Medicare was established in 1965 and has certainly evolved since then. Medicare is health insurance provided by the government for seniors aged 65 and older, and others who qualify due to disability. As the year 2020 comes to an end, Medicare changes in 2021 have begun.
There are important points to know about Medicare in 2021, as there are many misconceptions about Medicare and its cost. So, let’s first dive into the number one misunderstanding: Is Medicare free?
Medicare is not free
Many seniors enroll in Medicare assuming they will receive it at no cost. They assume that the Medicare taxes deducted from their paychecks cover their premiums. Unfortunately, this isn’t entirely true.
If you have worked ten years (40 quarters) in America and paid payroll taxes, you will not have to pay a Part A premium. Medicare taxes fund the Part A premium, but you are still responsible for the Part A deductible which is $1,484 in 2021. You pay this per benefit period which means you could owe the Part A deductible more than once per year.
If you do not have the qualifying work history for premium-free Part A, you can still purchase it. If you have less than 40 working quarters but at least 30 quarters, you will pay $259 a month for Part A. If your work history is less than that, you can purchase Part A for $471 a month.
Unlike Part A, everyone pays a monthly premium for Part B. The base Part B premium increased by $4 to $148.50, which is lower than expected. You continue to pay the Part B premium as long as you are enrolled in Medicare. There is also an annual Part B deductible which is $203 in 2021.
Although the base Part B premium is $148.50 in 2021, there is a chance you could pay a higher premium based on your modified adjusted household gross income. The IRS will examine your tax returns from two years prior, and if you made more than $88,000 individually or filed jointly and made more than $176,000, you will pay a monthly adjustment in addition to the base Part B premium.
You are not auto-enrolled in Medicare
Many seniors are under the impression that once they turn 65 years old, they will be automatically enrolled in Medicare. Unfortunately, that is not accurate. The only way you can be automatically enrolled in Medicare is if you have received Social Security benefits for at least four months before your 65th birthday month.
If you are not receiving Social Security benefits and do not have creditable employer health insurance coverage, you will need to enroll in Medicare during your Initial Enrollment Period (IEP). The Initial Enrollment Period is a seven-month-long period that begins three months before your 65th birthday month and ends three months after.
For example, if you turn 65 in July, your IEP begins April 1 and ends on October 31. During those seven months, you can apply for Part A, Part B, and Part D. The best time to enroll in Medicare is within the first three months of your IEP; that way, your Medicare will begin on the first of your birthday month.
You have Medicare options
The government administers Original Medicare. This consists of Part A for inpatient coverage and Part B for outpatient coverage. These two parts provide a substantial amount of coverage, however, they do not cover 100% of your costs. For example, once you have paid the Part B deductible, Part B covers 80% of Medicare-approved services. Therefore, you will pay 20% coinsurance for your outpatient services.
Many beneficiaries purchase either a Medigap or Medicare Advantage plan for help with cost-sharing expenses. However, these plans are very different from one another.
Medigap plans, also known as Medicare Supplement plans, help cover your out-of-pocket costs with Original Medicare, such as deductibles and copayments. Medigap plans are secondary to Medicare, so Medigap plans pick up your share of the costs.
For example, if you get a Medicare-approved service and you have Medigap Plan G, Medicare will pay 80% coinsurance, and Plan G will pay the remaining 20% coinsurance. Medigap plans help make your healthcare costs predictable throughout the year.
Medigap plans do not have services areas. Therefore, you can visit any doctor in the United States that accepts Medicare. A doctor must accept your Medigap plan, regardless of plan, if they accept Medicare.
Medicare Advantage plans, also known as Part C, are very different from Medigap plans. One example is that instead of receiving your Part A and Part B benefits from the government, you will get them from the private insurance carrier. Although you get your Part A and Part B benefits from the Medicare Advantage carrier, you still must pay the Part B premium.
The two most purchased Medicare Advantage plans are HMO and PPO plans. HMO Medicare Advantage plans are typically stricter than PPO plans, as you can only receive your health care services and medications in the plan’s network. If you were to receive care out-of-network, your plan will likely not provide any cost-sharing unless it’s an emergency.
PPO Medicare Advantage plans are more lenient than HMO plans, as you can receive healthcare services out-of-network. However, you will pay more for out-of-network services than you would in-network.
Medicare Advantage carriers create the plan’s cost-sharing structure. For example, you may have to pay coinsurance for a doctor’s visit, or you may pay a flat copayment.The maximum out-of-pocket you can spend with a Medicare Advantage plan in 2021 is $7,550, but most carriers set their limit below the government maximum.
Medicare research is essential if you want to ensure you enroll on time and choose a plan that meets all your needs. These are just a few of the most important points to know about Medicare in 2021. For more information regarding Medicare in 2021, visit Medicare.gov or contact a trusted Medicare broker for help.