• Enrolling in Medicare
• Medigap versus Medicare Advantage
• Medicare's 'Parts'
• Clash over expanded Medicare coverage and more
• Consequences and penalties
• Medicare Savings Programs for low-income consumers
• About Consumer Action

Enrolling in Medicare

By Ruth Susswein

It’s open enrollment season for those who are eligible to receive Medicare, the federal health insurance program. By age 64, take time to consider your insurance options, as there are a number of choices you’ll want to be prepared to make. What you decide today will affect the cost and coverage you have tomorrow—and, potentially, for the rest of your life.

Enrollment period

You are eligible to enroll in Medicare in the three months before your 65th birthday month and for three months after your birthday month. Small employers (with fewer than 20 people) can require employees age 65 and up to enroll in Medicare Parts A and B, which become their primary coverage. Also, know that your small employer has the option to cancel or retain your private insurance as secondary coverage. This will affect how much supplemental insurance you’ll need. But we’ll get to that.

If you work for a large employer that offers health insurance, once you’re 65, Medicare will be your secondary coverage. Those with federal government employee health benefits can also enroll in and receive Medicare benefits during the three months before and after the month in which they turn 65. Medicare would become the primary coverage.

People with disabilities must first receive Social Security Disability Insurance (SSDI) for 24 months before being eligible for Medicare. The enrollment period begins three months before the 25th month of disability payments and ends three months after disability payments stop.

If you already receive Social Security (SS) benefits, you will automatically be enrolled in Medicare Parts A and B the month you turn 65. If you’ve delayed receiving Social Security payments, you can enroll in Medicare (only) by phone (800-MEDICARE, or 800-633-4227/TTY: 877-486-2048) or online (instructions here). If you set up an online account at Medicare.gov, you can receive personalized Medicare information and paperless Explanation of Benefits (EOBs) statements.

Medicare Parts A and B

Since most Americans will not pay a monthly premium for Medicare Part A, it’s recommended that you register for Part A (hospital coverage) even if you still have health insurance from an employer.

However, you may want to postpone enrolling in Part B (medical coverage) if you currently have employer-based coverage. If you defer Part B enrollment, you will not pay a penalty as long as you enroll within eight months of losing your coverage or stopping work, according to the Centers for Medicare & Medicaid Services (CMS).

Important: Pay attention to time frames or it will cost you. If you do not enroll in Part B during the eight-month window, you may have to pay a lifetime late enrollment fee that increases the longer you wait. Evaluate your situation using CMS’s fact sheet on whether to enroll in Part A and Part B when you turn 65. Also see "Consequences and penalties" to learn what other financial pitfalls to avoid.

Under Part B, you typically will pay a premium of about $150 per month (or higher, depending on your income), a $203 deductible (which increases a bit each year), and then 20% of Medicare-approved doctor services.

See "Medicare's 'Parts'" for a description of categories of Medicare coverage (A, B, C and D).

Turn to the Medicare Eligibility & Premium Calculator to estimate what your Medicare premiums will be, or call 800-MEDICARE for help. If you are receiving Social Security, your premiums can be automatically deducted from your monthly benefit.

Part D

CMS predicts that, in 2022, Part D (prescription drug coverage) will run, on average, $33 a month in premiums, plus a yearly deductible, and copayments on each prescription. But there can be a significant difference in cost (premiums and deductibles) and which drugs are covered, depending on the prescription drug plan you choose. Last year, premiums ranged from $13 to $83 a month. Also, those who earn more than $88,000 a year will be charged higher monthly premiums on Part B and Part D because of the mandatory Medicare Income-Related Monthly Adjustment Amount (IRMAA).

It’s best to sign up for Part D when you first enroll in Medicare, for quicker coverage and to avoid a permanent “late” enrollment penalty. You can register for a standalone drug plan through a private insurance company, or you may be able to get your prescription coverage through a Medicare Advantage plan. You can see what your coverage options include at Medicare.gov.

Choosing Medigap vs. Medicare Advantage

You’ll want to choose either a Medigap supplemental insurance plan, which covers many of the out-of-pocket costs under Original Medicare, or a Medicare Advantage plan, which offers managed care options that may provide broader benefits and lower overall costs. There are key differences between the two options, including coverage and cost as well as access to specific doctors and facilities.

