The Basics of Medicare

What is Medicare?

Medicare is a federal health insurance program system for:

  • people age 65 or older;

  • people under age 65 with certain disabilities; and

  • people of all ages with chronic illnesses such as End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant) and Lou Gehrig’s Disease (neurodegenerative disorder that results in the loss of motor neurons that control voluntary muscle contraction).

Medicare v.s. Medicaid

Unlike Medicare, which is a federal program that sets standards for costs to ensure that coverage is the same no matter what state you live in, Medicaid is a joint federal and state health insurance program that helps cover medical costs for people with limited income.

The federal government sets broad guidelines that all state Medicaid programs have to follow, but each state runs its own programs, which means that the eligibility requirements and benefits differ from state to state.

Medicare specifically covers people of retirement age, or people with disabilities or chronic illnesses. Medicaid covers a broader spectrum of people with limited resources.

Medicare Eligibility

Approximately 85% of the people enrolled in Medicare are:

  • at least 65; and

  • have paid into Medicare tax system for at least 40 quarters (equivalent to 10 years of work).

There’s still a way to qualify for Medicare even if you don’t have the required 40 quarters of work history. If you’ve been married for at least one year to someone who’s at least 62 years old and eligible for Social Security, you can draw Medicare eligibility from their work record.

In the case of divorce, you can still receive benefits from your ex-spouse if the marriage lasted for at least 10 years, with no remarriage before the age of 60.

In the event of your spouse’s death, you can still receive benefits as long as the marriage lasted at least 9 months, with no remarriage before the age of 60. Even if you were divorced from the deceased spouse, you may still be eligible so long as the marriage lasted at least 10 years.

In any of these cases, you must still have at least 40 quarters, either from your own work record or someone else’s, though you will have to provide additional documentation if you’re drawing quarters from someone else’s record.

Approximately 15% of those enrolled in Medicare are under the age of 65. They qualify due to disability or chronic illness.

Here are some simple guidelines. You can get Part A at age 65 without having to pay premiums if:

  • You already get retirement benefits from Social Security or the Railroad Retirement Board.

  • You are eligible to get Social Security or Railroad benefits but have not yet filed for them.

  • You or your spouse had Medicare-covered government employment.

If you are under 65, you can get Part A without having to pay premiums if:

  • You have received Social Security or Railroad Retirement

  • Board disability benefit for 24 months. You are a kidney dialysis or kidney transplant patient.

While you don’t have to pay a premium for Part A if you meet one of those conditions, you must pay for Part B if you want it. It is deducted from your Social Security, Railroad Retirement, or Civil Service Retirement check. If you don’t get any of the above payments, Medicare sends you a bill for your Part B premium every 3 months.

The Different Parts of Medicare

Part A (Hospital Insurance):

  • Most people don't pay a premium for Part A because they or a spouse already paid for it through their payroll taxes while working. If you have less than 40 quarters to draw from, you do pay a premium ($278 or $505 for Medicare Part A, depending on how many quarters they have).

  • Medicare Part A covers inpatient care in hospitals, including critical access hospitals, and skilled nursing facilities (not custodial or long-term care).

  • It also helps cover hospice care and some home health care. Beneficiaries must meet certain conditions to get these benefits.

Part B (Medical Insurance):

  • Most people pay a monthly premium for Part B (set at $174.90 per month (2024 rates) for most people).

  • Medicare Part B covers doctors' services and outpatient care.

  • It also covers some other medical services that Part A doesn't cover, such as some of the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary.

Part C (Medicare Advantage):

  • Medicare Advantage plans are approved by the federal government, but run by private companies.

  • They offer an alternative way to receive Medicare benefits, providing all of the benefits of Original Medicare (Parts A and B) plus some additional coverage, such as prescription drugs and a dental allowance.

  • Medicare Advantage plans often have lower or no additional premiums, but individuals must pay copays and coinsurance for services received.

  • You must sign up for Part A or Part B before enrolling in a Medicare Advantage plan.

Part D (Prescription Drug Coverage):

  • Most people will pay a monthly premium for this coverage (plans vary in cost, with average premiums ranging from $10 to $70 per month).

  • This coverage is to help you lower prescription drug costs and help protect against higher costs in the future. Medicare Prescription Drug Coverage is insurance. Private companies provide the coverage. Beneficiaries choose the drug plan and pay a monthly premium. If a beneficiary decides not to enroll in a drug plan when they are first eligible, they may pay a penalty if they choose to join later.

Medicare Part A

Part A Deductible:

  • $1632 out of pocket before part A covers costs up to 60 days in the hospital

  • This deductible isn’t annual. It can occur up to 6 times throughout the year depending on your benefit period

For hospital stays lasting more than 60 days:

  • 61 - 90 days: $408/day

  • 91 - 150 days: $816/day

Staying at a Skilled Nursing Facility:

  • $204/day for stays lasting longer than 20 days

Gaps in Coverage

Medicare Part B

Part B Deductible:

  • $240 annual payment

  • This deductible applies annually. Once you’ve met it, Medicare pays 80% of the approved amount while you’re responsible for the remaining 20%

Your Co-Insurance:

  • You’re responsible for paying 20% of the costs for most doctor services, outpatient therapy, and medical equipment

Excess charges:

  • You’re responsible for excess charges if the amount Medicare pays doesn’t meet the doctor’s full charge

  • Some doctors may charge an excess charge of up to 15% above the Medicare-approved amount for any services

Getting Help

There are 2 types of agents from whom you can seek help for navigating Medicare: captive agents and brokers.

Captive agents work for a specific insurance company and can only offer plans from that company. They may provide useful information, but their coverage options are limited.

Meanwhile, brokers work with multiple insurance companies and can provide a broader range of options.

It’s important to work with an agent who discusses both Medigap plans and Medicare Advantage plans. Some agents may focus on a specific plan type due to higher commissions, so it’s crucial to have an unbiased advisor who’ll explore all available options with you.

Whether you choose an agent or broker, the price for plans remains the same. Insurance companies set the premiums, and there is no cost for assistance. Agents are paid by the insurance companies.