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Your healthcare expenses are likely to climb sharply as you age. But fortunately, so does the help that may be available to you.
Approaching age 65? It's time to learn about Medicare, the government-run health insurance program for older Americans. Medicare also covers certain people with disabilities who are under age 65.
As you try to wrap your head around the topic, it's helpful to focus on Medicare's five key building blocks - Parts A, B, C, D and Medigap.
Part A: The Basic Plan
Medicare Part A helps cover:
- Hospital bills
- Hospice
- Some home health care
You automatically qualify for Part A if you've worked the 10 years required to receive Social Security or if you are on the account of someone who qualifies, such as a spouse.
If you already get benefits from Social Security, you'll get Medicare Part A and Part B automatically when you're first eligible and don't need to sign up.
If you aren't yet receiving Social Security benefits, you can sign up for Part A during the three months before you turn 65, so you are fully enrolled by your birthday.
You can apply for Medicare Part A even if you have health insurance at work and are considering staying on the job past age 65. Part A may cover some of the costs not covered by your group health plan. You should ask your employer how signing up for Medicare will affect your company health insurance.
Part B: Additional Coverage
When you sign up for Part A, you will be asked if you also want Part B.
Among other things, Medicare Part B covers:
- Most doctors' bills
- X-rays
- Some lab tests
- Medical equipment and medications
- Physical and speech therapy.
Part B comes with a premium, which is based on your income and eligibility date.
If you don't sign up for Part B within a certain timeframe after you become eligible, you may have to pay a late enrollment penalty.
Part C: Medicare Advantage
If you want more coverage than you would receive from Medicare Parts A and B, you can instead choose Part C, also known as Medicare Advantage, whereby Medicare pays a fixed fee for your care every month to companies offering Medicare Advantage plans.
These companies must follow rules set by Medicare. Each plan, however, can charge different out-of-pocket costs and has different rules for how you receive services, including whether you can see a doctor out of network. There's a wide variety of plans, so carefully compare several companies' costs and terms of coverage. Also, check with your doctor's office to make sure it accepts the plan you are considering.
Part D: Prescriptions
Medicare Part D covers prescription drugs. It is offered to anyone with Medicare coverage and it is funded by the government, but you must join a plan run by an insurer or other private company approved by Medicare. It is generally a good idea to compare several plans in your area to see which ones pay for the drugs you need at a cost you can afford.
Even if you don't need extra prescription coverage when you turn 65, you may want to sign up for Part D anyway, in case your prescription drug needs change in the future. Additionally, there is a late enrollment penalty.
Most Medicare drug plans have a gap in coverage, also known as the “donut hole,” that comes into play after Medicare has paid a certain amount for your drugs each year.
Medigap Insurance
Once you have enrolled in Medicare Parts A and B, you might consider Medicare supplement insurance, known as Medigap. Medigap is the system of private insurance that covers some of the holes–or gaps–in Medicare coverage. This insurance usually pays for premiums, co-payments, doctor's bills, and deductibles that exceed charges approved by Medicare. It does not cover long-term care. Medicare also generally doesn't cover nursing home care, except for stays that are needed post-hospitalization.
For more information on Medicare and Medigap policies, including online tools to help you research costs and plan features, go to www.medicare.gov.