Medicare 101: Everything You Need to Know to Plan Ahead

By April 13, 2022News

doctor with patient

Medicare is more than a fancy government term: It is a vitally important insurance product. The state and federal governments fund the program, with participation from private insurance companies.

At the moment, more than 62 million Americans are on Medicare, and that number is expected to rise every year. Medicare is a federal government program, and it is one of the largest operated by the United States government.

If you are approaching retirement age or getting close to 65, you must be investigating your health care options and ensuring that you will have medical insurance that can take care of your health needs for the rest of your life. 

That almost certainly means checking out what Medicare plan may work best for you. Of course, everyone has a different financial situation, and what works for one person may not work for another. That’s why you must engage in retirement planning throughout your life, ensuring that you are ready for retirement. 

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How Do I Sign Up for Medicare?

Thankfully, the process of signing up for Medicare is relatively straightforward: You can just visit the Medicare website and answer a few basic questions.

Fortunately, this only applies to specific Medicare plans. The Social Security Administration will automatically enroll you in other Medicare plans as soon as you turn 65. These plans include Medicare Part A (Hospital Insurance) and Part B (Medical Insurance). There are other parts of Medicare for which you have to sign up. This includes Part C (Medicare Advantage Plans) and Part D (Prescription Drug Coverage). These two Medicare plans will provide insurance coverage for many services, including regular check-ups, preventative care, emergency care, and much more. Most Americans will also need a prescription drug plan. 

If you do choose to sign up for optional parts of Medicare — like Part C and D — you can do so three months before you turn 65. Signing up this way will not only allow you to enroll in optional programs but will enable you to identify potential cost-savings options and find the least expensive plan possible.

When Does Medicare Start?

As long as you enroll at the right time, Medicare starts at age 65. The specifics of your medicare coverage are determined by when you sign up:

  • If you sign up the month before you turn 65, your coverage begins the month you turn 65 — even if you turn 65 on the last day of the month.
  • If you sign up the month you turn 65, your coverage begins the next month.
  • If you sign up one month after you turn 65, your coverage begins two months after you sign up. 
  • If you sign up 2-3 months after you turn 65, your coverage will begin three months after you sign up.

Enrolling in Medicare is something you must do to protect yourself and guarantee your health care in retirement. Furthermore, you will need to consider Medicare and health care coverage in the event that you are considering retiring early, even if you are a high net-worth individual.

When Do I Apply For Medicare?

As noted above, you can enroll in Medicare three months before you turn 65. You have an Initial Enrollment Period that runs from three months before you turn 65 to three months after the month in which you turn 65. This leaves you with a roughly seven-month period to sign up. If you are going to sign up for Medicare, you must do it during this time. The specifics of when your coverage starts depends on what plan you sign up for — more information can be found at the government’s Medicare webpage.

Of course, there are a variety of circumstances in which you may not need Medicare coverage right away, such as if you are still working. If that’s the case, you still have to sign up, as doing so will enable you to access Medicare when you stop working and ensure that you can access health coverage without paying a fee. 

Once you sign up for Medicare, you will receive various pieces of information, including your coverage specifics, out-of-pocket costs, services covered, and more. You will have to pay a monthly premium, and the particulars of that premium depend on the plan you take. 

How Much Does Medicare Part B Cost?

Premium costs are adjusted every year for inflation and other factors. The cost of the Medicare premium varies, depending on the income you reported on your tax return. You can find this information on the Medicare website. At its least expensive — meaning you file with less than $91,000 a year — the monthly premium is $170.10. At its most expensive — meaning if you file with more than $500,000 in income — you will be paying $578.30 every month. 

Since the program is administered by the federal government, your Medicare premium costs are deducted automatically from your Social Security payments. Furthermore, like any insurance program, Medicare will not cover every cost. You will still have to meet a deductible and make sure that your coverage handles a variety of other medical-related items. Generally speaking, you may still have to pay up to 20% for certain services. These out-of-pocket costs can get prohibitive. 

What is the Medicare Tax?

Medicare taxes are the taxes paid that support the program. If you have ever worked on a job that has tax withholding, you’ve probably seen a Medicare deduction on your paystub. Like Social Security and federal tax, Medicare is paid for by automatic withholdings on your paycheck. If you are self-employed, you may have to pay a self-employed tax to fund your Medicare contributions. This tax is 2.9%. You pay 1.45%, and your employer pays the other half. Other taxes were enacted by the passage of the Affordable Care Act. These taxes helped to fund the expansion of Medicare into the states.