Here, too, you’ll want to enroll when you sign up for Medicare Parts A and B. If you wait, acceptance into a supplemental plan will be based on your (good or poor) health, which may limit your options and increase your costs.

For more on these different policies and plans, see "Medigap versus Medicare Advantage."

Language assistance

This year, Medicare is offering its helpful Medicare & You handbook online in Chinese, Korean, Vietnamese and Spanish. For other languages, interpreter services and printed copies, call 800-MEDICARE (800-633-4227).

SHIP

If all this seems overwhelming, know that there is an agency in every state—the State Health Insurance Assistance Program (SHIP)—to help you sort out your coverage options and costs. SHIP counselors offer free, local, one-on-one guidance about Medicare eligibility, coverage changes and costs. Find your local SHIP online or by calling 877-839-2675.

Open enrollment—Oct. 15 through Dec. 7—is the time each year that you can make changes to your Part B or Part D coverage or your Medigap plan, or switch to a Medicare Advantage plan. Coverage changes take effect Jan. 1.

Medigap versus Medicare Advantage

By Monica Steinisch

Those who are looking for enhanced Medicare coverage have some decisions to make, including whether to purchase a Medigap plan to supplement Original Medicare or to forgo Original Medicare entirely and opt for a Medicare Advantage plan.

Medigap plans

Medicare Supplement insurance, commonly known as Medigap, is extra coverage you purchase from a private company to pay some of the charges—coinsurance, copayments, deductibles—that are not fully covered by traditional Medicare (Parts A and B). Medigap policies are lettered A through N, with each lettered plan offering a different level of coverage. Plans with the same letter will provide the same coverage no matter what insurer you buy them from (with some exceptions for Massachusetts, Minnesota and Wisconsin). You’ll still have some out-of-pocket expenses (deductibles and possibly copays), though they’ll be considerably lower than without a Medigap plan.

Each insurance company decides which Medigap policies it wants to sell, as long as it offers at least what state law requires. That means not every insurance company or broker you contact will offer exactly the same plans. Monthly premiums, which you must pay in addition to your Medicare Part B premium, can vary widely based on plan (from around $50 to hundreds of dollars per month), and even on the same coverage (plans of the same letter) offered by different companies, so it’s important to shop around. Ultimately, the cost of your Medigap policy depends on the type (letter) of plan you buy, the insurance company, your location and, in many cases, your age. Premiums can also be higher for smokers, and can increase due to inflation. Learn more about pricing factors at Medicare.gov. A standardized Medigap policy is guaranteed renewable, despite any health issues, as long as you pay your premiums on time. However, the issuing company can increase rates on the same plan each year.

Note: If you don’t purchase Medigap or a Part D plan when you first enroll in Medicare, you could face higher premiums when you do join.

Medicare Advantage plans

A Medicare Advantage plan (Part C) takes the place of Original Medicare (and Medigap). In addition to providing your hospital insurance (Part A) and medical insurance (Part B), most Advantage plans include prescription drug coverage (Part D), and many pay for things not covered under Original Medicare or a Medigap policy, such as vision, hearing and dental services—even gym memberships and over-the-counter drugs. These plans are offered by private companies—typically Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). With a Medicare Advantage plan, you’ll pay your monthly Part B premium, and some plans charge an additional premium (averaging $21 per month in 2021), but 65% of Advantage enrollees pay no additional premium at all. That doesn’t mean there aren’t costs (copays, a deductible, etc.), but all Medicare Advantage plans have an out-of-pocket limit—the maximum amount you could pay for medical services for the year. For 2021, that limit is $7,550 for in-network care and $11,300 for combined in- and out-of-network care. (Note, however, that the out-of-pocket limit does not apply to prescription drugs.) Traditional Medicare has no out-of-pocket limit.

To be eligible for an Advantage plan, you must already be enrolled in Medicare Part A and Part B, and you must live in the service area of the Advantage plan you choose. (Medicare Advantage plans are not available in every part of the U.S.)

