Medicare provides insurance for millions of seniors. If you're one of them -- or if you're about to enroll in Medicare -- you may have lots of questions about exactly how this health insurance program works. Fortunately, we've got the answers to five key questions so you'll be better prepared to get the Medicare coverage you need and to use it effectively. 

Doctor talking with older patient

Image source: Getty Images.

1. What does Medicare cover?

Contrary to what many believe, Medicare isn't just one big policy. There are actually several different parts to Medicare, each of which provides a different kind of coverage. For example:

  • Part A provides coverage for inpatient hospital care, as well as for care in skilled nursing facilities for eligible patients. Part A provides the same coverage for all eligible seniors. 
  • Part B covers basic care, including outpatient therapies, doctor visits, and routine medical testing. Part B also provides standardized coverage for all seniors who sign up. 
  • Part D provides coverage for prescription drugs. If you want Medicare Part D, you'll need to select a plan. Coverage and costs vary, and signing up for Part D is optional.

You may notice Part C is missing. That's because Part C is a replacement for Parts A, B, and sometimes D. Medicare Part C is also called Medicare Advantage, and essentially it's an assortment of heavily regulated plans provided by private insurance companies and paid for partially by the government.  

If you opt for Medicare Part C, the insurance provider is required to provide certain benefits similar to Parts A and B. But there's much variation from one Advantage plan to the next. For example, you may be required to get a referral to see a specialist with some plans, and some may have lower out-of-pocket costs than others. 

2. Can I get Medicare as soon as I retire?

Whether you can get Medicare upon retirement depends on when you retire. Unless you're disabled, you become eligible for Medicare at age 65 -- and not any earlier, even if you retire at a younger age.

If you retire before 65, you'll need to explore other options for coverage, such as using COBRA to maintain coverage through an employer or shopping for insurance on the Obamacare exchanges

3. Do I have to pick a Medicare plan?

If you simply want coverage through Medicare Parts A and B, you don't have to pick a plan. As long as you're receiving Social Security, you should be signed up automatically when you become eligible. If you aren't yet receiving Social Security benefits, you'll need to sign up within the three months before you turn 65, during that month, or the three months after. 

Many seniors with Parts A and B also opt to buy supplemental coverage in the form of a Medigap plan. Medigap plans can help you cover some of the expenses Medicare leaves you with. While the government sets rules standardizing Medigap plans, there are still multiple plans to choose from with different premiums and levels of coverage. 

You'll also need to shop for a Part D plan if you want one. Or, if you want Medicare Advantage instead of traditional Medicare, comparison-shop among Advantage plans and opt into the plan of your choosing.

You can change your plan during open enrollment each year, which runs from October 15 to December 7. If you aren't happy with your current coverage, act within this time frame to make a change. 

4. How much does Medicare cost?

Healthcare costs include premiums, deductibles, coinsurance costs, and co-pays. Costs vary for different parts of Medicare. 

Medicare Part A doesn't charge premiums for most people unless they didn't earn enough Medicare work credits, but you have a $1,340 deductible during each benefits period. If you have a hospital stay that lasts more than 60 days or stay in a skilled nursing care facility for more than 20 days, you'll also have coinsurance expenses. 

Medicare Part B has premiums, a deductible, and charges 20% coinsurance costs for covered services. As of 2018, most seniors pay $134 in monthly Medicare premiums. However, if you have a high income, premiums are higher. The Part B deductible for 2018 is $183, so you'll have to pay this out-of-pocket before Medicare begins paying for covered services. 

Medicare Part D costs vary, as do Medicare Advantage plans. There are differences in premiums, coinsurance, and co-pays, so shop plans carefully. 

5. What happens if I don't sign up for Medicare?

If you don't sign up for Medicare when you become eligible, you'll be penalized with higher premiums if you eventually get covered.

If you're not eligible for premium-free Part A and fail to sign up as soon as you can, premiums will be as much as 10% higher. You'll have to pay the higher price for coverage for double the number of years you were eligible for coverage but chose not to sign up. 

If you don't sign up for Part B when you become eligible, you'll also be charged a late enrollment penalty, but you'll have to pay this penalty for the entire time you're covered. The penalty is a 10% premium increase for each full 12-month period you were eligible for coverage but opted not to sign up.

In addition to the penalties, if you fail to sign up, you may not be able to get covered when you need to, but instead may have to wait until general enrollment. However, there are some exceptions to both penalties and coverage delays if you meet certain criteria, such as being covered by an employer or union plan. 

Make sure you understand the ins and outs of Medicare

It's imperative you understand the ins and outs of Medicare so you can avoid owing extra premiums and so you can get the right kinds of coverage to meet your needs. This guide to Medicare in 2018 will help you make fully informed choices to keep your healthcare costs down and get the care you require as you get older. It's worth taking the time to learn about all your options, because healthcare is expensive and you don't want to pay more than you need to.