Your 65th birthday once seemed far off on the horizon, but now it’s knocking at your front door. Lately, your daydreams drift toward retirement: living life by your own calendar, maybe some travel, volunteer work, cooking classes, Medicare. …
Medicare? Buzzkill alert!
There's no escaping the reality, though, that planning for retirement also means planning for how you'll pay for health care. You need to learn the basics of Medicare, a program many people don't really think about until it's time to sign up.
What Is Medicare?
Medicare is the national health insurance system that Americans qualify for if they're 65 or older or have certain disabilities. The program was signed into law in 1965. Today, it covers about 63.1 million Americans.
Medicare is run by the U.S. Centers for Medicare and Medicaid Services agency. It's not the same as Medicaid, which is an assistance program that serves low-income people of every age.
The coverage works something like insurance you get through your job. You may have to pay deductibles, coinsurance, and sometimes copays. For most types of Medicare coverage, you also pay monthly premiums. (Most people don't pay premiums for hospital coverage, called Part A.)
But you enjoy advantages under Medicare that you don't with private insurance. Yes, Medicare premiums rise as your income does. But they're still generally cheaper than with an employer’s plan.
Who Qualifies for Medicare?
Let’s say your 65th birthday is fast approaching. You and your spouse have had Medicare taxes deducted from your paychecks, or paid them directly to the government, for at least 10 years. Here’s how you can join Medicare and get no-premium Part A hospital insurance:
- If you get payments from Social Security or the federal Railroad Retirement Board (RRB) for at least 4 months before you turn 65, you don’t need to enroll. You automatically get Part A, plus Part B medical insurance, starting the first day of your birthday month. (For example, it would start on Dec. 1 if your birthday is Dec. 30). Once your Medicare card arrives in the mail, you’re all set.
- If you're not getting Social Security or RRB benefits, you need to register for Medicare with the Social Security Administration. The 7-month initial enrollment period starts 3 months before your 65th birthday month and ends 3 months after.
If you don’t qualify for no-premium hospital insurance, you can buy Part A coverage for a monthly premium. In 2021, the premium was either $259 or $471, depending on how long you paid Medicare taxes.
Also, some people can start Medicare well before they turn 65 -- for example, if you:
- Have gotten Social Security Disability Income (SSDI) payments, or certain RRB disability payments, for at least 24 months. “If you get those payments, you automatically are enrolled in Medicare,” says Casey Schwarz, JD, senior counsel of education & federal policy at the Medicare Rights Center. Look for your Medicare card in the mail 3 months before your 25th month of disability payments.
- Have amyotrophic lateral sclerosis (also called ALS or Lou Gehrig’s disease) and have applied for SSDI. You're automatically enrolled in Parts A and B, and you will get your Medicare card the month your disability benefits start.
- Have end-stage kidney (renal) disease. You can choose to enroll in Medicare to cover some dialysis or kidney transplant services. “Your doctor’s office usually helps you enroll, which makes the paperwork a lot easier on you,” Schwarz says.
Medicare Hospital Coverage (Part A)
Original Medicare’s hospital insurance (Part A) pays for your stay in any hospital that takes part in Medicare. It also covers care you get:
- In a skilled nursing facility after you get out of a hospital
- In a hospice
- In some cases, through home health care
Part A covers rehabilitation, but not personal care, at skilled nursing facilities and by home health care workers, says Lina Walker, PhD, vice president of health security for the AARP’s Public Policy Institute.
Medicare Medical Insurance (Part B)
Medicare Part B medical insurance pays for:
- Services from doctors who take part in the program
- Some outpatient and home health care services
- Durable medical equipment (things like blood sugar testing devices, wheelchairs, and oxygen tanks)
You pay for this coverage. The standard premium in 2021 is $148.50 a month. If your "modified adjusted gross income" (MAGI) from your most recent U.S. tax return is more than $88,000 for you (or $176,000 for you and your spouse if you file jointly), your premium may be more.
Put simply, “Part B coverage is basically for outpatient care,” says Tatiana Fassieux, a training specialist with California Health Advocates and Medicare counselor for five northern California counties.
That category covers more than it used to, she says.
In recent years, she says, Medicare has “been able to have more and more traditionally inpatient services treated under outpatient coverage, thanks mostly to improvements in medical technology.”
Beyond Original Medicare
If you want prescription drug coverage, you need to also buy Part D coverage or a Medicare Advantage plan (Part C) with drug benefits. Both types are run by private companies that contract with Medicare. You may have to pay a monthly premium to enroll in these plans. You must enroll in Original Medicare to be eligible for them.
Medicare Advantage plans usually also offer other benefits, like vision and dental coverage. But these plans require you to use doctors who are in your plan's network and follow your plan’s rules.
Help With Medicare Costs
Depending on your income, you may qualify for help paying your Medicare premiums. The Medicare Shared Savings Program is part of your state’s Medicaid programs. It can help you pay for Part B premiums, as well as Part A premiums if you pay them. To find out if you qualify, contact your state’s Medicaid program.
There's also a program to help you pay for Medicare Part D programs, called Extra Help. You can apply through your local Social Security office or state Medicaid program.
To get individual help understanding your Medicare benefits, contact your local State Health Insurance Assistance Program (SHIP). Trained SHIP counselors will give you free, unbiased, and one-on-one advice and answer your Medicare questions.