Evaluating your options

When choosing between an Advantage plan or Medigap insurance, consider that a Medigap plan allows you to go to any doctor who accepts Medicare (which means most), while most Advantage plans provide full coverage only for the doctors in their own networks (in-network) and require you to pay more for out-of-network care. Seeing a specialist under Medicare Part B or Medigap policies does not require a referral, but some Medicare Advantage plans might. If you have expensive medical issues, you’ll probably benefit more from Medigap insurance, because Medigap covers coinsurance, copays, and often deductibles. If you’re in good health, you’ll probably save money with the lower Advantage plan premiums. With most Advantage plans, you pay less up front and more as you use services.

If you spend a lot on prescription drugs and are interested in a Medicare Advantage plan, look for one with drug coverage and compare that cost against the premiums for Medicare Part D to see which is a better deal. (Sometimes plans are hard to compare because of bundled benefits.) Be sure to check the plan’s formulary to confirm that the drugs you take are covered. Use Medicare’s Plan Finder to compare prescription drug (Part D) and Advantage (Part C) plan options, and the Medigap tool to find a policy that works for you. Reading “Choosing a Medigap Policy” can help with the decision-making process. For more Medigap advice, see “How to Pick the Best Medicare Supplement Plan in 4 Steps." If an Advantage plan sounds more advantageous, read NerdWallet’s “How to Choose a Medicare Advantage Plan” and Consumer Action’s “Get Covered” Medicare fact sheet. You can also get personalized help evaluating your Medicare options from your local State Health Insurance Assistance Program (SHIP) (online or 877-839-2675).

Medicare's 'Parts'

There are four “Parts” to the Medicare program (Parts A and B together are often referred to as “Original Medicare” or “traditional Medicare”):

1. Part A (hospital insurance) covers inpatient hospital and skilled nursing facility stays, some home health care, hospice (end-of-life) care, in-hospital lab tests, and surgery, but not custodial (long-term) care. Most people qualify for premium-free Part A through the Medicare taxes they or their spouses paid during their working years. Part A benefits are subject to a deductible and coinsurance (out-of-pocket costs) for extended hospital and nursing facility stays, with no yearly cap on costs.
2. Part B (medical insurance) covers physician visits, preventive services (vaccines, cancer screenings, etc.), outpatient lab tests and other diagnostic tests, doctor-requested medical equipment (a wheelchair, for example), mental health care, ambulance service, and miscellaneous other medically necessary services or supplies. You typically pay a monthly premium for Part B, deducted from your Social Security benefits if you receive them, or billed if you don’t. In 2021, Part B premiums run from $148 to $504 per month, with higher-income enrollees paying a higher price for both Part B and Part D. There’s also a deductible and coinsurance for most doctor services and medical equipment, with no yearly limit on out-of-pocket expenses, though most preventive services are free.
3. Part C refers to Medicare Advantage plans, which are offered by private companies (HMOs and PPOs, for example) that are approved by Medicare. Advantage plans must cover everything provided by Parts A and B (Original Medicare). Most include prescription drug coverage (Part D), and most offer extra coverage, like vision, hearing and/or dental care, which are not included in Original Medicare. To enroll in Part C, you must already be enrolled in Parts A and B. There may be a monthly Advantage premium in addition to your Part B premium, though many Advantage plans have a $0 premium. There also may be a deductible, a copay and/or coinsurance for services. All Medicare Advantage plans have an out-of-pocket limit. (Medicare Advantage plans are not available in all parts of the U.S., or there may be only one plan available in your region.)
4. Part D covers prescription drugs. This is the way to add a prescription benefit to your Original Medicare coverage (Parts A and B). Enrollees pay monthly premiums of about $30, with higher-income enrollees paying more. There also is an annual deductible and copayments or coinsurance for prescriptions, with costs varying by plan, prescription and pharmacy. If you choose a Part D plan with a low premium, you will likely have a high deductible. If you take few, if any, prescription drugs, the lowest-cost Part D plan could save you money, and you can choose a different plan each year during the open enrollment period.

—Monica Steinisch

Clash over expanded Medicare coverage and more

By Ruth Susswein

Congress sparred this fall over adding new benefits to Medicare recipients’ coverage. The goal was to expand access to dental, vision and hearing benefits for those who receive Medicare and to fund these services via the $3.5 trillion budget reconciliation bill that’s still stuck in negotiations. (Dental care is the medical service people skip most due to cost and lack of coverage, and poor dental care has been linked to a number of serious health issues, including heart disease.)

