But your 65th birthday usually comes with a new bang out of health insurance: Medicare.
But how does Medicare work, anyway?
Its also one of the most confusing and complex programs.
Have questions about Medicare open enrollment? Nonprofit volunteers at theState Health Insurance Assistance Programcan help.
Contrary to popular belief, Medicare isnt free and it doesnt cover all your health care costs, either.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
You dont need to be retired or taking benefits to qualify.
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2.
How Is Medicare Funded?
Payroll taxes, general revenue and beneficiary premiums are the three main funding sources for Medicare.
Medicare Part A which mostly covers hospital visits and hospice care is funded viapayroll taxes.
Also known as FICA, these taxes are automatically withheld by your employer.
How Does Medicare Work and What Are the Different Parts?
Original Medicare, also known as traditional Medicare, includes Part A and Part B.
However, it doesnt cover vision, dental, hearing or prescriptions.
Medicare Part D is optional prescription drug coverage, and serves as a supplement to Original Medicare.
Medicare Part C, better known as Medicare Advantage, is an alternative to Original Medicare.
In this situation, Medicare pays first and your other insurance is the secondary payer.
Medicare Part A is basically hospital insurance.
Its premium-free for most Medicare beneficiaries because you paid into it during your working years via those Medicare taxes.
However, Part A isnt completely free.
You still have Part A deductibles and coinsurance costs.
It ends once you havent had any in-patient care for 60 days.
If you were hospitalized again six months later, youd start a new benefit period.
Youd oweanother$1,600 deductible.
Medicare Part Dis an optional prescription drug coverage program for people enrolled in Original Medicare.
This coverage is provided by a private insurance company that Medicare later reimburses.
Thus, your prescription drug costs can vary, depending on the Medicare Part D you choose.
it’s possible for you to shop for a Part D plan by using theMedicare Plan Findertool.
Medicare Part C, better known as Medicare Advantage, is an all-in-one alternative to Original Medicare.
you’ve got the option to buy a Medicare Advantage plan offered by a Medicare-approved private insurance company.
Many include additional benefitsOriginal Medicare doesnt cover, like hearing, dental and vision coverage.
You may also need to get prior authorization and approval from your plan for certain services and supplies.
Medigap policies help cover some out-of-pocket costs, such as deductibles and coinsurance, for Original Medicare beneficiaries.
you’ve got the option to only purchase a Medigap policy if youre enrolled in Original Medicare.
Medicare Advantage enrollees cant buy these supplement insurance policies.
Medicare supplement insurance plans are sold by private insurance companies.
Youll pay an insurer a monthly premium for your Medigap coverage in addition to all your other Medicare costs.
What Doesnt Medicare Cover?
There are several major medical expenses that arent covered by Medicare Part A or Part B.
Other services not covered by Medicare:
5.
How Do I Sign Up for Medicare?
If youre already receiving Social Security benefits, youll be automatically enrolled in Medicare.
You dont have to do anything.
But your benefits wont start until July of that year.
The Medicare enrollment process is handled by the Social Security Administration.
What Is Open Enrollment?
Its the time when people who are already enrolled in Medicare can make changes to their plans.
If youre happy with your coverage, you dont need to do anything.
During open enrollment, you could:
Whatever changes you make wont go into effect until Jan. 1.
Is Signing Up for Medicare Mandatory?
In some cases, yes.
But be sure to check with your employer.
Be sure youre very clear on the rules.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
Send your tricky money questions to[email protected]or chat with her inThe Penny Hoarder Community.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
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