Here’s What You Need to Know
The Medicare system can feel overwhelming. From knowing the difference between Medicaid and Medicare to questions about enrollment and benefits, it can be difficult to sort through all the information available and see where you fit in. This article will help it all make sense.
Medicaid is funded jointly by the states and the federal government. It is administered by the states according to federal guidelines. It provides health coverage for those who meet the eligibility requirements—low-income adults, children, people with disabilities, pregnant women, and the elderly. To be eligible for Medicaid coverage, individuals must meet financial eligibility requirements and some non-financial criteria.
Medicare, on the other hand, is the program that provides health coverage to folks age 65 and older. Individuals become eligible at age 65 even though their full retirement age for Social Security may not be until age 66 or 67. If individuals are receiving Social Security, they can choose to have their Medicare premium deducted from their Social Security check. Otherwise, they will receive a bill for the cost of the premiums.
Individuals have a seven-month window to apply for Medicare: three months before the month they turn 65, the month of their birthday, and three months after. For example, if a person will turn 65 in February, 2018, they can apply for Medicare any time from November 1, 2017 to May 31, 2018. If you don’t apply during this seven-month window, your Medicare premium will be increased by 10% for every 12-month period you don’t enroll. This penalty increase will last for the rest of your life. It is best to enroll during the early part of the seven-month period to avoid a medical coverage gap. If you enroll during your birthday month, you will have a one-month gap in coverage. If you enroll later, your coverage gap will increase, up to six months.
If you are still working at age 65 and participate in your employer’s group health insurance plan or are covered under your working spouse’s group health insurance plan, your enrollment window starts the month your group health coverage ends or your employment ends, whichever comes first.
Medicare has three parts with co-pays and deductibles:
Part A covers inpatient hospital care, nursing home, hospice, lab tests, surgery, and home health care. There is no premium for Part A for individuals who have at least 40 work credits during their working lives which is essentially 10 years of work.
Part B covers doctors and other health care provider services, outpatient care, durable medical equipment, home health care, and some preventive services. Generally, Medicare pays 80% of these costs. Premiums are based on the participant’s income. They start at $134 per month for individuals earning less than $85,000 and increase up to $428.60 per month for participants earning $214,000 or more.
Part D covers prescriptions and is purchased from private insurers under contract with the Centers for Medicare and Medicaid Services. Even if you don’t currently take prescription medications, you should still enroll for a Part D plan to avoid penalties in the future if you do need to start taking prescriptions. If you are taking medications, it is important to review your Part D plan each year to ensure that your prescriptions are covered and that you are not paying for more insurance than you need.
The most important thing you need to remember about Medicare is to apply during the three months before the month you turn 65. This will ensure you avoid lifelong premium penalty and also avoid any coverage gaps.
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.