The plan also called for giving Medicare the power to negotiate with drug manufacturers to reduce the price of prescription drugs. When Medicare Part D was authorized in 2003, the statute prohibited Medicare from intervening in price negotiations between manufacturers and Part D plans. Allowing Medicare to negotiate directly with drugmakers is expected to lower drug costs for consumers because it would bring the significant influence of the government to bear on drug prices.

Americans pay more for prescriptions than any other country—even for the same drugs. One-third of the average Social Security check is eaten up by healthcare costs―particularly prescription drugs―according to the nonprofit Social Security Works. Savings from drug price negotiations would mean lower costs for Medicare recipients and massive savings for the federal government.

In the last year, funds from the federal American Rescue Plan improved low-income consumers’ access to low- or no-premium plans in the Affordable Care Act (ACA) Marketplace. Some lawmakers want to extend access to reduced premiums for low-income people.

Congressional Democrats also proposed plugging the Medicaid “coverage gap” in 12 states that do not cover health care for all of their lower-income citizens―people who earn too much to qualify for Medicaid and too little for ACA Marketplace subsidies. (The 12 states are Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin and Wyoming.)

Dental, vision and hearing benefits remain

Coverage for dental, vision and hearing services was still included in Medicare expansion negotiations as of late October. But dental coverage was to be phased in by 2028, with 10% of dental costs covered in year one, and up to 50% of costs covered by 2028. This current proposed coverage would help many moderate-income people, but dental care likely would remain unaffordable for low-income consumers.

The battle for better benefits also included a cap on Medicare beneficiaries’ out-of-pocket expenses, but the proposal did not survive, nor did a plan to lower the eligibility age for Medicare coverage to 60.

As for lower drug prices, as of late October, Congress was planning to reduce prices for Medicare recipients, group health plans and individuals in the ACA Marketplace. Which drugs, and how many, would receive a price cut remained in question.

“Life-saving prescription medication should not cost anyone their life savings,” Secretary of Health and Human Services Xavier Becerra said. The Biden administration strongly supports legislation that would allow Becerra to negotiate drug prices with pharmaceutical companies on behalf of millions of Medicare recipients.

As of this publication, Congress continues to debate whether, and which, benefits will be expanded this year.

Consequences and penalties

By Alegra Howard

Although you’re not required to sign up for Medicare, there are consequences for delaying enrollment, including high fees that might last as long as your coverage. Here’s what you need to know.

Part A: If you’re eligible for Medicare when you turn 65, you should sign up during your Initial Enrollment Period (the seven-month period that includes the three months before and after the month you turn 65). If you’re already getting Social Security (SS) or Railroad Retirement Board (RRB) benefits, you will automatically be enrolled in Part A and Part B starting the first day of the month you turn 65.

If you’re not receiving Social Security, you can still enroll in free Part A any time after your Initial Enrollment Period starts, without penalty. You can even sign up for Part A if you’re working and have employer-based health insurance. If you have to buy Part A (because you have not paid enough into the system, over the years, through Medicare payroll taxes) and you don’t sign up when you’re first eligible for Medicare, you’ll pay a penalty of 10% of your monthly premium, charged for twice the number of years that you were eligible for Part A but didn’t enroll.

Contributions to a Health Savings Account are no longer allowed once you sign up for Medicare, though existing funds can be used to pay ongoing Medicare expenses.

Part B: If you don’t sign up for Medicare Part B (outpatient medical care) during the initial enrollment period, you’ll be charged a late fee with each monthly payment for the duration of the time you’re enrolled. The penalty is 10% of what your monthly premium would have been for each 12-month period you were eligible for Part B but not enrolled.

However, if you didn’t enroll because you received health insurance through an employer, a union or a spouse’s employer, you may delay enrollment until you no longer have this coverage, but make sure you retain documentation of when the employer plan ended. You will have eight months to enroll from the time your coverage ends. If you enroll during this “Special Enrollment Period” (SEP), no late penalty will be charged. If you are incarcerated when you’re 65 years old, you’ll face a similar decision: Enroll in Part B and pay premiums while in prison, or face the same late fees if you wait to sign up until after you are released. Be aware that Medicare does not treat domestic partners the same as legally married spouses. If you’re in a domestic partnership at age 65 and have medical coverage through your partner’s employer’s health plan, you still must sign up during your Initial Enrollment Period to avoid a late penalty.

