Medicare Isn't as Simple as Turning 65

Medicare Isn't as Simple as Turning 65

For many Americans approaching retirement, Medicare can sound straightforward:

You turn 65. You get Medicare.

If only it were that simple.

Turning 65 may make you eligible for Medicare, but it can also introduce a series of decisions involving enrollment periods, different parts of Medicare, prescription drug coverage, private insurance options, employer coverage and potential penalties.

And some of those decisions have deadlines.

That's why Medicare is such a good example of the importance of financial education.

You don't need to become a Medicare expert.

But you should understand enough to know which questions you need to ask before your 65th birthday arrives.

Your 65th Birthday Isn't the Entire Enrollment Period

One of the first things to understand is that Medicare enrollment isn't simply something that happens on your birthday.

For most people who become eligible for Medicare at 65, the Initial Enrollment Period is seven months long. It generally begins three months before the month you turn 65, includes your birthday month and continues for three months afterward.

That means Medicare is something worth learning about before you turn 65.

Why?

Because when you enroll can affect when your coverage begins, and delaying enrollment in certain circumstances can potentially result in gaps in coverage or late-enrollment penalties.

So instead of asking:

"What do I do when I turn 65?"

A better question might be:

"What do I need to understand before I turn 65?"

That's a very different mindset.

A, B, C and D - What Do All These Letters Mean?

For someone encountering Medicare for the first time, even the terminology can be confusing.

At a basic level:

Medicare Part A: Hospital Insurance

Part A helps cover inpatient hospital care, skilled nursing facility care, hospice care and certain home healthcare.

Medicare Part B: Medical Insurance

Part B helps cover services from doctors and other healthcare providers, outpatient care, durable medical equipment, certain home healthcare and many preventive services.

Medicare Part C:  Medicare Advantage

Medicare Advantage is an alternative way to receive Medicare benefits through a Medicare-approved private insurance company. These plans include Part A and Part B and usually include Part D prescription drug coverage.

Medicare Part D: Prescription Drug Coverage

Part D helps cover prescription drug costs and is available through private insurance plans that follow Medicare rules.

And then there's Medigap, which isn't another "Part" of Medicare at all.

Medigap is supplemental insurance offered by private insurers to help cover certain out-of-pocket costs associated with Original Medicare.

If you didn't already know all of that, you've just discovered something important.

Medicare involves choices.

Original Medicare or Medicare Advantage?

Once you're enrolled in Medicare Parts A and B, there are two primary ways to receive your Medicare coverage.

You can use Original Medicare, which consists of Part A and Part B. You can also add a separate Part D prescription drug plan and potentially purchase Medigap supplemental coverage.

Or you can choose Medicare Advantage, also known as Part C, through a Medicare-approved private insurer. These plans bundle Part A and Part B and usually prescription drug coverage as well. Depending on the plan, provider networks, approvals, costs and additional benefits can differ from Original Medicare.

Which is better?

That's the wrong question.

A better question is:

"What differences should I understand before choosing?"

Your healthcare needs, doctors, prescriptions, travel, budget and preferences may all matter.

Financial education shouldn't tell an entire room of people that one option is universally better.

It should help each person understand what they need to compare.

What If You're Still Working at 65?

This is where the assumption that "everyone signs up for everything at 65" can become especially problematic.

Many Americans are still working when they turn 65.

Others may have health insurance through a spouse who is still working.

Depending on your circumstances and the type of employer coverage you have, different Medicare enrollment rules may apply.

Some people with qualifying coverage based on current employment may be eligible for a Special Enrollment Period for Part B after that employment or coverage ends. Medicare currently provides an eight-month Special Enrollment Period in certain circumstances involving coverage through your or your spouse's current employment.

But not every type of health coverage is treated the same way.

For example, Medicare specifically notes that COBRA isn't considered current-employment group health coverage for purposes of that Part B Special Enrollment Period.

That means:

"I already have health insurance"

isn't necessarily enough information to determine what you should do.

You need to understand what kind of coverage you have and how it coordinates with Medicare.

Missing a Deadline Can Have Consequences

Medicare deadlines aren't simply administrative suggestions.

In some situations, delaying enrollment when you don't qualify for an exception can result in a late-enrollment penalty.

For Medicare Part B, the penalty is generally an additional 10% of the applicable premium for each full 12-month period you could have had Part B but didn't enroll, unless you qualify for an exception such as a Special Enrollment Period. The penalty can generally continue for as long as you have Part B.

Think about that for a moment.

Something you didn't understand at 65 could potentially affect what you pay years later.

That's precisely why education before action matters.

Medicare Doesn't Necessarily Pay for Everything

Another important misconception is that once you have Medicare, all of your healthcare expenses are covered.

They aren't.

With Original Medicare, beneficiaries can be responsible for premiums, deductibles, coinsurance and other out-of-pocket expenses. Medicare notes that Original Medicare by itself doesn't have an annual out-of-pocket maximum. Supplemental coverage such as Medigap can help with certain costs, while Medicare Advantage plans have different cost structures and annual out-of-pocket limits.

