If you don't already rely on Medicare for your healthcare needs, you will eventually. Knowing the basics of how the program works is essential to make sure you'll have the coverage you'll need.
Roughly 55 million Americans are on Medicare, and about 10,000 new enrollees sign up every day. Yet despite how important Medicare is, many people don't know the facts about it. Below, we'll give some of the most-common questions, and some simple answers to them.
1. Do I qualify for Medicare?
You can qualify for Medicare if you or your spouse has earned the required number of credits while working at a job at which you paid Medicare payroll taxes. It takes 40 credits to get full coverage without having to pay a premium for Medicare Part A hospital insurance, and it typically takes someone 10 years of work in order to earn 40 credits.
Those who have fewer than 40 credits can still get Medicare coverage, but they have to pay for their hospital insurance coverage with monthly premiums. A reduced rate is available for those with 30 to 39 credits compared to those with fewer than 30 credits.
Note that, even if you never worked in a job in which you paid payroll taxes to Medicare, you can still get coverage if you're a U.S. citizen, or a legal resident for at least five years. Again, the key difference is that you'll pay up to $411 per month for your hospital coverage.
2. When can I sign up for Medicare?
Most people first become eligible for Medicare when they turn age 65. The initial enrollment period for Medicare begins three months before your 65th birthday, and extends for three months after you reach 65.
In addition, some people can sign up for Medicare before age 65. If you have certain types of conditions or a disability, then eligibility follows different rules. Disabled people get Part A hospital coverage and Part B medical coverage automatically after receiving Social Security disability benefits for 24 months. Sufferers of ALS, also known as Lou Gehrig's disease, get coverage immediately once disability benefits begin. Coverage for those who have end-stage renal disease get coverage effective on the fourth month of dialysis treatments.
If you are still working, you don't have to sign up for Medicare immediately on turning 65, but many people do anyway. If you have qualifying coverage at work, then Medicare may not be necessary, and you'll be eligible for a special enrollment period when your group coverage at work ends. However, some smaller employers might require you to sign up for Medicare in order to reduce their own health plan's expenses.
3. What choices do I have with Medicare?
Medicare comes with two main choices. If you go with traditional Medicare, then you'll usually sign up for Part A hospital coverage and Part B medical coverage, with prescription drug coverage under Part D being more of an optional benefit. Alternatively, you can go with Medicare Advantage, sometimes known as Medicare Part C, in which a private insurer provides the same benefits that the federal government provides directly for traditional Medicare recipients.
Medicare Advantage plans can come with or without prescription drug coverage, and the options you have for more-extensive coverage are generally more prevalent than you get through traditional Medicare on its own. However, there can be additional costs with Medicare Advantage plans, and so it's important to be sure that the coverage you get matches up well with your healthcare needs.
4. Can I change my Medicare coverage?
Every year, Medicare participants get a chance to change their coverage. The annual open enrollment period runs every year from Oct. 15 to Dec. 7, and during that period, you can do a number of things. If you're in traditional Medicare, you can switch to a Medicare Advantage plan, and if you're in a Medicare Advantage plan, you can switch back to traditional Medicare.
Those who are in Medicare Advantage plans can switch between different plans, and you can change your mind about whether you want Part D prescription-drug coverage included under Medicare Advantage or not. You can also switch drug plans, join a new drug plan, or drop your drug plan entirely.
In addition, there's a special Medicare Advantage disenrollment period from Jan. 1 to Feb. 14. During that period, you can move from a Medicare Advantage plan back to original Medicare only.
5. Do I need other coverage besides Medicare?
Medicare doesn't cover everything. For example, there are 20% copayments for most medical services under traditional Medicare, and deductibles and copays for hospital services can be even higher. Because of this, many Medicare participants get Medigap policies to cover what traditional Medicare doesn't.
Medicare Advantage plans usually cover some of the most-common gaps in traditional Medicare, and so most people don't need supplemental coverage above and beyond what their Medicare Advantage plan provides. It's therefore useful to compare the cost of Medicare Advantage with the total cost of traditional Medicare plus any Medigap policy that you end up buying.
Most retirees rely on Medicare, so it's crucial to know the ins and outs of how the program works. By knowing the answers to these simple questions, you'll have a better sense than most about what you can expect from Medicare when you retire.