Why You Need to Understand Medicare Before You Turn 65
Medicare is a critical part of healthcare planning, and it's important to understand how this federal health insurance program applies to you before you turn 65. At RetireMed, we believe that educating individuals about Medicare is just as important as helping them find the right health coverage for their needs. Here’s why it's necessary to understand Medicare before age 65.
You Need to Know When to Enroll
Enrolling in Medicare at the right time is critical to ensure you avoid penalties and gaps in coverage. Retirement is not a requirement for Medicare. If you don't enroll during your Initial Enrollment Period (when you’re initially eligible for Medicare) or you don’t have creditable coverage (coverage greater than or comparable to Medicare), you could face a lifetime penalty on your Medicare premium(s). Understanding when and how to enroll can help you prevent these issues.
As mentioned, your Initial Enrollment Period (IEP) is when you are first eligible for Medicare. More specifically, it’s a seven-month window that centers around your birth month, beginning three months before and ending three months after it. For example, if your 65th birthday is Nov. 20, your IEP would begin on Aug. 1 and end on Feb. 28. You can enroll in Medicare at any point during your IEP.
If you plan to delay your Medicare enrollment, you need to verify that your current coverage meets Medicare’s standards for creditable coverage. If you work for a company with fewer than 20 employees, you should enroll in Medicare Part A and B once you’re eligible because Medicare coverage is primary to group insurance if your employer has fewer than 20 employees.
If you delay signing up for Medicare when you’re first eligible and you don’t have creditable health coverage, you will face fees and penalties that stick with you for life. Our advisors can walk you through signing up at the right time to make sure you avoid any late enrollment penalties or a lapse in coverage.
You Need to Understand Your Coverage Options
Medicare has various parts and plans, and each one has different benefits, costs, and restrictions. Understanding your options in advance can help you make an informed decision about which plan is right for you.
The Parts of Medicare
Medicare consists of four basic parts: Part A, Part B, Part C, and Part D. Depending on your health insurance needs, you can get Medicare coverage through a combination of these parts.
Most individuals qualify for Medicare Part A (hospital insurance) and Part B (medical insurance) when they turn 65, so long as they or their spouse worked at least 10 years (40 quarters) and paid into Social Security taxes. Together, Part A and Part B are considered “Original Medicare.”
Medicare Part C, also known as Medicare Advantage (MA), offers an alternative to Original Medicare for medical and drug coverage. MA plans are all-inclusive plans offered by private insurance companies that are contracted and approved by Medicare. They roll Part A, Part B, and often Part D (prescription drug coverage) coverage into one plan. Although MA plans are required to provide the same basic coverage as Medicare Part A and Part B, these plans also feature extra benefits.
You must have Medicare Part A or Part B to enroll in Medicare Part D. Most standalone Part D plans have a monthly premium. You can save on this monthly premium, however, when you purchase a Medicare Part C plan, which often includes Part D coverage (MAPD).
Medicare Supplement Plans
Medicare Supplement plans, also known as Medigap, are health insurance policies sold by private insurance companies. Medicare Supplement insurance is designed to be paired with Medicare Part A and Part B to “fill in the gaps” that Original Medicare does not cover (such as copays, coinsurance, and deductibles). Many individuals choose these plans because they have very few out-of-pocket costs. It’s important to know that you will likely pay a much higher monthly premium for a supplement compared to a Medicare Advantage plan.
Because supplements do not offer Part D benefits, if you choose a supplement plan, you will need to enroll in a standalone Medicare Part D plan or another form of creditable drug coverage.
Between Medicare Advantage and Medicare Supplement plans, hundreds of plan options are available if you want to purchase additional coverage. If you need help assessing your options, our local advisors can help you compare plans and find the right fit for you.
You Need to Plan for Your Costs
Despite what many individuals believe, Medicare doesn't cover every healthcare expense. You'll be responsible for paying certain costs out of pocket, such as deductibles, copays, and coinsurance. We created a free guide to help you.
Your 2024 Medicare Costs & Coverage Guide
Medicare Costs
Medicare Part A Costs
Most people don’t pay a monthly premium for Medicare Part A. If you or your spouse have paid Social Security taxes for at least 10 years, your Medicare Part A premium is waived.
Medicare Part B Costs
Below are Medicare Part B costs for 2024:
- Monthly premium: $174.70 (for most Medicare enrollees)
- Annual deductible: $240
- Coinsurance: 20 percent of the total cost of the Medicare allowed amount (for covered services)
After the deductible is met, you typically pay 20 percent of the Medicare allowed amount for covered services, and Medicare pays for the rest. When budgeting for your Part B expenses, note that there is no cap on the 20 percent that you will be responsible for paying. The Part B costs above apply if your only coverage is Original Medicare (Part A and Part B). One way to lower your out-of-pocket costs is by exploring Medicare Advantage or Medicare Supplement plan options.
Medicare Part C Costs
The amount you pay for a Medicare Advantage (MA) plan (Medicare Part C) varies based on the plan you select and the benefits it includes. Regardless of the MA plan you choose, you must continue to pay your Part B premium. When you use Medicare Advantage services, you pay copays, coinsurance, and possibly deductibles. MA plans also include an out-of-pocket maximum, so you will know exactly what your financial risk will be if the unexpected happens (Original Medicare does not have a limit).
Medicare Part D Costs
Actual costs for Medicare Part D plans, as well as the amount you pay for your medications, are set by the insurance companies and approved by the government. Your costs will vary based on the medications you take and the plan you choose.
Most Part D plans include:
- A monthly premium
- An annual deductible
- A prescription drug formulary
- Copays and/or coinsurance per drug
- Coverage phases (Deductible, Initial Coverage Phase, and the Coverage Gap―also known as the Donut Hole)
Medicare Supplement Costs
While many Medicare Supplement (Medigap) enrollees receive minimal bills for healthcare expenses, beneficiaries do pay a monthly premium in addition to their Part B premium. Supplement premium rates vary by the insurance carrier and are determined by your age, gender, where you live, and when you enroll.
Your 2024 Medicare Costs & Coverage Guide
Your Partner in Medicare
Understanding Medicare before you turn 65 is crucial to ensure you enroll at the right time, consider the proper coverage options, and plan appropriately for healthcare costs.
At RetireMed, we're committed to helping individuals understand Medicare and find coverage that meets their unique needs. Reach out to us at 866.330.7448 or schedule a call to learn more about how we can help you prepare for a smooth transition to Medicare.
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