When we talk about health insurance for seniors, it will always center around Medicare.
Other forms of insurance can also come into play – and we’ll talk about those further down – but Medicare dominates the elderly healthcare space like no other program. And it can feel like a complicated beast! The language around Medicare and the way it works can be difficult to understand.
Most people become eligible for Medicare when they turn 65 and sign up for Social Security benefits. But, it is possible to qualify for Medicare earlier in life, for example if you qualify for Social Security disability benefits.
The sign-up process can seem unfamiliar at first, especially if you’re used to health insurance enrollment through your workplace, and with all the talk of “Part A” this and Part B” that. But, at the end of the day, it’s about choosing a health plan, just as you might during open enrollment or at your job.
First we’ll run through the different types of Medicare, and then we’ll go through the differences in coverage that they offer.
Medicare coverage has three basic elements:
Medicare began in 1966 with just two “parts,” which are still in place today. It is a pure single-payer plan with no private insurance involvement.
“Part A” is your hospital coverage. This pays for room and board at a hospital, nursing facility, or hospice, but does not cover long-term care.
“Part B” is your outpatient coverage. This pays for things like doctor visits, diagnostic tests, lab-work, surgeries, and durable medical equipment (like wheelchairs) etc.
Medicare Advantage Plans
In the 1990s, Congress brought in “Part C,” better known as “Medicare Advantage,” Medicare Advantage plans pay INSTEAD of Medicare. They were created to give a low-cost alternative to bridge the gaps in Original Medicare.
These plans are optional and provided through private insurance companies; Both PPOs (Preferred-Provider Plans) and HMOs (Health-Maintenance Organizations).
Prescription Drug Coverage
In 2006, Medicare began “Part D” which is your drug coverage. This is a pharmacy card which will allow you to purchase your prescriptions at a much lower price than retail. Part D is optional coverage but is important if you don’t want to pay out-of-pocket for all your medicines. The national average Part D premium is currently around $35/month.
Part D is also included in many “Medicare Advantage” plans if you choose to go that route.
Does Medicaid Matter?
Medicaid is a completely separate program from Medicare and is intended for low-income individuals and families. “Dual enrollment” in both Medicare and Medicaid is possible, and quite common. If you are covered under Medicaid, look at the Medicaid rules for your state, and see how that coverage would work with Medicare before moving on to the next steps.
What Should You Sign Up For?
For most people, Part A’s insurance is free, and so enrolling in Part A is an easy decision. Part B comes with a premium cost, and some folks delay enrollment in Part B for that reason.
Bridging the Medigap
Original Medicare coverage remains a popular choice, especially when combined with Medigap coverage, which are private insurance plans designed to cover the out-of-pocket costs (the “gaps”) of Parts A and B coverage.
Others opt for the Medicare Advantage plans (Part C). Medicare Advntage plans generally have lower premiums than Medigap plans because you agree to share in the costs by paying co-pays for services as you get them. With a Medigap plan, you will often have NO copay, depending on the plan you choose.
NOTE: You cannot get BOTH Medigap and Medicare Advantage together.
Filling the Donut Hole
For Part D prescription coverage you will almost always have to pay a premium, whether as part of a Medicare Advantage plan, or as an addition to a Part B premium.
For a long time, many Medicare members have been wary of Part D’s so-called “donut hole” problem, which imposed an increased co-pay level for part of the coverage. Wonderfully, as of 2019, the “donut hole” is closed, and co-pays for prescription drugs now remain level across the board.
When to Enroll
Medicare enrollment is available only at certain times. (This doesn’t apply to you if your enrollment is automatic, such as when signing up for Social Security benefits.)
Most people sign up during the “Initial Enrollment Period”, which is for a seven-month period of time that stretches from the three months before you turn 65, the month of your 65th birthday, and the three months after.
NOTE: You can refuse coverage for Part B during your Initial Enrollment Period and choose to sign up for Part B during a later one, but you will have to pay a late enrollment penalty.
What If I Have My Own Insurance?
Many people have their own health insurance when they turn 65 and want to take that into account as they consider how or if they wish to join Medicare. In many cases, having Medicare along with another form of insurance is allowed.
You can have both employer-sponsored insurance as well as Medicare. This would probably look like signing up for Part A, but using your work’s insurance instead of Part B.
It will be important for you to talk with the Human Resources department at your job to find out who pays first – your employer’s plan or Medicare – in the event of a claim. It would be worth double-checking with Medicare for its opinion as well.
IMPORTANT NOTE: Because of the Medicare as Secondary Payer (MSP) rules, employers with 20 or more employees cannot force or incentivize you to give up your employer-sponsored coverage because of Medicare eligibility. You must be allowed to have both coverages if you choose.
If you have retiree health coverage, you’ll need to talk to the Human Resources office of your former employer to see what effect Medicare eligibility may have on that coverage. Some retiree plans end coverage in the event of Medicare enrollment. This does not break the MSP (Medicare as Secondary Payer) rules, because retirees are no longer “employees”.
Know Your Rights
Despite what many believe, employers that are under the MSP (Medicare as Secondary Payer) rules are not allowed to forcibly end your employer-sponsored coverage, even if you sign up for Medicare as an employee. Consult with your Human Resources Department if you believe your employer is making this error.
After you quit or lose a job, you can keep your employer-sponsored health insurance for up to 18 months through a federal law known as COBRA. This applies to the former employee and all their dependents who were covered on that plan. Because this is seen as a temporary program to stop people from having no insurance, you are not eligible for COBRA if you are eligible for Medicare. However, if your spouse or your dependents are not yet eligible for Medicare, they can continue on the COBRA plan until they find an alternative.
Still not sure?
You’re not alone. This is confusing. There are many folks out there that can answer your questions and translate confusing words. Medicare.gov is a great place to start.