With the steep costs of healthcare these days, it's clear that Medicare will be a very important support for us in retirement. Thus, it's critical to understand what it does and doesn't do, what some of your options are, and when to sign up for it. (Applying for it late can be very costly.) Here's a concise summary of what you need to know about Medicare.
Don't be late! When to sign up for Medicare
When is the right time to apply? You're eligible for Medicare at age 65, and can sign up anytime within the three months leading up to your 65th birthday, during the month of your birthday, or within the three months that follow. That's your "Initial Enrollment Period" (IEP). Missing it can be very costly, as you may face more expensive premiums for the rest of your life. Specifically, your part B premiums (which cover medical services, but not hospital services) can rise by 10% for each year that you were eligible for Medicare but didn't enroll.
If you fail to enroll during that period, you can always enroll during the "general enrollment period," which is from January 1 through March 31 of each year -- though that coverage won't begin until July and the late penalty might apply.
There's a little safety net for some folks: If you're already receiving Social Security benefits as you approach 65, you'll likely be automatically enrolled in Medicare. You'll know this has happened because you'll receive your Medicare card in the mail three months before your 65th birthday. Many people don't start collecting Social Security that early, though, so this little loophole may not help you.
You might also avoid the penalty and be able to skip the deadline if you're still working, with employer-provided healthcare coverage, at age 65, or are serving as a volunteer abroad. Such folks can delay enrolling in Medicare without penalty. You'll get a special enrollment period based on when you return, when you stop working, or when your employer-provided coverage ends.
What is and isn't covered by Medicare
It's also rather important to understand just what is and isn't covered by Medicare. Here's a quick summary of that. First off, know that the main parts of Medicare are referred to as Parts A, B, C, and D. Parts A and B, respectively covering hospital expenses and medical expenses, make up what it now often referred to as traditional or "original" Medicare. That's because you can now opt for Part C instead of A plus B -- with Part C being a Medicare Advantage plan. More on that soon. Part D offers prescription drug coverage, including insulin supplies.
More specifically, Part A covers hospital inpatient care, skilled nursing facility care, and some home healthcare and hospice care. Part B covers physicians' services, service from other healthcare providers, certain therapies, lab tests, home healthcare, durable medical equipment (such as blood sugar monitors, wheelchairs, or crutches), and some preventive services such as screenings and vaccines.
Medicare generally doesn't cover vision, hearing, or dental expenses, as well as basic home health help, such as assistance with bathing or toileting -- unless the patient is also receiving skilled nursing care. Alternative medicines or treatments (such as acupuncture, acupressure, homeopathy, or chiropractic care) are generally not covered. Care you receive while outside the U.S. is not covered, either. When it comes to Part D, don't expect coverage for weight-loss pills, erectile dysfunction treatments, fertility drugs, or over-the-counter medicines, among other things.
Consider a Medicare Advantage plan
One thing that many Americans don't realize is that if they want Medicare coverage, they don't have to sign up for the U.S. government-provided original Medicare coverage. Private insurance companies such as Blue Cross Blue Shield and UnitedHealth Group now offer Medicare Advantage plans ("Part C").
Medicare Advantage plans, which debuted in 1995, already make up 31%of the Medicare market, and that share is growing. They're administered by private insurers but are regulated by the U.S. government. Each must offer at least as much coverage as original Medicare (i.e., the benefits you'll find in Part A and Part B) and many offer broader coverage, such as vision and/or dental care. Most include prescription drug coverage, too, among other things. While original Medicare doesn't cover healthcare provided outside the U.S., some Medicare Advantage plans do so. (Though original Medicare will give you access to doctors all over the U.S., while Medicare Advantage plans tend to be limited to a local network of healthcare providers, some of which are rather big.) Original Medicare will often have you footing 20% of many bills and your total out-of-pocket costs could be very high, but a Medicare Advantage plan might charge you a low copay per doctor visit or service -- and all Medicare Advantage plans have out-of-pocket limits, beyond which the plan will pick up all your healthcare costs for the year.
If you think you might be interested in a Medicare Advantage plan, see which ones are offered in your area. Know, too, that choosing between original Medicare and a Medicare Advantage plan isn't a permanent decision. At least once a year, you will be able to switch between them.
It's smart to learn all you can about Medicare coverage options. The more you know about Medicare, the more likely you'll be to get the coverage that suits you best.