The need for this tax is likely obvious: Medicare is an extremely expensive program. The cost of the entire program was $829.5 billion in 2020, and as America gets older, the costs of the program will continue to rise. Unfortunately, the program faces real challenges in the future, with reports saying that the Hospital Insurance Trust Fund — the financial location for Medicare deposits — may run out of money by 2026. This is obviously a huge problem. In the long run, it may threaten the ability of the federal government and states to fund health care for the elderly well into the future. This would mean that the federal government would have to develop other ways to fund Medicare. 

Why Do I Need Medicare Part C?

Medicare Part C is also known as a Medicare Advantage plan. It is called Medicare Advantage because it is an all-encompassing plan offered by a private insurance company. It usually covers Part A, Part B, and prescription drug plans (part D). In addition, many Medicare Advantage Plans will also offer additional services that are not covered by a base Medicare plan. This includes dental, vision, and more. 

You don’t necessarily need Medicare Part C, but it can make your life much easier by simplifying coverage questions, offering additional benefits, and potentially offering a lower rate. Furthermore, the government limits Medicare Advantage plans in what they must cover and what they can charge. Companies will receive a fixed reimbursement for offering such a plan. However, they may have various requirements for referrals, inpatient care, outpatient care, medical equipment, and more. As such, there are trade-offs with any Medicare Advantage plan.

Like any other aspect of your healthcare and retirement, deciding what plan to enroll in requires an extensive amount of time and planning. It is well worth consulting with an insurance expert before finalizing the best plan to enroll. 

When Did Medicare Start?

Medicare was signed into law by then-President Lyndon Johnson in 1965. He formally signed the bill into law in Independence, Missouri, the hometown of former President Harry S Truman, who championed the idea of a national health insurance policy.

Medicare is considered a cornerstone of Johnson’s “Great Society,” which sought a significant expansion of the role of the federal (and state) governments into providing a social safety net for ordinary Americans. Before the advent of Medicare, many older Americans were forced into poverty as they attempted to cover their health expenses. Furthermore, Medicare covers various services needed by elder Americans at the end of their life, including nursing homes. As such, the advent of Medicare made massive investments into the health of older Americans.

In total, Medicare is believed to have made a major, positive difference in the lives of ordinary Americans. Medicare is responsible for a major drop in a variety of illnesses. It also caused an increase in hospital admissions (seen as a positive, as it indicated that elder Americans could have illnesses addressed), an increase in the amount of elder Americans who had connected with physicians, and an increase in life expectancy for Americans as a whole. 

What Countries Accept US Medicare?

This can be a real challenge: Medicare is available only in the United States in an extremely limited set of circumstances. For example, if you travel in France and need hospitalization, Medicare will not cover your care. This includes prescription drugs or emergency care. As such, you would be responsible for paying for the cost of any health care received outside of the United States.

However, if you have a Medigap plan, you may be covered. Medigap is a supplemental Medicare plan covering costs that other Medicare insurance plans may not cover. Examples include copayments, deductibles, and more. If you travel to foreign countries regularly, you may want to consider applying for a Medigap plan. Keep in mind that Medigap is different than an Advantage plan. You also have to have Medicare Part A and Medicare Part B to qualify for a Medigap plan. Furthermore, just like any other insurance plan, you will have to pay a monthly premium for your Medigap plan. Such added expenses will add to what you pay for insurance. 

How Do I File A Medicare Claim?

There’s good news here: Generally speaking, except in “very rare circumstances,” you will not have to file a claim. Most of the time, your doctors, health care professionals, or hospitals will manage that for you, taking care of any of the paperwork and removing one more stressor from your life. If you do have to file a Medicare claim, you have to do so within 12 months of the date that the claim was incurred. You can file a claim on this page.

Keep in mind that every insurance company operates slightly differently. Different Medicare Advantage plans may have various regulations surrounding when you need to file a claim and what you need in order to file a claim. As such, it is always best to directly contact your insurance provider if you have any specific questions about if you need to file a claim for reimbursement. 

Conclusion

There is no question that Medicare is complicated, but fear not: Hundreds of millions of Americans have successfully used this program to care for their health needs in their old age. If you are in need of high-quality retirement planning services, consider reaching out to Churchill Management Group. We offer an array of financial planning services that can fit the needs of a variety of clients, and we’re happy to discuss your financial situation and help you learn more about how we can help you retire with security. Contact us today for more information on how we can help you retire in comfort. 

Financial Planning Services Disclosure; Churchill provides financial planning services to Clients that specifically engage Churchill for that service. The planning can include defining goals, designing a plan, assisting with implementing the plan, and evaluating and adjusting the plan over time, at the request of the client. The financial planning includes advice regarding securities investing and may include discussions of a client’s tax, insurance, employee benefits, estate planning, and other issues. Churchill, however, does not provide legal, insurance, employee benefit, estate planning, tax, or accounting advice, and the client must rely on legal, insurance, and accounting professionals for that advice and documentation.

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