As retirees inch closer to age 65, it's important to understand the basics of Medicare — a federal health insurance program for people over 65.
As you start your research, you may read about Original Medicare, which refers to federal government insurance that covers both hospital and medical expenses. In practice, this insurance covers many healthcare expenses — but not all of them.
Read on to learn the basics of Medicare Part A and Part B and health insurance in retirement, including the details of what is and isn't covered for eligible enrollees.
What Is Original Medicare?
This type of Medicare encompasses both Medicare Part A (hospital insurance) and Medicare Part B (medical insurance).
Part A generally doesn't require enrollees to pay a monthly premium. It covers inpatient care in a hospital or skilled nursing facility in addition to hospice and some home care.
Part B covers medically necessary services and supplies, plus preventive care. It usually requires enrollees to pay a monthly premium based on their yearly income.
Several key items aren't covered in either Part A or Part B, including eye exams, dental care, hearing aids and most prescriptions.
How Do I Enroll in Original Medicare?
First, make sure you're eligible to enroll in Medicare Part A and Part B.
If you meet the requirements, there are two ways to enroll:
- You'll be automatically enrolled in Original Medicare if you're already receiving Social Security or Railroad Retirement Board benefits at least four months before you turn 65.
- If you aren't receiving Social Security benefits, you must apply for Medicare during the open enrollment period, which begins three months prior to your 65th birthday and ends three months after it. Apply online at the Social Security website.
If you plan to enroll around your 65th birthday, pay attention to the timing; you'll need to pay a penalty if you sign up after the enrollment window closes.
How Are Medicare Claims Handled?
After you visit the doctor, your provider will submit a claim to Medicare for approval. You will likely need to pay a deductible before your Medicare plan takes effect and begins covering costs. After meeting your deductible, you'll still need to pay your coinsurance or copayment for medical visits and care.
Before you receive care, use Medicare.gov's search tool for providers, hospitals and nursing homes to find doctors and facilities near you that accept Medicare.
Also note that Medicare typically covers about 80% of medical costs, which means patients are on the hook for the rest. Depending on your care needs, the remaining 20% can add up quickly, and you may want to purchase additional coverage to offset those costs.
Do I Need Extra Insurance to Cover Out-of-Pocket Charges?
It's not a requirement, but Medicare Supplement insurance — also known as Medigap — can provide peace of mind and help manage medical costs for many retirees. These private insurance plans help Medicare enrollees pay out-of-pocket deductibles, copays and coinsurance costs.
If you're interested in Medigap coverage, research the different policy tiers to find the coverage you need at a price that works in your budget.
Whether your 65th birthday is fast approaching or still a few years away, it's important to understand what Original Medicare covers, how to enroll and whether you want Medicare Supplement insurance. By reviewing your options in advance, you can set yourself up for a smooth experience when your enrollment window opens.