Part D: You can enroll in Medicare Part D (prescription drug coverage) during your Initial (seven month) Enrollment Period. If you sign up later than that, and you don’t have prescription drug coverage through an employer-sponsored plan or an Advantage plan, you’ll be charged a fee of 1% of the average monthly drug plan premium for every month you were late enrolling. The fees will be incurred for as long as you have Part D.

Medigap: If you delay applying for Medicare supplement insurance you risk being disqualified for coverage based on your health, or you may be hit with pricey premiums.

If you apply for Medigap coverage when you’re new to Medicare (within six months of signing up for Part B) or when you lose current health coverage (from 60 days before coverage ends to no later than 63 days after it ends), you may qualify for a “guaranteed issue right,” which means you’re guaranteed coverage and you cannot be charged more for your health conditions. If you apply outside of these periods, companies can refuse to cover you, charge you higher monthly premiums based on your (poor) health, or subject you to a waiting period before covering any pre-existing conditions.

Protect your retirement savings—and avoid costly penalties—by giving yourself plenty of time before your 65th birthday to carefully consider your Medicare enrollment strategy.

Medicare Savings Programs for low-income consumers

By Alegra Howard

If you’re on Medicare and struggling to afford the costs of health care, your state might offer assistance through one of four Medicare Savings Programs. These programs are administered by Medicaid to help cover Medicare Parts A and B premiums and, in some cases, deductibles, coinsurance and/or copayments for qualifying enrollees with limited income and assets. (Assets include money in a checking or savings account, stocks, bonds, mutual funds and individual retirement accounts, but not your home, car, household items, burial plot or life insurance policies.)

The Qualified Medicare Beneficiary (QMB) Program helps individuals with a monthly income limit of $1,094 and an asset limit of $7,970, and married couples with a monthly income limit of $1,472 and an asset limit of $11,960, pay for Part A and Part B premiums, deductibles and coinsurance, and Part B copays.

The Specified Low-Income Medicare Beneficiary (SLMB) Program helps individuals with a monthly income limit of $1,308 and an asset limit of $7,970, and married couples with a monthly income limit of $1,762 and an asset limit of $11,960, pay for Part B premiums.

The Qualifying Individual (QI) Program also helps to pay Part B premiums, but does not cover as large of a portion of the premium as the SLMB Program. You won’t qualify for QI if you qualify for Medicaid, and you must apply every year to receive the benefit. Funds are limited and are offered on a first-come, first-served basis. Low-income individuals with a monthly income limit of $1,469 and an asset limit of $7,970, and married couples with a monthly income limit of $1,980 and an asset limit of $11,960, are eligible to apply.

The Qualified Disabled and Working Individuals (QDWI) Program helps cover the Part A premium for working disabled people under age 65 who no longer qualify for their Social Security disability benefits and premium-free Part A because they returned to work. You’re eligible if you are not currently receiving state-provided medical assistance and you meet the income and asset limits for individuals ($4,379 and $4,000, respectively) or married couples ($5,892 and $6,000, respectively).

To apply for a Medicare Savings Program, click here. Got questions? Call 800-MEDICARE (800-633-4227/TTY: 877-486-2048).

Important: You may qualify for these programs even if your income and assets are more than the limits listed, as states’ income and asset requirements can vary, including which assets they consider in the low-income assessment. Check with your state to see if you qualify.

Extra Help is a federal program that helps low-income individuals pay monthly premiums, annual deductibles and copayments for Medicare Part D (prescription drug coverage). You automatically qualify for the Extra Help program if you are enrolled in Medicaid, Supplemental Security Income (SSI) or a Medicare Savings Program. Otherwise, to be eligible, you must already be signed up for Medicare and meet asset and income thresholds: combined savings, investments and real estate worth no more than $29,520 (if you’re married) or $14,790 (if you’re single) (not including your home, vehicles, personal possessions, life insurance, burial plots, and back payments from Social Security or SSI.) Income limits are $19,320 for individuals and $26,130 for married couples living together. To apply for Extra Help, visit the program webpage or call Social Security at 800-772-1213.

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