More and more Americans every year rely on Medicare for health insurance after they retire. Yet it can be difficult to get the answers you need in order to understand this complicated federal program fully. Below, we've compiled some of the most common questions that people have about Medicare, and provided simple answers that will help you get started on integrating the program into your broader financial plan for retirement.
1. How does Medicare eligibility work?
Most workers can claim Medicare when they turn 65, though people with end-stage renal disease, Lou Gehrig's disease, or certain disabilities can sign up earlier. U.S. citizens and those who've lived legally in the U.S. for the past five years can generally get benefits; the amount you'll pay for them depends on how long you or your spouse worked and contributed payroll taxes into the Medicare system.
2. What are the differences between Medicare Parts A, B, C, and D?
Medicare coverage gets broken up into four parts, each of which gets an alphabetical designation. Coverage for hospital and most inpatient care gets provided by Medicare Part A, while Part B is responsible for doctor visits and other common outpatient medical expenses. Prescription drug coverage is provided under Medicare Part D. Most people refer to Part C coverage as Medicare Advantage: It offers the same general overall coverage options as Medicare, but is run through private health insurance companies, many of which add further benefits that can be of value to retirees.
3. Do I have to pay for Medicare Part A?
Hospital and inpatient coverage under Part A is free if you or your spouse worked 10 years or longer in a job that paid into the program through payroll taxes. If you don't meet those guidelines, then premiums of $232 to $422 per month can apply, depending on whether you have at least 30 quarters of qualifying work or not.
4. What services does Part A include?
Charges you incur for necessary medical procedures in hospitals, skilled nursing facilities, hospice facilities, and sometimes nursing homes are typically covered under Medicare Part A. You can also get payments for home health services. Medicare doesn't pay all of those expenses: There's an upfront deductible (it's $1,340 in 2018) and rising copayments depending on how long you have to remain at a covered medical facility.
5. Do I have to pay for Medicare Part B?
Medical outpatient coverage under Part B comes at a cost, even for those whose payroll taxes have gone into the Medicare system for their entire careers. Premiums for 2018 are typically $134 per month, although high-income individuals can pay as much as $428.60 per month if they make more than $160,000 for individual filers or $320,000 for joint filers.
6. What services does Part B include?
Regular doctor visits and annual physicals are the most common items paid for by Medicare Part B, but you can also get coverage for things like wheelchairs, ambulance costs, and ordinary preventive procedures such as flu shots. The services must be medically necessary or preventive in order to qualify for coverage, and Medicare typically pays 80% of costs, leaving you with a 20% copayment.
7. Do I have to pay for Medicare Part D?
There are many different prescription drug plan offerings under Part D, and their costs can vary widely. In general, cheaper plans cover fewer drugs or have higher deductibles and copayments, while more expensive plans offer coverage on a greater number of drugs and carry lower out-of-pocket costs. As with Part B premiums, high-income individuals pay surcharges for their Part D coverage that can add as much as $74.80 per month to the ordinary charge for a prescription drug plan.
8. What drugs does Part D cover?
Medicare Part D plans have to tell you which drugs are included in their coverage, but when evaluating a plan, there's no substitute for going through the list yourself to make sure that your prescriptions are covered. The last thing you want to do is pay for a plan that doesn't actually give you the coverage you need.
9. What does Medicare not cover?
As you can see above, Medicare plans don't pay 100% of the costs even for covered services. More importantly, there are many healthcare related expenses that it doesn't cover at all, such as long-term care needs that don't include medically necessary services. Many retirees find it helpful to combine Medicare with a Medigap supplemental policy, as well as a long-term care insurance policy. Layered together, these can help you avoid large out-of-pocket costs.
Medicare provides a vital service to older Americans, but you need to know what the program will do for you in order to make the most of it. These questions aren't the only ones you'll have about it, but the answers will get you moving in the right direction toward getting the coverage you need.