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When you blow out the candles on your 65th birthday, you'll have extra reason to celebrate. For most people, Medicare eligibility begins at 65, although some people with certain disabilities qualify sooner. But Medicare is a complex federal health insurance program that can get confusing quickly. We'll walk you through the basics of how Medicare works.
Medicare is a federal health insurance program that helps older Americans and those with disabilities pay for medical care. Most people qualify for Medicare once they turn 65. If you receive Social Security Disability Insurance (SSDI), you'll also qualify after two years. If you're younger than 65, you may also be eligible immediately if you have end-stage renal failure or ALS (also known as Lou Gehrig's disease).
Unlike Medicaid, a state-federal health program that's only available to certain individuals and families with low incomes, Medicare eligibility isn't based on income or assets. Requirements are similar to the eligibility rules for Social Security. Most people will be eligible if they worked for at least 10 years (or if their current or former spouse did) and paid Medicare taxes.
There are four different parts of Medicare. Here's what each one covers:
You're automatically enrolled in Medicare Part A if you're receiving Social Security when you turn 65. But if you're not yet taking benefits, you'll have a seven-month open enrollment period to enroll around your 65th birthday. If you miss the seven-month window, you'll have to delay coverage and pay permanent late penalties on Part B premiums.
Although Medicare covers a lot of vital healthcare for older people and those with disabilities, there are several important things that aren't covered by Original Medicare. Some of these services may be covered if you choose a Medicare Advantage plan:
Of all of the services Medicare doesn't cover, the biggest concern for most people is long-term nursing care. Although Medicare will typically cover inpatient stays for rehabilitation purposes -- for example, if you fall and break a bone or are recovering after surgery -- it generally won't pay for ongoing nursing home care.
To afford long-term care, many people have to deplete their resources by paying out of pocket until they qualify for Medicaid. Given that a semi-private room in a nursing facility costs an average of $7,908 a month, according to the 2021 Cost of Care Survey by Genworth, many people in need of skilled care can quickly burn through their life's savings.
To pay for the services Medicare doesn't cover, it's worth considering long-term care insurance, although the costs are often prohibitively expensive. To help with other healthcare costs in retirement, choosing a high-deductible health plan (HDHP) that allows you to fund a health savings account (HSA) may make sense. Any unused money stays with you, and distributions are always tax- and penalty-free if you use them for qualifying medical expenses.
