Whether or not you are on Social Security at age 65, you are eligible for Medicare, as long as you are a U.S. citizen or lawful permanent resident. Medicare is federal health insurance for people 65 or older, and for some younger people with disabilities. Most people on Medicare have helped fund it over the years through payroll taxes.
1. You Pay for MedicareWith a few exceptions, Medicare is not free. Even if you paid into it throughout your career, you’ll still have a monthly premium. If you are on Social Security, it will be automatically deducted monthly from your check.
2. Medicare Doesn’t Cover EverythingMedicare is broken down into Part A and Part B. According to the federal government's Medicare website, Part A helps cover inpatient care in hospitals, home healthcare, skilled nursing facility care, and hospice care.
Note that the operative word in this definition is "helps." Medicare doesn't pay for the entire amount. It pays 80 percent for most outpatient care and services. You’ll be responsible for out-of-pocket deductibles, copayments, and co-insurance. If you are very ill, all these charges can add up quickly.
The Medicare website explains that Part B helps cover services from doctors and other healthcare providers, outpatient care, durable medical equipment, and preventative services like physicals. Once more, the word that stands out is "helps." Medicare also includes copayments and co-insurance (20 percent) that come out-of-your pocket.
3. Prescription Drug Coverage Is ExtraIf you need prescription drugs, you'll need an additional policy called Part D, Medicare drug coverage. You can sign up for Part D when you first sign up for Medicare.
4. There Is an Option for Healthy ConsumersWhen you turn 65, you’ll have the option of choosing the original Medicare plan or a Medicare Advantage plan. Medicare Advantage is not the same as supplemental Medicare insurance (Medigap).
Medicare Advantage plans have the same coverage as the original Medicare, but may offer additional benefits like prescription drugs, vision, and dental.
If you opt for this choice, instead of paying directly for Medicare, you will pay for the Medicare Advantage plan that you choose.
Not for the IllAlthough Medicare Advantage premiums look enticing, and the coverage may appear to be the same or better, it can come with heavy out-of-pocket expenses. There are separate copays for lab tests, x-rays, outpatient surgery, emergency room, and more. These expenses can add up quickly.
5. Supplemental Insurance Fills Medicare Coverage GapsDesigned to fill in the gaps in Medicare coverage, Medigap is sold by private companies. Medigap coverage can help with copays, co-insurance, and deductibles.
Unlike Medicare Advantage plans, Medigap plans do not have networks. They allow you to choose any healthcare provider who accepts original Medicare. And you won't need to have a referral from your primary physician.
Medigap LimitationsUnfortunately, you cannot purchase both Medigap coverage and Medicare Advantage plans at the same time. You’ll need to choose one or the other.
Newer Medigap plans are not allowed to include prescription drug coverage. If you want prescription drug coverage, you will need to join Medicare Part D or get prescription drug coverage elsewhere.
Most Medigap plans do not include vision or dental coverage.
6. PenaltiesIf you don't sign up for Medicare Parts A, B, and D when you are first eligible, you may regret it.
Take-AwaysDespite your payroll deductions over the years, you must still pay a monthly premium for Medicare. Unfortunately, Medicare generally doesn’t cover all your healthcare needs.
Medicare Advantage or Medigap plans may offer additional services or cost benefits when Medicare falls short. Each of these plans has pros and cons. If you are relatively healthy, a Medicare Advantage Plan may be sufficient and may offer you cost savings. If you have health issues, combining original Medicare with a Medigap plan may be a more practical option.