What You Need to Know About Medicare

Make sure you know the basics of this key program.

Dan Caplinger
Dan Caplinger
Jun 11, 2017 at 7:47AM
Investment Planning

Medicare provides key health benefits for older Americans, and most people seek to become part of the Medicare program as soon as they can. Yet Medicare isn't always easy to understand, and there are some things you have to know in order to take full advantage of the program. Here are some answers to the most commonly asked questions about Medicare and what role it plays in your overall health coverage during your retired years.

When can I get Medicare?

Most people become eligible for Medicare on their 65th birthday. The initial enrollment period starts three months early, so as soon as you're 64 years and nine months old, you can get your application in.

There are a couple of reasons to sign up for Medicare as soon as possible. First, signing up before you turn 65 ensures that your coverage will kick in on your 65th birthday. That will avoid any delays that can apply to late filers, which can amount to several months and cause some headaches if you have healthcare costs after you turn 65 but before your Medicare coverage begins. The later you wait in the initial enrollment period, the longer it takes Medicare to start your coverage, so it pays to get an early start.

Medicare chart with stethoscope.

Image source: Getty Images.

Also, if you don't sign up for Medicare during the initial enrollment period, then late enrollment penalties can apply. Parts B and D of Medicare have particularly onerous penalties, and some of them can result in higher premium payments for the rest of your life. As you'll see below, there are some cases in which enrollment deadlines are extended, but you'll still want to keep a close eye on your particular situation to make sure you don't inadvertently trigger penalty provisions.

What coverage choices do I have?

One big decision you need to make is whether to go with traditional Medicare or Medicare Advantage. Traditional Medicare is administered through the federal government and offers standard hospital and medical coverage, along with optional prescription drug coverage under Part D. Medicare Advantage uses private insurers that offer insurance coverage that's similar to what Medicare offers. Medicare Advantage plans have slightly different ways of providing coverage, and you can often get prescription drug coverage within a single policy rather than getting separate coverage under Part D.

Costs among Medicare Advantage plans vary greatly, and that can have a big impact on which choice is better for you. In general, your health condition and the particular charges that a Medicare Advantage plan covers will help determine whether traditional Medicare or Medicare Advantage is the smarter pick for you.

What if I still have other healthcare coverage?

Those who are working or who have a spouse who's working might still have access to group health plan coverage. For them, the question is whether it makes sense to sign up for Medicare. The rules typically allow for penalty relief as long as you have qualifying coverage, and when your outside coverage ends, you can use a special enrollment period to get your Medicare coverage started.

You'll need to consult with your employer or spouse's employer to see what role Medicare will have in your overall coverage. For employers with 20 or more employees, the group health plan has primary responsibility for healthcare expenses, leaving Medicare in a secondary role and therefore making it not as important for those who have both types of coverage at the same time. However, for smaller employers, group coverage only provides secondary payments behind Medicare, and that makes Medicare more important for your overall coverage. Take the time to talk to your HR department about the matter and find out where you stand.

What's the process for applying for Medicare?

Medicare has done everything it can to make the application process as simple as possible. In fact, if you're already receiving Social Security before you turn 65, then you'll typically get enrolled automatically for both Part A hospital coverage and Part B medical coverage when you hit your 65th birthday. In that situation, you'll typically get your Medicare card shortly before your 65th birthday. If you don't want Medicare coverage, you'll have to contact the agency to undo the automatic Medicare enrollment. You can call the SSA toll-free at 1-800-772-1213 on weekdays from 7 a.m. and 7 p.m., or visit a local Social Security office in person, using the fact that Social Security and Medicare interact extensively in providing service to older Americans.

For those who aren't automatically enrolled, the Social Security Administration website offers an online application for Medicare. If you want to apply for Medicare only, then this link will take you where you need to go. If you also want to apply for Social Security and Medicare together, then the link will also guide you in the right direction.

Taking Medicare is an important step, and you need to get it right. By keeping these ideas in mind, you'll be better prepared to make Medicare work harder for you.