by Russell Noga | Updated July 31st, 2023
If you are an American, health insurance is something that you should definitely look into if you do not already have a plan in place. Health coverage can be expensive and painstaking in the U.S., where a single cab ride can cost hundreds of dollars to the ER.
There are different options available, and it is wise to look into all of them. Medicare is one option available to a specific group of people, mostly over the age of 65, that is federally funded, although deductibles and possibly monthly fees exist when using it.
What is Medicare insurance?
Medicare is a government-backed health insurance program within the United States that mainly provides health insurance to people over 65 years of age, with some exceptions. Such as certain people with disabilities and People with End-Stage Renal Disease. Individuals who receive Social Security disability insurance may become eligible for Medicare after a two-year waiting period.
It is a federally-funded program; thus, it can be called public insurance. It differs from private insurance in the U.S., where you are welcome to choose your own provider, and one must meet specific requirements to enroll in Medicare. Also, unlike private care, Medicare does not offer a plan for couples or families.
You still may be asking yourself what Medicare is or how it works exactly. There are multiple plans involved.
The Idea Behind Medicare
Medicare has drawn controversy over the years and was a big talking point among politicians running for office in how it will be funded. This is because more and more Americans are reaching retirement age and qualify for it; thus, the pool of funds has to be bigger to pay for it all.
However, as you see, it is still thriving with no signs of going away despite what the naysayers were saying during, say, some of the presidential campaigns of the past few elections.
The original idea for Medicare and the program, which is still in place, involves insurance covering most of the costs for approved healthcare services and supplies. You have to pay a deductible, then pay your share of costs for services and supplies as you receive them. There is no limit on what you can pay out of your own pocket annually unless you have other coverage.
A deductible, by the way, is the amount you pay out of your pocket or criteria you have to meet before your insurance takes over and covers the rest. For services to be covered, they need to be a medical necessity, however. Despite this, preventive services are also covered, and this includes shots and screenings.
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Controversies Surrounding Medicare Advantage
There was some recent controversy surrounding Medicare Advantage and the way it will be paid for in the upcoming year due to the Biden Administration’s proposal for changes to payments. This includes how the health risk of those enrolled in the plan is captured alongside a plan for recouping payments not supported by audits.
According to KFF, “The Centers for Medicare and Medicaid Services estimated the payments to plans per enrollee would increase by 1% in 2024.”
This approach could reduce inappropriate overpayments to insurers, but critics argue that this represents a cut to Medicare and will lead to higher costs for those benefiting from it.
This is just one of the many examples that people have to take into consideration related to Medicare, as it is always flooded with certain controversies and changes being proposed to it. Often, however, these are just political talking points.
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The Different Parts of Medicare
There are two parts to signing up for the Original Medicare. They include Part A and Part B. The way they are differentiated is that Part A is hospital insurance, while Part B is medical insurance.
You only need to sign up for both once a year, and you can choose which way to get your health coverage, such as adding or switching drug coverage, each year as well. This plan is still in place, although a new option exists now. It is called Medicare Advantage.
There is also a Part D or a Medicare drug plan, and you even have the option to purchase a Medicare Supplement Insurance (Medigap) policy to make the costs for services you get lower.
What Medicare Advantage Is About
Medicare Advantage, which itself is called Part C coverage, bundles the different coverages or parts: Part A, Part B, and usually Part D into a single plan. Some extra benefits that the original Medicare does not come with might also be included, such as vision, hearing, and dental services.
Medicare Advantage is approved by Medicare-approved private companies that follow rules set by Medicare. There may be costs for monthly premiums and services provided to you from the plan you have at your disposal.
It must cover all emergency and urgent care alongside almost all the necessary medical services from Original Medicare. Some options may tailor their benefit packages for patients with specific conditions that need to be treated.
The way payment for this plan works is that you must continue to pay your Plan B premium in addition to a possible second premium you may have to pay for the insurer. Despite this, many Medicare Advantage plans are offered at a 0$ premium to insured recipients.
One thing that makes it different from the Original Medicare plan packages is that Medicare Advantage plans have an annual limit on out-of-pocket costs. Thus, if you are a person needing heavy medical help or suffering from serious diseases, definitely look into this option.
Medicare Advantage plans are typically HMOs or PPOs and provide coverage only in certain local areas, usually that are pre-authorized or done with referrals. For this reason, you will need to use doctors within your plan’s network for non-emergency or non-urgent care. You may also have to pay a premium for the plan and the monthly Part B premium from Original Medicare. However, plans may have a $0 premium or may help pay the Part B premium.
Combining Medicare with Other Plans and Waiting to Enroll
Medicare coverage is optional and can be combined with other forms of health insurance. When you combine it with additional health insurance, for instance, that is covered by your employer, you will pay first the primary payer, then a secondary payer.
The one paid for first will depend on a number of things, like if you are still working, the type of insurance you are enrolled in, and if you are engaged in a special situation related to health, such as an End-Stage Renal Disease (ESRD).
