Insurance Retirement

What is Medicare? Complete Guide with Everything You Need to Know

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Every American imagines retiring financially stable. However, the battle for a comfortable retirement is getting more challenging to attain for seniors. The rising cost of living eats away at your savings quickly, and more seniors are working into their retirement years instead of enjoying the remainder of their lives.

You’ll need to create a financial plan for your retirement, including all of the costs involved with staying healthy. All seniors are entitled to apply for Medicare after they retire.

Medicare is a Federal Health insurance program designed to help seniors manage their health as they age, assisting them with handling the financial costs of healthcare.

However, figuring out how Medicare plans work can leave you feeling more confused than ever. With so many programs available, how do you know which one suits your situation? There’s a Part A, B, and D, Medicare Advantage, and what on earth is a doughnut hole? Figuring out which plan suits your needs, and when to enroll, is a frustrating experience.

We put together this brief guide to give you what you need to know when enrolling for Medicare.

The Costs of Medicare

You may not know that all Medicare plans have two parts. Part A includes treatment and care at a hospital. It’s a free service provided that you or your spouse made contributions to the fund through Medicare payroll taxes, for a minimum period of least ten years. If you aren’t eligible for Part A, then it can cost you several hundred dollars a month in premiums.

Part B of Medicare provides you with coverage for outpatients services and doctors. This part comes with a monthly premium of $135.50 in 2019. Part D of Medicare covers your prescription drug costs, and the cost of your premium differs depending on your risk profile. The average cost for Part D in 2019 is a monthly premium of $24.

Your monthly premiums do not cover additional expenses such as deductibles, co-payments, and other costs that are out-of-pocket.

2019 & 2020 costs at a glance
Part A premiumMost people don’t pay a monthly premium for Part A (sometimes called “premium-free Part A“). If you buy Part A, you’ll pay up to $437 each month in 2019 ($458 in 2020). If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $437 ($458 in 2020). If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $240 ($252 in 2020).
Part A hospital inpatient deductible and coinsuranceYou pay:

  • $1,364 ($1,408 in 2020) deductible for each benefit period
  • Days 1-60: $0 coinsurance for each benefit period
  • Days 61-90: $341 ($352 in 2020) coinsurance per day of each benefit period
  • Days 91 and beyond: $682 ($704 in 2020) coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
  • Beyond lifetime reserve days: all costs
Part B premiumThe standard Part B premium amount is $135.50 ($144.60 in 2020) (or higher depending on your income).
Part B deductible and coinsurance$185 ($198 in 2020). After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you’re a hospital inpatient), outpatient therapy, and Durable medical equipment (DME)
Part C premium
The Part C monthly  Premium varies by plan.

Compare costs for specific Part C plans.

Part D premium
The Part D monthly Premium  varies by plan (higher-income consumers may pay more).

Compare costs for specific Part D plans.

Source: Medicare Costs at a Glance

Gap Policies

Those individuals that are already on Plan A, B, or D, may also want to look into Medigap cover. In some cases, you may be liable for out-of-pocket costs or gaps in your coverage. Your plan might not cover some of your expenses or only partially cover the cost. For example, if you need an anesthesiologist, they may charge a rate that’s higher than your Medicare coverage.

As a result, you’ll end up paying in the extra to cover the costs of the specialist. In some cases, these costs may be hundreds or thousands of dollars, depending on the type of operation. Trying to come up with hundreds of dollars to pay the additional expense can leave your budget gasping for some breathing room.

If you fail to pay your outstanding medical bills, the healthcare provider can lodge a collection notice against your with the credit bureaus. As a result, you’ll struggle to obtain any form of credit until you settle the creditor. You might also experience an increase in your Medicare premiums as well, or you might receive a temporary suspension of your plans.

Fortunately, Medigap plans help you bridge the costs of your additional expenses not covered by your original plans. Medigap covers you for any co-payments, deductibles, or shortfalls in your medical coverage. It’s the ideal supplemental plan to add to your Medicare expenses. Medigap is well worth the money if something serious happens, and you need advanced medical treatment.

