Health care after age 65
When you turn 65, you become eligible for Medicare. In fact, unless you qualify for an exception, failing to enroll on time can result in expensive and ongoing penalties. Given this, most Americans turn to Medicare for their health care needs as soon as they turn 65. It sounds simple, right? But it’s not.
Medicare actually refers to several distinct plan types, or parts, which include a private option. Some people purchase additional plans to supplement their regular Medicare. On top of that, depending on their income and assets, some people qualify for a financial help through Medicaid.
Health insurance is complicated, and Medicare is no exception. To get the best value for your premium dollars, and to keep your out-of-pocket costs down, you need to understand your options. Then you need to figure out which option is best for your unique personal situation. This article will help you do that.
Medicare
Medicare is a national health insurance program administered by the U.S. government. It consists of four parts.
- Medicare Part A provides hospital insurance. This is the part of Medicare that covers inpatient hospital care. It also covers care in a skilled nursing facility or hospice, home health care, surgery and lab tests.
- Medicare Part B provides medical insurance. This is the part of Medicare that covers outpatient care and visits to doctors and other health care providers. It also covers preventative services and durable medical equipment.
- Medicare Part D provides prescription drug insurance.
Sometimes you’ll hear people talk about Original Medicare. This refers to Medicare Part A and Medicare Part B.
Medicare Advantage, on the other hand, refers to plans offered by private insurance companies but approved by Medicare. Often called Medicare Part C, Medicare Advantage plans combine Medicare Part A and Medicare Part B into one plan, replacing Original Medicare. Most Medicare Advantage plans also include the prescription drug coverage that you’d get with Medicare Part D. Some Medicare Advantage plans also provide coverage for services not normally covered by Medicare, often including dental, vision and hearing. Some plans more provide even more services, such as acupuncture.
Another type of Medicare Advantage plan is called a Medicare Special Needs Plan. These plans are specially designed for individuals suffering from specific chronic conditions, such as diabetes, chronic heart failure or cancer. Each Special Needs Plan is designed to meet the needs of patients with the specific chronic condition, and only patients with that condition can join. All Special Needs Plans include prescription drug coverage.
You become eligible for Medicare when you turn 65. However, it’s also possible to be eligible for Medicare if you are younger than 65 if you are receiving Social Security Disability Insurance.
Paying for Medicare
Although Medicare is partially funded through payroll taxes, it is not free for beneficiaries.
Most beneficiaries do not pay a monthly premium for Medicare Part A. If you or your spouse paid Medicare payroll taxes for 40 quarters (10 years), you qualify for Medicare Part A at no cost when you turn 65.
If you do not qualify for free Medicare Part A, you will have to pay a premium. In 2018, the standard premium is $232 per month for people who paid Medicare taxes for 30 to 39 quarters and $422 per month for people who paid Medicare payroll taxes for 0 to 29 quarters.
Whether or not you pay a premium for Medicare Part A, you will have a deductible and coinsurance costs. In 2018, the deductible is $1,340. The 2018 coninsurance rate for hospital stays is $0 for up to 60 days, $335 per day for 61 to 90 days, and $670 per day after that, up to the lifetime reserve. Medicare may not cover costs after all the lifetime reserve days are used.
Medicare Part B is not free. The standard premium in 2018 is $134 per month. For individuals earning more than $85,000 per year, and for married couples earning more than $170,000 per year, the premium is higher. On top of the premium, you have an annual deductible of $183. You also pay 20 percent for most approved doctor services, outpatient services and durable medical equipment.
Medicare Part D and Medicare Advantage costs vary by plan.
Because Medicare Advantage plans often include extra services and may limit out-of-pocket costs, these plans may be more affordable for some individuals once all costs are considered.
Medicare Supplement Plans
Medicare Supplement Plans provide another way of taking control of out-of-pocket costs.
Also called Medigap policies, these policies are sold by private insurance companies. They are used in conjunction with Original Medicare to help keep out-of-pocket costs down. They can help cover deductibles, coninsurance and copayment costs. This can make your costs more predictable, so you have an easier time budgeting for your medical care.
Medicare Supplement Plans can only be combined with Original Medicare. If you are enrolled in a Medicare Advantage Plan, you cannot enroll in a Medicare Supplement Plan.
Recapping Your Medicare Options
So far, you have two main options, although there are variations:
- You can enroll in Medicare Part A, Medicare Part B and Medicare Part D. Another way of saying this is Original Medicare and Medicare prescription drug coverage. You can also add a Medicare Supplement Plan to help keep your out-of-pocket costs under control.
or
- You can enroll in Medicare Advantage, also called Medicare Part C, including Special Needs Plans for individuals who qualify. Either your Medicare Advantage plan will include prescription drug coverage, or you will purchase this separately.
Financial Assistance and Medicaid
Financial help is available for low-income individuals.
The “Extra Help” program reduces the cost of prescription drug coverage under Medicare. In 2018, individuals with up to $18,210 in annual income and up to $14,100 in resources, or married couples with up to $24,690 in annual income and up to $28,150 in resources can qualify for Extra Help.
Additional financial help can be found through Medicaid. If you qualify for both Medicare and Medicaid, you are considered “dual eligible.” This means that Medicaid will cover many of the costs not covered by Medicare.
Medicaid is intended to help low-income individuals and families, but the specific eligibility requirements vary from state to state. To receive Medicaid assistance, you need to contact your state’s Medicaid program.
Calculating Your Best Option
As you can see, you have many health care options under Medicare.
If you think you might qualify for either Medicare Extra Help or Medicaid, you should apply as soon as possible. Even if you’re not sure, applying is a smart move. This way, you won’t miss out on any assistance.
Next, you need to calculate your expected costs under different plans. Don’t just look at the premium. Also look the deductibles, as well as the coinsurance and copayments for the services you expect to need.
To do this, you’ll need to make a list of all the medical care you expect to need. List all prescriptions, medical equipment, doctor’s visits and other expected medical services. Also look at the cost of each prescription or service.
Once you have this information, you’re ready to calculate your expected costs.
Answer the questions below for each plan you’re considering, as well as plan combinations, such as Original Medicare with a Medicare Supplement Plan. Once you have done this for all plans, compare the results to determine which plan best meets your needs.
If you don’t have the exact figures for every medical service or prescription you’ll need, you may have to estimate. The more precise you can be, however, the more accurate your calculations will be.
Plan:
What is the premium? This is how much you pay each month. Multiply your monthly premium by 12 to get your annual premium.
What is the deductible? This is how much you pay out-of-pocket before your insurer pays for care. Some costs, such as preventative care costs, may be covered before the deductible is met.
What are your out-of-pocket costs? This is the coninsurance or copayment for each prescription or service you’ll need. For example, if your doctor’s visit costs $200 and a plan requires you to pay 20 percent out-of-pocket, your cost for the doctor’s visit is $40.
What is the out-of-pocket limit? If the plan has an out-of-pocket limit, this is the maximum you will have to pay. This is especially important if you think you are likely to need expensive medical care.
What is your total expected cost? To calculate this, add the deductible and the other out-of-pocket costs, up to the out-of-pocket limit. (If an out-of-pocket cost goes toward your deductible, make sure you’re not counting it twice.) Then add this to the annual premium.
Read more articles about Medicare Insurance.