You turn 65 and retire, then you hopefully start to receive Medicare benefits. It all seems so simple, but how does Medicare actually work?
The first thing to know is that there are four parts to Medicare, as well as a type of insurance called Medicare Supplement Insurance (or Medigap). Each part of Medicare provides coverage for different needs, and each Medicare beneficiary can choose the Medicare parts that provide the benefits they want.
This guide can help you understand how Medicare operates and how you can enroll in the coverage you need.
When you work and pay income taxes, a portion of what you pay are Medicare taxes. The Medicare tax rate for most workers is 2.9 percent in 2018, and that is split evenly between the employee and employer.
If you are 65 years old and have paid Medicare taxes for 40 quarters (10 years), you may qualify for premium-free Part A. That means you will not pay any premium to receive Medicare Part A, which provides hospital insurance.
You can still qualify for Part A by working fewer than 40 quarters (as long as you are at least 65 years old and a U.S. citizen), but you will have to pay a monthly premium for it. The Medicare Part A premium can cost up to $437 per month in 2019.
If you are under 65, you may still qualify for Medicare if you have a disability.
If you aren’t sure of your status, you can check your Medicare eligibility on the www.medicare.gov website.
Some beneficiaries are automatically enrolled in Medicare Part A. If you need to manually enroll in Part A, you can sign up in one of four ways:
Part B of Medicare is optional. Part B is medical insurance and provides coverage for doctor appointments and other outpatient care, as well as medical equipment and supplies.
Everyone pays a monthly premium for Part B. The standard Part B premium is $135.50 in 2019, though people with a higher income may pay more.
You must have Part A in order to enroll in Part B. The combination of Part A and Part B together is known as “Original Medicare.”
Part D of Medicare provides coverage for many prescription medications. Part D plans are sold by private insurers, so the cost and coverage of these plans may vary.
You must be enrolled in both Part A and Part B in order to sign up for a standalone Medicare Part D Prescription Drug Plan.
Part C of Medicare is also known as “Medicare Advantage.” Medicare Advantage are an alternative to Original Medicare and are required by law to provide the same benefits as Original Medicare.
Where Medicare Advantage plans differ from Original Medicare is that some Part C plans also provide additional benefits not covered by Original Medicare.
These additional benefits can include:
Medicare Advantage plans are optional and are sold by private insurance companies. You have the option of receiving your Part A and Part B benefits from Original Medicare or through a Medicare Advantage plan.
With Original Medicare, you may have to pay certain out-of-pocket costs like deductibles and coinsurance when you use your Medicare benefits.
A Medigap plan, also called Medicare Supplement Insurance, can help cover some of these out-of-pocket Medicare costs. These plans are also optional and are sold by private insurers.
You cannot be enrolled in a Medicare Advantage plan and a Medigap plan at the same time.
Once you’ve decided on the Medicare coverage that works for you, it’s time to put your Medicare benefits to use.
As a Medicare beneficiary, you’ll be issued a Medicare card that you will present to health care providers when receiving services, just like a health insurance card you’ve probably used before.
To use your Medicare Part A, Part B and Medigap plan benefits, you will need to visit a health care provider who accepts Medicare. The majority of health care providers in the U.S. do accept Medicare, but it is always wise to check with your provider to confirm how your services will be covered by Medicare.
Using Medicare Advantage plans and Medicare Part D drug plans can be a little different. These plans may have a network associated with them, and you may need to seek health care services from providers or pharmacies who participate in your plan’s network.
Some Medicare Advantage plans and Part D drug plans will cover care services or prescriptions from providers outside of your network, but they will likely cost more than if you received those services or drugs from within your plan network. Costs and networks will vary based on your plan.
Part A and Part B of Medicare each feature a deductible, which is the amount of money you have to spend out of your own pocket in a year or in a given benefit period before Medicare begins providing coverage.
The Medicare Part A deductible in 2019 is $1,364 per benefit period. The 2019 Medicare Part B deductible is $185 per year.
Medicare Advantage plans and Part D plans may or may not have a deductible, depending on your plan. Deductible amounts will vary.
Once your deductible is met, you will typically pay a copayment or coinsurance cost for covered services and items.
You can review this more detailed breakdown of Medicare costs.
These are just some of the basics of Medicare.
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