As people age, healthcare becomes a critical aspect of everyday life. Medicare is the government-funded health insurance program in the US that provides essential medical coverage to individuals aged 65 or older. Medicare is a crucial resource for people who need medical and preventative care. It’s important to understand its benefits and limitations, even if you are not yet 65 years old. We take an in-depth look at Medicare, how it works, who is eligible, and what services it covers (or doesn’t in many cases).
- What Is Medicare?
- How Much Does Medicare Cost?
What Is Medicare?
Medicare is the largest federal health insurance program in the US. Medicare was established in 1965 by President Lyndon B. Johnson. Prior to Medicare, there were very few insurance options for older adults.
Medicare covers individuals 65 years and older, as well as some younger individuals with disabilities or permanent kidney failure. Medicare is funded by the federal budget, Social Security, taxes, and members’ premiums.
Does Your 65th Birthday Mean It’s Time to Sign Up for Medicare?
When you turn 65, you become eligible for Medicare and it is best to sign up as soon as your eligibility window opens. The ideal time to enroll is within the three-month window before you turn 65. By taking advantage of this initial enrollment window, your Medicare coverage will take effect in the first month you turn 65.
How Do I Sign Up for Medicare?
Once you are eligible, you can sign up by applying through Social Security online. The online method through Social Security is the fastest way to apply. You can also contact their hotline number at 1-800-772-1213 or 1-800-325-0778.
How Much Does Medicare Cost?
Medicare costs will depend on several factors. The plans you choose to buy, where you purchase the plan, your income, and sometimes your age. It is best to have a good understanding of your coverage needs, so you can better manage the costs ahead.
Here is an overview of the average cost people pay for each part of Medicare:
Medicare Part A
The majority of enrollees don’t have to pay anything for Part A. You contribute to Social Security and Medicare taxes each time you receive a paycheck. If you’ve worked for more than 10 years, you will be eligible for Medicare Part A for free. Those who don’t qualify will pay anywhere from $272 – $499 per month (in 2022). The exact amount will depend on how much Medicare taxes you have paid.
Medicare Part B
The cost of Medicare Part B in 2022 is $170.10 per month for most enrollees. The rate will adjust based on gross income. Those who earn $91,000 or less will have a monthly premium of $170.10. High earners pay a higher premium.
Medicare Part C
Part C (also called Medicare Advantage) is a private health insurance product. Premiums are not standardized and will vary depending on the plan you choose. There are less expensive plans that cost around $20 and there are also plans that can be hundreds of dollars.
Medicare Part D
Medicare Part D premiums will also vary based on the plan you choose and your income. Enrollees who earn more than $91,000 will pay an extra fee besides a plan’s premium based on the Income Related Monthly Adjustment Amount (IRMAA). Per Medicare, the average national premium for Part D in 2022 is $33.37.
What Does Medicare Cover?
Medical, supplies and equipment coverage will depend on the particular components of Medicare you decide to purchase. Medicare is divided into four parts: A, B, C, and D, which all cover different benefits. Read on for a clear breakdown:
Medicare Part A
Medicare Part A (hospital coverage) covers hospital costs. These include inpatient hospital stays and nursing facilities. It can also cover some home health and hospice care. Most people don’t have to pay for Part A. They have already paid Medicare taxes while working. Part A can still be acquired by paying a monthly premium if you don’t qualify for premium-free Part A.
Medicare Part B
Medicare Part B (medical coverage) pays for outpatient care, services from doctors and other health care providers, home health care, lab tests, and other medical screenings. Part A and B together are included in Original Medicare. If you don’t have Part B, you will need to pay a monthly premium to receive this type of medical coverage.
Medicare Part C
Part C is also known as Medicare Advantage, a specific type of health plan offered by private companies. Original Medicare only includes hospital and medical coverage. Medicare Advantage plans also include drug coverage or Part D. Some plans cover services like vision, dental, and audiology.