And some services people associate with healthcare in retirement aren't necessarily covered in the way they expect.

For example, Medigap generally doesn't cover long-term care, routine vision or dental care, hearing aids or private-duty nursing.

So another important retirement question becomes:

"What healthcare expenses could I still be responsible for?"

That's a financial planning question as much as it is a healthcare question.

Prescription Coverage Deserves Its Own Attention

If you take prescription medications, don't assume that every plan covers every prescription in exactly the same way.

Medicare Part D provides prescription drug coverage, either through a standalone drug plan used with Original Medicare or typically as part of a Medicare Advantage plan that includes drug coverage. These plans are offered by private insurance companies operating under Medicare rules.

That means understanding your coverage can involve looking beyond the monthly premium.

Questions worth asking can include:

• Are my current prescriptions covered?

• What might I pay for them?

• Are there pharmacy network considerations?

• What happens if my prescriptions change?

• How does prescription coverage fit with my other Medicare choices?

Again, the objective isn't to memorize every rule.

It's to know that these are questions worth asking.

There's Another Enrollment Period You Should Know About

If you're considering Original Medicare with supplemental coverage, there's another deadline that can be particularly important.

Your Medigap Open Enrollment Period generally lasts six months and begins the first month you're 65 or older and enrolled in Medicare Part B.

During that period, insurers generally can't deny you a Medigap policy because of pre-existing health conditions. After that enrollment period, depending on your circumstances and applicable protections, you may not be able to purchase a policy or it could cost more.

That's very different from assuming:

"I'll decide about supplemental insurance whenever I'm ready."

Understanding when choices are available can be just as important as understanding the choices themselves.

Your Spouse Doesn't Necessarily Make the Same Choice

Employer health insurance often encourages us to think about healthcare coverage as a household decision.

Medicare works differently.

Medicare doesn't provide family or couple plans. Each person has individual coverage, and spouses don't necessarily have to make the same Medicare coverage choice.

One spouse could have different:

• Healthcare needs

• Prescription medications

• Preferred physicians

• Retirement dates

• Employer coverage

• Medicare eligibility dates

That makes another seemingly simple question important:

"Are my spouse and I assuming we need the same Medicare strategy?"

You may not.

How Much Do You Know About Medicare Today?

Try this quick self-assessment.

Can you confidently answer these questions?

1. When does my Initial Enrollment Period begin?
2. Do I need to enroll in Medicare at 65 if I'm still working?
3. What's the difference between Medicare Parts A and B?
4. What's Medicare Part C?
5. What's Medicare Part D?
6. What's the difference between Medicare Advantage and Original Medicare?
7. What is Medigap?
8. When is my Medigap Open Enrollment Period?
9. Could delaying Medicare enrollment result in a penalty in my situation?
10. How does my current employer insurance work with Medicare?
11. Are my prescriptions covered under the plan I'm considering?
12. What healthcare expenses could Medicare leave me responsible for?

How many did you know?

10-12?

You may already have a strong understanding of Medicare fundamentals.

6-9?

You've got a foundation, but there are areas worth exploring before making enrollment decisions.

0-5?

You've just learned something extremely useful:

There are questions you didn't know you needed to ask.

And discovering them before you need to enroll is exactly what financial education is supposed to accomplish.

Don't Start Learning About Medicare at 65

There's a broader lesson here.

The best time to understand a financial decision isn't necessarily when the decision is sitting in front of you.

If you're approaching 65, start learning beforehand.

Understand the terminology.

Understand the deadlines.

Understand your current insurance.

Understand your choices.

Write down your questions.

And use authoritative resources, including Medicare.gov, when researching current Medicare rules.

You don't need to know everything.

You need to know enough to recognize what you don't know.

Education Before Enrollment

The Society for Financial Awareness (SOFA) provides educational workshops designed to help people better understand financial topics that can affect retirement, including Medicare and healthcare considerations.

The purpose of education isn't to tell everyone which Medicare plan to choose.

Your circumstances are your own.

The purpose is to help you understand the landscape well enough to ask better questions, evaluate your options and recognize when you need additional information.

Because there's a significant difference between:

"I'm turning 65, so I guess I will get Medicare."

and:

"I'm approaching 65, and I understand the decisions I need to make."

That's financial awareness.

What Don't You Know Yet?

If Medicare is approaching, don't wait for your 65th birthday to start asking questions.

Explore an upcoming SOFA Tampa educational workshop and learn about Medicare before the deadlines, terminology and choices become decisions you have to make.

Learn before you enroll.

This article is intended for general educational purposes only and does not constitute financial, insurance, tax, legal or healthcare advice. Medicare rules, costs, plan availability and individual circumstances can change. Visit Medicare.gov and consult the appropriate qualified professionals for information applicable to your individual situation.