Medicare is one of the most convoluted programs in the country. With the many sources of information available on the subject, it’s hard to know which information to trust. Realistically, it could take years to become a true Medicare expert. However, there are six Medicare facts you should know when beginning your Medicare journey.
1.Original Medicare isn’t free
Original Medicare consists of Medicare Part A and Part B. While most people qualify for premium-free Part A, it certainly isn’t free – nor is Part B. While working, you will pay FICA taxes, which partially goes towards funding your future Part A. After paying these taxes for at least 10 years, you will automatically qualify for premium-free Part A. However, you will still have a monthly premium for Part B.
2. You can customize your Medicare coverage
Medicare has several parts and plans that you can piece together to customize your Medicare coverage. For example, after you’re enrolled in Part A and Part B, you can add on either a Medigap plan or Medicare Advantage plan. Each of these plans helps to lower your out-of-pocket spending as you use your Medicare.
If you choose a Medigap plan, you will also need to select the most cost-effective Part D plan for your prescriptions. If you enroll in a Medicare Advantage plan, however, your Part D plan will likely be built-in, so you’ll need to verify that the drug coverage is substantial for your specific medications. Although some Medicare Advantage plans have a $0 premium, each of these types plans generally come with an additional premium.
3. Your enrollment periods are critical
Medicare has numerous enrollment periods, and several of them are very critical. Missing these enrollment periods could result in penalties, lack of coverage, and more. The three most important enrollment periods you should prepare for are your Initial Enrollment Period (IEP), Medigap Open Enrollment Period (Medigap OEP), and the Annual Election Period (AEP).
Your IEP is the first time you are able to apply for Part A and Part B, as well as enroll in a Part D or Medicare Advantage plan for the first time. Your Medigap OEP is a one-time window that allows you to enroll in a Medigap plan without having to answer any health questions. The AEP, although an annual period, is critical because this is generally the only time you can change your Part D and Medicare Advantage plans each year.
4. You can only delay Medicare enrollment if you have creditable coverage
As mentioned above, missing certain enrollment periods could result in penalties. If you fail to enroll in Medicare during your IEP and don’t hold creditable coverage, you will be assessed a lifelong late penalty. The most common form of creditable coverage for Original Medicare is active large employer coverage. So, if you or your spouse actively works for an employer with 20 or more employees, and you hold that employer’s coverage, you can delay Medicare past 65 without penalty.
5. Medigap plan coverage is standardized throughout every insurance carrier
A common question among new Medicare beneficiaries is, “Should I get my Medigap plan through this carrier or that carrier?” And the answer is, you should purchase your Medigap plan through the carrier with the most cost-effective premium, lowest average rate increases, and best financial rating.
Each Medigap plan has a set level of coverage, meaning the coverage for each plan doesn’t change from carrier to carrier. A Plan G through Carrier A will have the same coverage from year to year as Carrier B. So, you should compare as many carriers as possible to find the one that is most cost-effective – not the one with the most popular branding.
6. The AEP is NOT for Medigap plans
A huge misconception about the AEP is that it is another chance for you to enroll in a Medigap plan without answering health questions. You would be very discouraged when the AEP rolls around if you plan to change to a Medigap plan without underwriting. The AEP, as mentioned earlier, is only for making changes to your Part D and Medicare Advantage plans.
It is not another opportunity to enroll in a Medigap plan without having to go through underwriting. In most states, the only chance you are given to do this is during your one-time, six-month Medigap OEP. After that period is gone, you will likely have to answer health questions when enrolling in a new Medigap plan.
While there are many other important facts you should know about Medicare, these are arguable the most crucial details you should remember as you prepare to transition to Medicare.