Medicare Part D
Part D helps pay for prescription drugs. This may be included in your Medicare Advantage plan. You can also purchase Part D separately if you want to add drug coverage to your Original Medicare.
What Is Not Covered by Medicare?
Medicare covers the majority of the health care needs of older adults. There are still some common medical expenses that you may need to pay on your own. One of the biggest misconceptions about Medicare is coverage for long-term care. Medicare does not pay for any room and board in any senior care facility except skilled nursing.
Medicare does cover the full cost of a certified skilled nursing facility for the first 20 days of a qualifying stay. Starting on day 21 through day 100, you are responsible for a $194.50 co-pay each day. After day 100, you are responsible for 100% of the cost of your stay.
- Routine eye exams and glasses
- Chiropractic care
- Cosmetic surgery
- Routine non-medical care for feet
- Hearing aids
- Most overseas medical care
- Long-term custodial care
- Private caregivers
- Medical alert systems
4 Tips for Managing Your Healthcare Costs on a Fixed Income
Healthcare costs can be daunting if you are not prepared, which is why it is important to plan ahead. Here are some strategies to help you manage.
Understand the costs. By knowing what costs are associated with your plan, it will be easier for you to prepare. Research premiums, deductibles, and other out-of-pocket expenses to make health care planning more practical. Make sure to sign up for Medicare during your enrollment period, otherwise, your premiums will be higher.
Make a budget. Once you’ve figured out the cost implications, draw out a course of action that will fit into your budget. Consider other non-medical expenses, fixed, and variable costs when creating your financial plan.
Choose the right health plan. Plan coverages and their costs vary. To ensure that your hard-earned money will be going to the right place, it is important to know which plans are best for your specific health needs. Be aware of coverage limitations and don’t overspend on something that won’t be beneficial in the future. Take advantage of the yearly open enrollment period. This is the time to compare costs and perhaps switch to a new plan.
Consider a Medicare supplement. Medicare doesn’t pay for all your healthcare costs. You will want to explore supplemental insurance, like Medigap, which covers the out-of-pocket costs in your health plan.
Can You Qualify for Both Medicare and Medicaid?
Yes, if you qualify for both programs, you can be covered by both Medicare and Medicaid. Being dually eligible will have most – if not all – of your health costs covered. Medicaid will cover any additional costs after Medicare has paid its portion.
Dually eligible plan holders are automatically enrolled in the Extra Help program. This will cover prescription drug costs. Medicaid eligibility and requirements will differ depending on the state you reside in.
Take the time to understand Medicare policies, coverage, and costs. It’s important to explore other essential health support systems available like Medigap policies. There are several things to know about Medicare before you turn 65:
- Medicare is the largest federal health insurance program
- Medicare enrollment starts three months before you turn 65
- Sign-up is easy through the Social Security website
- Medicare has four parts that cover different aspects of healthcare
- Some things are not covered by Medicare like hearing aids, eye exams, and custodial long-term care
- You can qualify for both Medicare and Medicaid at the same time
Medicare Frequently Asked Questions
Medicare is a health insurance program administered by the federal government in the US. Medicare covers healthcare services for people 65 years or older and younger individuals with end-stage kidney disease.
Medicare is divided into 4 parts. Part A helps with hospital and skilled nursing facility coverage. Part B pays for medical coverage. Part C can be acquired through private insurance companies. Part D covers the cost of prescription drugs.
You can only receive Medicare if you meet eligibility requirements. If you have worked for more than 10 years, have contributed to Social Security, and paid Medicare taxes through your employer, you are eligible for Medicare hospital coverage for free.
Yes, you can still receive Medicare even if you have never worked. You will have to pay a monthly premium, which will be more expensive. If your spouse has paid their full Medicare taxes while in the workforce, you may still get premium-free eligibility through them.
Amie Clark, BSW
Aging Advocate and Senior Care Expert
Amie has worked with older adults and their families for the past twenty-plus years of her career. Her senior care knowledge is based on her experience as a social worker, family caregiver, and senior care consultant. Learn more about Amie here.