The Basics of Medicare

Medicare can be confusing, but I can simplify it for you by breaking it down. Let’s start with the basics of Medicare. In this article we will answer two questions to get started. What is Medicare and what are the 4 main parts of Medicare.

What is Medicare?

Medicare is health insurance available to almost all seniors when they turn age 65. It is available to people under age 65 with certain disabilities or End Stage Renal Disease. Most people get Part A automatically and free if either spouse worked and paid Medicare taxes for at least 10 years.

If you start Social Security before age 65, Medicare enrollment is automatic. If this is the case your Part B will be deducted monthly from your Social Security. If you are not already signed up for Social Security, then you will be billed quarterly for Part B.

Your initial enrollment period lasts 7 months. It begins 3 months before your 65^th birthday, includes your birthday month, and lasts 3 months after you turn 65.

If you have Creditable group health insurance, then you may delay enrolling in Part B without a penalty. If you are actively working or getting coverage through a working spouse. If getting coverage from an employer or less than 20 employees, it is recommended you sign up for A and B regardless of work status.

What are the 4 main parts of Medicare?

Part A:

Hospital, skilled nursing, hospice, some home health.

Part B

Doctors services, outpatient services, lab test, medical equipment, preventative services.

For 2020, the standard Part B premium is $144.60.

Higher incomes have an adjustment to their part B premium referred to as IRMAA (Income-Related Monthly Adjustment Amount). The screen will show this adjustment. To calculate IRMAA you would look back at income from 2 years prior. So, if you retire in 2020 then you will use your 2018 income to see if the IRMAA adjustment applies. You could appeal the IRMAA tax if you had a big income change over the 2-year period. You would appeal with Social Security.

Part C

Although there are 4 Parts of Medicare, there are 2 distinct paths. You must choose one or the other. The first path is original Medicare where you receive Parts A & B and typically add Part D drug coverage. You can choose to add a Medicare supplement and part D stand-alone drug plan.  Path 2 is Medicare Advantage. If you choose this path, you will still pay your Part B Premium. But you will get Parts A & B and all of your insurance through a private insurance company. With Medicare Advantage all your insurance, including your prescription drug insurance, is combined. There is typically a network of Doctors and hospitals. There are pros and cons to each type of coverage. I have separate videos that compare the pros and cons of original Medicare versus Medicare Advantage. Actuarially, Original Medicare and Medicare Advantage are equivalent.

Part D

Part D is for prescription drug coverage. You purchase Part D if you are staying in original Medicare. Just like Part B, the IRMAA adjustment effects Part D for those who have a higher income. Also, part D plans are given a star rating from 1 to 5 stars from the Center for Medicare & Medicaid Services. If you choose Medicare Advantage, then generally the plan will include Part D.  However, there are Medicare Advantage only plans.

It isn’t difficult to see why people get so confused when it comes to making decisions around Medicare but rest assured that we are here to help. We can walk you through the decisions, the timelines and more so that you feel confident in your decision and your coverage.