If you're approaching 65, you might be counting the days until you're eligible for Medicare. Before you reach that point, however, there are a few things you should know about the Medicare program and what you'll need to do before your 65th birthday.
What is Medicare?
Medicare is the national health insurance program in the U.S., and has been administered by the federal government since 1966. The program provides health insurance to Americans over 65, as well as to people with certain disabilities. In all, Medicare provides health insurance for more than 55 million people as of 2015.
The parts of Medicare
When you hear about Medicare, you'll probably hear about the different parts. There are four of them, and all refer to different types of coverage, so here's a quick breakdown of what's what.
- Medicare Part A (hospital insurance): This covers inpatient hospital stays, skilled nursing facilities, hospice care, and some home healthcare. This is the part funded by your payroll taxes, and for most people, doesn't come with a premium to pay.
- Medicare Part B (medical insurance): This covers visits to your doctors, outpatient care, medical supplies, and preventative care. Medicare Part B is premium-funded.
- Medicare Part C (Medicare Advantage Plans): These plans are offered through private companies contracted through Medicare to provide Parts A and B benefits.
- Medicare Part D (prescription drug coverage): An add-on coverage to Medicare, this is offered by insurance companies and other private providers. Some Medicare Advantage plans offer prescription drug coverage as part of their services.
For the most part, when discussing Medicare, I'm referring to parts A and B. As you'll see in a minute, these are the parts managed by the federal government. Most Americans over 65 have both of these parts, and they are also referred to as "original Medicare."
How to enroll in Medicare
If any of these criteria apply to you, you'll automatically get enrolled in Medicare Parts A and B:
- You already get Social Security benefits or retirement benefits from the Railroad Retirement Board (RRB). In this case, you'll automatically get Medicare Parts A and B on the first day of the month you'll turn 65.
- You've gotten SS or RRB disability benefits for 24 months.
- You have ALS (Lou Gehrig's disease). In this case, you'll get Parts A and B the month your disability benefits begin.
If you're automatically enrolled, you can expect to receive your Medicare card in the mail three months before you'll be eligible for benefits.
If none of the above criteria apply to you, you'll need to sign up. You'll have a seven-month initial enrollment period, which for those eligible by age starts three months before the month you turn 65 and extends through the three months after you turn 65. You can sign up anytime you want (once you're eligible), but failing to sign up during your initial enrollment period can result in permanently higher Medicare premiums later. The general enrollment period for Medicare runs from Jan. 1 through March 31 each year.
By far, the easiest and fastest way to sign up is online at the Social Security Administration's (SSA) website. This should take you about 10 minutes; you'll have no forms to sign, and no additional documentation is typically required. If you already have Part A and just need Part B, there is a separate application to use. You also have the option to apply at your local Social Security office, or by phone. If you choose the in-person option, it's generally a good idea to make an appointment first.
Do you need Medicare if you have other insurance?
There's not a yes or no answer to this question, unfortunately. If you're getting close to 65 years old and are still covered by an employer's plan, you should ask your benefits administrator if they require you to sign up for Medicare.
If it's not required by your employer, there's no immediate need to enroll in Medicare during your initial enrollment period. In this case, you'll be granted a special enrollment period that begins the month after your coverage or employment ends, whichever comes first, and lasts for eight months.
However, if any of the following situations apply to you, you'll need to enroll in Medicare, even if you have other health insurance:
- Your employer requires you to enroll in Medicare at 65.
- You retire and are allowed to keep your employer's coverage. This is not considered employer-based coverage and you won't get a special enrollment period later on.
- You have insurance under COBRA.
After you apply for Medicare, you can still keep your other insurance, but Medicare becomes your primary form of health insurance. Any healthcare charges will be submitted to Medicare first and any remaining costs will go to your other insurance carrier.
Will you need supplemental insurance?
On average, Medicare covers about half of healthcare charges for enrollees. The remainder must be paid out-of-pocket, by separate medical insurance, or through supplemental insurance.
Many Medicare recipients without separate insurance coverage choose to buy a supplemental insurance plan, also known as a Medigap plan. Different Medigap plans offer different benefits and have different costs, so here's a thorough look at these if you'd like to learn more.
The future of Medicare
You may have seen some gloom-and-doom headlines about how Medicare is "bankrupt" or something to that effect. So, as a final topic, let's separate fact from fiction so you'll have a realistic idea of what to expect in the years ahead.
It's true that the Medicare trust fund is projected to run out of money by 2028, but the situation isn't as extreme as that makes it sound. In fact, Medicare is projected to run at a surplus from 2016 through 2020 before the deficits begin. And, once the reserves are depleted in 2028, the incoming payroll taxes that fund Medicare Part A will be sufficient to cover 87% of the hospital insurance program's cost.
To be perfectly clear: As a worst-case scenario, Medicare benefits would have to be cut by 13% in about 12 years. It's also worth mentioning that this only affects Medicare Part A. Parts B and D receive their funding from general revenue as well as beneficiary premiums, and keep their reserves in a separate trust fund which is in no danger of being depleted.
Finally, history tells us that Congress will step in and fix the issue. Medicare taxes have been increased several times throughout history, and have recently been increased on high earners and certain investment income, which is the primary reason for the short-term surplus. There are several ways Medicare can be fixed (benefit reductions, higher taxes, increased eligibility age, etc.), but the point is that senior citizens have no need to fear about the future of their Medicare benefits.
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