Medicare Advantage plan, your out-of-pocket costs for drugs can vary from plan to plan. These costs can include a deductible, copayments, or coinsurance (the percentage of drug cost you will need to pay).

The amount of out-of-pocket costs can be less if you purchase Medicare Supplement insurance or enroll in a Medicare Advantage plan, depending on your specific plan.

Medicare Supplement plans (sometimes also called “Medigap”) provide gap coverage for Original Medicare (Parts A and B) costs, including deductibles, coinsurance, and copayments. Some plans may include foreign travel emergency benefits, which Medicare does not cover.

When Can You Enroll?

Your Initial Enrollment Period (IEP) for Medicare begins three months before your 65th birthday and continues for three months after your birthday month, for a total of seven months. By not enrolling into Medicare during your initial enrollment period, you may face a lifetime penalty for waiting.

There are situations when you could delay your Medicare enrollment, such as if you are covered through your employer. For additional information on when to sign up, visit www.ssa.gov/medicare/plan/when-to-sign-up

If you are about to turn 65, and are looking to enroll into Medicare, you’ll want to review your additional coverage options and make some decisions before your initial enrollment period closes. 

You can contact the Social Security Administration office to discuss enrolling in Medicare Parts A and B at 1-800-772-1213 between 8:00 a.m. and 7:00 p.m., Monday through Friday. To sign up for Medicare Parts A and B online, visit www.ssa.gov/medicare/sign-up. 

If you want to learn more about how Medicare works, here are links to some helpful websites.

• Medicare.gov Basics
• Social Security Medicare Benefits
• Vermont Medicare Plans