More than 50 years ago, the federal government established programs designed to help Americans afford health care services, called Medicare and Medicaid. Since both of these programs involve many variables, they can be somewhat complex. To provide insight into how the coverage works, here are six facts you might not know about Medicare:
1. Medicare and Medicaid provide most of the same services, but for different people. Medicare provides services for those age 65 and over and with other qualifying conditions, while Medicaid is a program intended for lower-income Americans based on financial need. The government continues to evolve and expand the programs to match the ever-changing health care environment.
2. Medicare coverage has four parts. Each part covers different categories of medical expenses. As you look into Medicare, you may see the term “original Medicare.” This term refers to what is now called Part A and Part B.
· Part A is the hospital insurance portion, which covers inpatient stays in hospitals, skilled nursing facilities, hospice facilities and sometimes also covers home-based health care services. Depending on your situation, you may automatically be enrolled in Parts A and B, or you may need to enroll.
· Part B covers doctor visits, durable medical equipment, home health services and qualified preventive services, among other related expenses.
· Part C (Medicare Advantage plans) provides Part A, Part B and usually prescription drug coverage from private insurers. You must be enrolled in Part A and Part B before you can receive Part C coverage.
· Part D covers outpatient prescription drug coverage from private insurers. You must be enrolled in Part A or Part B before you can receive Part D coverage.
3. Everyone can enroll in Medicare—eventually. There are three different times when you can sign up for Medicare Parts A and B:
· Initial enrollment period: Once you reach age 65, you may enroll within three months on either side of your birthday month.
· General enrollment period: If you don’t sign up during your initial enrollment period, you have the option to enroll each subsequent year between January 1 and March 31.
· Special enrollment period: You may get started with Medicare at any age if you experience a qualifying condition. Qualifying conditions may include disabilities, certain cancers or end-stage diseases. After your initial enrollment period ends, you may have a chance to enroll in Medicare during a special enrollment period due to a qualifying event such as moving away from your existing coverage or losing coverage from an employer.
4. Medicare is not free for most of us. While Part A comes with no monthly premium if you have at least a 10-year history of paying Medicare taxes, you will be responsible for deductibles and coinsurance, unless you qualify for help. For example, the deductible for 2016 is $1,288 for each benefit period, with varying coinsurance depending on the length of stay. The Part B premium costs $104.90 per month in 2016. Premiums can be higher for beneficiaries with incomes that exceed specific thresholds.
5. Original Medicare operates without networks and caps. With original Medicare, there are no networks to worry about. You’re free to go to any doctor or hospital that accepts Medicare, including outside of your home state. In addition, original Medicare does not limit your annual costs. Health care bills owed (due to coinsurance) continue to grow all year if you don’t have supplemental insurance to help manage these expenses. This is in contrast to Medicare Advantage plans, which operate around the concept of networks.
6. After you enroll in Medicare, you may need supplemental insurance. While Medicare covers a variety of expenses, there are limitations to its coverage. Therefore, you may need additional coverage depending on your current or future health needs. Carefully review information about what expenses each part covers before enrolling, and be sure to ask other insurance providers how their coverage complements with Medicare.
The federal government and most states provide resources to help you understand your options and guide you through the Medicare enrollment process. It’s good to be prepared—start learning more today so you’re ready when you become eligible for Medicare coverage.
William “Drew” Watson CFP® is a Financial Advisor and Private Wealth Advisor with Ameriprise Financial Services, Inc. in Owensboro, KY. He specializes in fee-based financial planning and asset management strategies and has been in practice for more than 20 years. To contact us by phone please call 270-684-8424 or by mail at 111 West 3rd St, Owensboro, KY 42303. You may also visit our website at www.williamawatson.com.