Those reaching age 65 have likely started to become bombarded by all the Medicare solicitation; from Medicare brochures, 50 phone calls a day, to people knocking on your front door, the Medicare transition can be overwhelming and confusing. Luckily, you aren’t alone on this journey! In fact, 3.8 million U.S. citizens turned 65 years old in 2019. It’s important to become familiar with Medicare before you reach age 65 to understand the Medicare pricing, enrollment periods, parts, and plans. Here are the five key points about Medicare in 2022.
1. When to apply for Medicare
Most seniors will apply for Medicare during their Initial Enrollment Period (IEP). The IEP is different for every beneficiary since it’s based on your 65th birthday month. The IEP is a seven-month window that begins three months before your 65th birthday month and ends three months after.
During this time, you can apply for Medicare Part A and Part B through the Social Security office either over the phone, online or in person. If you fail to apply for Medicare during your IEP and are not covered by creditable coverage from a large employer, you will be charged a lifelong late enrollment penalty. It’s recommended to mark your IEP on your calendar to ensure you do not miss this enrollment period!
2. There are two parts to Medicare
Medicare has two parts: Part A and Part B. Medicare Part A provides inpatient hospital care whenever you are admitted to the hospital. Part A covers a semi-private room, three meals a day, medications, and lab services as an inpatient. Part A can cover you outside the hospital for certain services. For instance, Part A covers home health care, hospice, and skilled nursing.
Part B covers your outpatient care, such as doctor’s office visits, preventative care, ambulance rides, certain vaccinations, durable medical equipment, and more. Without Part B or another form of coverage, you will pay the total cost for these types of outpatient services.
There are some services Medicare does not cover, such as routine dental, hearing, and vision services. Medicare also does not cover prescription drugs, which we will discuss next.
3. Medicare does not cover prescription drugs
According to Kaiser Family Foundation, 89% of adults who are 65 years and older currently take prescription medicine. With such a large number of seniors taking medications, private insurance carriers rolled out Part D drug plans for drug coverage.
Part D plans are entirely separate from Original Medicare since Medicare does not cover medications. A standalone drug plan can help you access medications at a more affordable rate. Since private insurance companies sell these plans, every plan will have a different premium, deductible, and drug formulary. When shopping the Part D plans in your area, you will want to ensure you purchase a plan with your current medications listed on the plan’s drug formulary (a list of drugs your plan covers). If you enroll in a Part D plan and find that the plan doesn’t cover your prescriptions, you will pay the total amount for your prescription.
4. Medicare comes with a cost
Medicare does come with some costs; however, Part A is free for many. Those who worked at least 40 quarters (ten years) in the U.S. and paid FICA taxes will have a $0 premium for Medicare Part A. Those with less than 40 quarters will pay either $274 or $499 per month in 2022, depending on how many quarters they have. However, if your spouse has the full 40 quarters, you can qualify for a premium-free Part A through them.
You will pay for Part B no matter how many quarters you worked. In 2022, the standard Part B premium is $170.10 per month. The Social Security office determines your Part B and Part D premiums every year, and they base it on your tax returns from two years prior.
In 2022, if your taxes show that you made more than $91K individually or $182K jointly in 2020, you would pay more for your Part B and Part D premiums. This additional charge is called an income-related monthly adjustment amount (IRMAA). If you no longer make the same high income as you did two years ago, you can file an IRMAA appeal to get your Part B and Part D premiums to be reduced.
5. You have Medicare plan options
There are many preventative services Medicare will cover in full, such as the Annual Wellness Visit or certain vaccinations. However, you will have out-of-pocket costs for many of your other services. For example, you are responsible for Medicare deductibles, copays, and coinsurance. Due to these out-of-pocket expenses, many seniors purchase a Medigap or Medicare Advantage plan for cost-sharing help.
Private insurance carriers and Medicare brokers sell Medigap plans, also known as a Medicare Supplement. Medigap plans are secondary coverage to Medicare Parts A and B. If Medicare covers a healthcare service, so will a Medigap plan. Medigap plans are favored by many since they give you predictable healthcare costs for the year and no network restrictions. You can visit any doctor across the U.S. and use a Medigap plan if the doctor takes Medicare for insurance.
There are ten standardized Medigap plans on the market and two high-deductible plans. Medigap premiums are based on several factors, such as your gender, age, carrier, and zip code. So, it’s beneficial to work with a Medicare broker that represents multiple carriers to ensure you enroll in the most cost-effective plan in your area.
Medicare Advantage plans, also known as Part C, are sold by private insurance carriers, as well. However, these plans are entirely separate from Medicare and Medigap plans. Whenever you enroll in a Medicare Advantage plan, you will get your Parts A, B, and D benefits through the private insurance carrier.
Since you will receive your Medicare benefits solely from the private insurance carrier, the provider will set your cost-sharing amounts and network of doctors and pharmacies to visit for your healthcare.
Advantage plans typically have a lower premium in exchange for more out-of-pocket costs. However, unlike Original Medicare, Advantage plans have an out-of-pocket maximum (MOOP), which sets a limit of how much you can spend in a year. In 2022, the MOOP is $7,550. A carrier can set the MOOP to be lower than $7,550, but a carrier cannot increase this amount.
Medicare Advantage plans can include additional benefits Medicare does not usually cover, such as routine dental, hearing, and vision. But it would be best if you didn’t enroll in an Advantage plan solely for the additional benefits since the carrier can take them away the following year.
Understanding Medicare can be overwhelming, which is why it’s best to begin your Medicare research before you reach age 65. For more Medicare information, visit Medicare.gov or reach out to a licensed Medicare broker in your state to get started on your Medicare journey.