You may want to delay having Medicare Part A, or hospital insurance, to continue contributing to a health savings account (HSA), which allows you to save money without paying tax on it. Once you enroll in any form of Medicare, even if it is only Part A, you cannot put money into an HSA.
Part A tends to charge a penalty for late enrollment, so keep this in mind when choosing when to sign up. However, despite this, it may be wise to wait before taking part in it if you can’t get it premium-free. Delaying this enrollment may avoid the expense.
Part B also comes with a monthly premium that may be avoided if you simply delay it. Timing is key to enrollment, however. This is because Part B also tends to charge a penalty for late enrollment. However, you may qualify for a Special Enrollment Period if you have creditable coverage through an employer or a union.
You can speak with a benefits administrator before delaying Part B and ask if they can help you find out if you have creditable coverage and if you have to enroll in Medicare at age 65 or can wait.
Final Thoughts
Medicare is a great option for people that can qualify for it as the federal government backs it or help pay for the coverage. However, be careful in choosing the right plan for your needs or the Original Medicare vs. Medicare Advantage. The Medicare Advantage may definitely be worth it, depending on your needs.
Also note that If you end up using a service that Medicare doesn’t cover, you pay the full cost. So keep that in mind. Still, Medicare should not be going away despite what the naysayers or politicians have been claiming for years now, and though Medicare is not mandatory, it is a great way to stay healthy as you age.
We hope that we have answered your questions related to what is Medicare. And this will give you a good base on what plan to choose now or in the future when you qualify.
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Frequently Asked Questions
What is Medicare?
Medicare is a federal health insurance program in the United States that provides coverage for eligible individuals aged 65 and older, as well as certain younger individuals with disabilities. It is administered by the Centers for Medicare & Medicaid Services (CMS) and helps millions of Americans access essential healthcare services.
Who is eligible for Medicare?
Individuals who are aged 65 and older and are either U.S. citizens or permanent legal residents for at least five continuous years are eligible for Medicare. Additionally, younger individuals with certain disabilities or end-stage renal disease (ESRD) may also qualify.
What are the different parts of Medicare?
Medicare is divided into four parts:
Medicare Part A: Hospital Insurance, which covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services.
Medicare Part B: Medical Insurance, which covers outpatient services, doctor visits, preventive care, and durable medical equipment.
Medicare Part C: Medicare Advantage, which offers an alternative way to receive Medicare benefits through private health plans approved by Medicare.
Medicare Part D: Prescription Drug Coverage, which provides coverage for prescription medications through private insurance plans.
When can someone enroll in Medicare?
Initial Enrollment Period (IEP): This is the seven-month period that includes the three months before turning 65, the birthday month, and the three months after. It is the best time to enroll to avoid late enrollment penalties.
General Enrollment Period (GEP): If someone missed their IEP, they can enroll during the GEP, which runs from January 1 to March 31 each year. Coverage begins on July 1.
Special Enrollment Period (SEP): Some individuals qualify for an SEP due to certain life events, such as moving, losing employer coverage, or qualifying for Medicaid.
What are the different types of Medicare coverage?
Original Medicare: This refers to Medicare Part A and Part B, which are provided directly by the federal government.
Medicare Advantage: Also known as Part C, these are private health plans that offer all the benefits of Original Medicare and may include additional coverage like prescription drugs and dental services.
Medicare Supplement: Also called Medigap, these private insurance plans help cover out-of-pocket costs not paid by Original Medicare, such as deductibles and copayments.
What is the difference between Medicare Supplement and Medicare Advantage?
Medicare Supplement plans work alongside Original Medicare, providing additional coverage for out-of-pocket expenses. Medicare Advantage plans, on the other hand, replace Original Medicare and often include prescription drug coverage and extra benefits like dental and vision.
Are all medical services fully covered by Medicare?
No, Medicare does not cover all medical services. There are cost-sharing aspects, such as deductibles, copayments, and coinsurance, that beneficiaries are responsible for paying.
Can someone have both Medicare and Medicaid?
Yes, some individuals may qualify for both Medicare and Medicaid, often referred to as “dual eligible.” Medicaid can help cover Medicare premiums, copayments, and other healthcare costs for those with limited income and resources.
Can Medicare beneficiaries change their coverage options?
Yes, Medicare beneficiaries can make changes to their coverage during certain enrollment periods, such as the Annual Enrollment Period (AEP) from October 15 to December 7 each year.
How does someone apply for Medicare?
Most individuals are automatically enrolled in Medicare Part A when they turn 65 if they are already receiving Social Security or Railroad Retirement Board benefits. If not, they can apply online through the Social Security Administration or visit a local Social Security office.
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Russell Noga is the CEO and Medicare editor of Medisupps.com. His 15 years of experience in the Medicare insurance market includes being a licensed Medicare insurance broker in all 50 states. He is frequently featured as a featured as a keynote Medicare event speaker, has authored hundreds of Medicare content pages, and hosts the very popular Medisupps.com Medicare Youtube channel. His expertise includes Medicare, Medigap insurance, Medicare Advantage plans, and Medicare Part D.