You have the opportunity to switch your Medigap plans at any stage. However, you might find that the insurer may deny your coverage based on your current health status. Medigap providers may also deny you coverage if you decide to switch plans in the first six months after signing up for Medicare Plan B.

You can identify Medigap plans by the classification using the letters A to N. Every policy that goes by a predetermined letter classification requires you to be eligible for the same benefits, and the only difference between the plans is the cost. Plan F is the most popular Medigap scheme, and a 65-year old male would pay anywhere from $1,226 to $7,405 per annum for the cost of the plan in 2019, depending on the insurance provider.

Save Money on Health Care

Read: How To Save Money on Health Care Costs: Complete Guide

A Holistic Option

When you sign up for Medicare, you have the choice of selecting your plans. The traditional Medicare A, B, and D plans along with a Medigap cover, should be sufficient to handle your medical needs during retirement.

However, signing up for all these plans may seem confusing. If you don’t fully understand what value you’re getting for your money, then sign up for Medicare Advantage instead. Medicare Advantage allows you to obtain medical coverage and prescription drugs through a private insurance company.

Also known as “Part C,” Medicare Advantage requires you to make monthly premium payments that vary in cost depending on your coverage. Fortunately, with Medicare Advantage, you don’t have to sign up for Part D or buy any Medigap policy to cover your deductibles and co-payments. You’ll still be liable for any co-payments, but they have a much lower cost than traditional Medicare plans.

In most cases, Medicare Advantage has lower premiums, but the plan also has higher cost-sharing. You’ll also get a limited choice of healthcare providers as well.

Medicare Contributions

During your career, you and your employer both make contributions toward your Medicare plan. Both employer and employee make monthly contributions of 1.45-percent of the employee’s income. Those individuals that are self-employed must make a monthly contribution of 2.9-percent of their income toward the Medicare system.

If you earn more than $200,000 annually or $250,000 for couples, you’ll need to pay the Medicare system an additional 0.9-percent in annual premiums.

Understanding Your Out-of-Pocket Expenses

Part B of your Medicare plan has a $185 deductible in 2019, that’s an increase of $2 from the premium cost in 2018. After exceeding the $185 threshold, you’ll have to pay 20-percent of the costs toward any Medicare-approved medical services. There’s no annual limit on these out-of-pocket expenses.

For each benefit period, Medicare Part A has a $1,364 deductible in 2019, which is an increase of $24 from the 2018 fee schedule. This deductible covers you during hospitalization, but additional expenses apply if your stay at the facility is longer than 60-days.

Premiums are Income-Dependent

If you decide to go for a traditional Medicare plan, and you earn more than $200,000, or $250,000 per household, you’ll end up paying more in premiums for Part B and D. Premiums charged for both parts come with surcharges when the individuals adjusted gross income exceeds $85,000, or $170,000, if filing jointly.

Individuals who are earning incomes higher than $85,000 per annum, but lower than $107,000, are subject to Part B premiums of $189.60 monthly, with a surcharge of $54.10. This figure is a moderate increase that’s up from the 2018 numbers of $187.50 in monthly premiums and a $53.50 surcharge.

However, those retirees with gross-adjusted incomes exceeding $500,000, or household incomes exceeding $750,000, will need to pay a 10.3-percent increase in surcharges of $325, which is a substantial increase from the 2018 contribution of $294.60. This increase equates to wealthy seniors paying over $11,000 for their Medicare Part B premiums in 2019.

Part D coverage also experienced a high increase in monthly premiums, with seniors required to pay between $13.00 to $74.80 extra on top of regular monthly premium costs.

When to Enroll with Medicare

If you’re currently paying for social security benefits, then you get automatic enrollment into Medicare Parts A and B. However, since Part B has a monthly cost, you can choose to turn it down if you can’t afford the additional expense in your monthly budget.

If you decide to keep Part B, then the government deducts the expense from your social security benefits if you have already made a claim. For those that are not yet starting with Social Security, you’ll have to enroll for Parts A and B yourself.

