Medicare provides essential medical benefits for tens of millions of Americans. Although the program can be extremely complicated, there are some simple numbers that nearly every Medicare participant should keep in mind. Below, we'll look at five of them and explain what you need to know about each one.
65 years old is the age at which you become eligible for Medicare. This causes some confusion, as the full retirement age on Social Security has risen to 66 and will rise further to 67 in future years. At least for now, though, calls to increase the eligibility age for Medicare haven't led to legislative action.
To apply for Medicare, you can complete an online application on the Social Security website. This works even if you haven't or don't want to apply for Social Security benefits at the same time. You can also find useful information there about your application options for both Social Security and Medicare and how you can coordinate the two programs in your retirement planning.
$104.90 (and $121.80)
Medicare Part B medical coverage charges participants a monthly premium. Most Medicare participants paid $104.90 per month for Part B premiums in 2015.
In 2016, the majority of those covered under Medicare will keep paying that same $104.90 monthly amount, thanks to legal provisions that prevent premium increases for Part B when there is no cost-of-living adjustment to Social Security benefits for the year. A lack of price pressure kept inflation under check in 2015, and that led to the lack of a COLA and the corresponding freeze on Part B premiums.
However, some participants, including new enrollees and those whose premiums are paid by state Medicaid programs, didn't get the benefit of what's known as the hold-harmless provision. As a result, they will see their Part B premiums rise 16% to $121.80 per month. Over time, this disparity should disappear, but it could take several years to do so simply because of how big the difference is right now. Indeed, the difference would have been much larger -- more than 50% -- without congressional action to prevent a bigger increase from taking place.
Medicare Part A hospital coverage doesn't charge a premium, but it does require a deductible for inpatient hospital care. For 2016, that amount will rise to $1,288, up $28 from its 2015 level.
The deductible is the only thing patients pay for the first 60 days of covered hospital expenses, with Medicare picking up the rest. After that, participants must make a copayment of $322 per day for the 61st to 90th days of their hospital stay. Beyond 90 days, participants must use up their 60 lifetime reserve days, for which a copayment of $644 per day is due. All told, Medicare covers a huge amount of hospital expenses even once these copayments start taking effect.
Most prescription drug plans under Medicare Part D come with what's known as a coverage gap, which is also known as the donut hole. This provision represents the point at which Medicare's initial coverage stops covering drug expenses but before catastrophic coverage provisions kick in. For 2016, the coverage gap begins once the combined total that you and your plan have paid on covered pharmaceuticals reaches $3,310.
Once you hit the coverage gap, you're responsible for covering 45% of the plan's cost for brand-name drugs. The plan itself pays 5%, and the manufacturer of the drug covers the other 50%. For generic drugs, you'll pay 58%, and Medicare pays the remaining 42%. With brand-name drugs, even though you pay only a limited amount, you get credit for having paid the drugmaker's share as well for purposes of triggering out-of-pocket maximums. Once you hit that out-of-pocket limit -- which is $4,850 for 2016 -- your plan goes back to covering the vast majority of the cost of your prescription drugs.
Medicare confuses many people, but its basic elements are quite simple. Knowing these five numbers will take you a long way toward understanding parts of Medicare that all of the program's participants really ought to know.
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