Medicare has an initial enrollment program that lasts from three months before your 65th birthday, until three months after your birthday month the following year. If you want to make sure your coverage starts by your 65th birthday, you’ll need to sign up for the plan in the initial three months after you reach 65-years old.

Those individuals that are working, and have a health insurance policy through their employer, can delay signing up for Medicare. However, you’ll still need to sign up for Medicare within eight months of leaving your employer’s plan. By signing up in this window, you avoid penalties for late enrollment into the program.

Medicare Enrollment Periods

Medicare has enrollment periods throughout the year, as well as the initial enrollment period of seven months. If you miss signing up for Part B coverage during the initial period, you can sign up in the general enrollment period that runs from January 1st to March 31st.

After signing up, your coverage starts on July 1st. If you delay in signing up, you’ll need to pay a 10-percent penalty fee for every year that you remain unregistered.

Coverage will begin on July 1st. If you have your current coverage with your employer, then there’s no penalty fee, provided that you enroll within 8-months of leaving your job. If you miss this special enrollment period, you still have the option of signing up at the next open enrollment window.

The open enrollment window runs between October 15th to December 7th. During this period, you get the opportunity to change your Medicare Advantage or Part D plans to other options. As of 2019, Medicare Advantage customers can switch to another Advantage plan, or they have the option of reverting to the original Medicare plan between the period of January 1st and March 31st.

Decreasing Doughnut Hole Costs

Fortunately, the costs are decreasing for the Part D “doughnut hole.” This coverage gap forces you to pay more in out-of-pocket expenses for your chronic medication. In 2019, the doughnut hole appears after your annual drug costs pass the threshold of $3,820.

If you find yourself in the doughnut hole, you’ll receive a further 65-percent discount on all branded drugs, and a 56-percent subsidy from the federal government for all your generic drugs.

Catastrophic coverage kicks in when your out-of-pocket drug costs exceed $5,000 during the year. If you reach this stage, then the government will pick up most of the outstanding expenses.

Free Preventive Treatment

If enrolled in a Medicare program, then you’re entitled to numerous free preventative medical services throughout the year. Members get an annual wellness update to make adjustments to your personalized prevention plan.

Other benefits included are a free cardiovascular exam every 5-years, as well as annual mammograms for women, and seasonal flu shots. You’re also entitled to free screenings for colorectal, cervical, or prostate cancer as well.

Exclusions to Your Coverage

It’s important to note that Medicare does not cover long-term care. In specific conditions, especially after hospitalization, Medicare may take care of your costs surrounding home health care or your stay at a nursing facility.

However, Medicare will not cover costs related to custodial care, where patients require assistance with everyday tasks like bathing and dressing. You’ll need to rely on your savings to cover these costs, or your long-term care Medicaid or insurance, provided you meet the requirements for these facilities.

Traditional Medicare won’t cover you for eye care of dental work or hearing aids, and you’ll need to account for these expenses out of your savings.

Wrapping Up – Appealing Payment Decisions

You might disagree with payment or coverage decisions made by your Medicare health plan. If so, you have the right to appeal their decisions. The appeals process has a structure of 5-levels, and your case escalates every time you reach a new level.

Speak to your doctor or healthcare provider for information that may be relevant to your case. In some cases, waiting for Medicare to decide on your appeal may further damage your health. You, therefore, have the right to ask for a fast-track to your decision within 72-hours, if your doctor confirms the need for your request.


Oliver Dale is Editor-in-Chief of MoneyCheck and founder of Kooc Media Ltd, A UK-Based Online Publishing company. A Technology Entrepreneur with over 15 years of professional experience in Investing and UK Business.His writing has been quoted by Nasdaq, Dow Jones, Investopedia, The New Yorker, Forbes, Techcrunch & More.He built Money Check to bring the highest level of education about personal finance to the general public with clear and unbiased

1 Comment

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    rachel frampton Reply

    I’ve been planning to apply for a medicare insurance, although I’m not sure if it’s affordable. I never knew that medicare is divided in between part A and B, in which part B comes with monthly premium of $135.50 in 2019. I just hope that I’ll be able to find a lenient medical insurance company.

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