For many seniors, the Medicare process can be pretty confusing. With so many moving parts, it can be hard to understand everything you need to do and, more importantly, how you can prepare for the cost of Medicare. What you can expect to pay also depends on multiple factors, so the whole ordeal only becomes manageable once you can estimate your Medicare expenses more accurately.
Let’s start with Part A
The two parts of Medicare you enroll through Social Security are Medicare Parts A and B. Part A covers inpatient services such as your room and board when admitted into the hospital. For most beneficiaries, Part A will cost them nothing because it has already been pre-paid through taxes during their working years.
In the U.S., if you have worked 10 years, or 40 quarters, you can enroll in Part A at no cost. If you’ve worked less than that, you must purchase Part A and pay a premium. The price can vary depending on if you’ve worked between 30 and 39 quarters or less than 30. For 2022, Part A premiums are $499 for less than 30 quarters and $274 for those who have over 30 quarters but less than 40.
Part A Late Enrollment Penalty
An additional cost you could face with Part A is a late penalty. This penalty could mean a 10% increase in your premium for twice the time you could’ve had coverage but did not enroll.
If you must pay a Part A premium and you don’t enroll during the right enrollment period, you would be penalized.
Now, what will Part B entail?
Medicare Part B is responsible for your outpatient medical services. Everyone must pay the Part B monthly premium to have coverage. These payments are based on your income, meaning if you are in a higher-income bracket, you could pay more for your Part B insurance.
For 2022, the standard base monthly premium is $170.10, which most beneficiaries pay. However, those in a higher income bracket could face payments up to $578.30.
Medicare Part B covers your non-preventative and preventative services. Preventative care is covered 100% by Medicare, but non-preventative services have only 80% coverage. Beneficiaries are responsible for the remaining 20% that Medicare does not cover. For situations like this, many people choose to add supplemental insurance to help with those remaining costs.
Part B Late Enrollment Penalty
You can also be subject to a late enrollment penalty for Medicare Part B. You would pay the penalty on top of your monthly premium for as long as you have Medicare coverage. It’s a 10% penalty that cumulates for every year without coverage. If you plan to delay your Part B enrollment, you must ensure that you have credible coverage for as long as you put it off, or you could face a hefty payment once you enroll.
What can I do about the remaining 20%?
Some people do choose only to have Medicare Parts A and B. Others, however, want additional coverage for their healthcare services. In cases like this, beneficiaries apply for a Medicare Supplement or Medicare Advantage plan.
Medicare Supplement Plans
Medicare Supplements, also known as Medigap plans, provide coverage for that remaining 20% not covered by Medicare. The good thing about these is that if a provider accepts Medicare, they must also take your Medicare Supplement plan. Once Medicare covers its 80%, the rest of the bill goes to your Medigap plan to provide the remaining coverage.
These have monthly premiums you pay in addition to the Part B monthly premiums. There are many options to choose from, but your rate choices are based on multiple factors such as age, gender, zip code, and tobacco use. Medicare Supplement plans do not include drug coverage, so you will need to enroll in a Part D plan if you choose this route.
Part C – Medicare Advantage
Medicare Advantage plans, also known as Part C of Medicare, are private, alternative plans which take over your Original Medicare benefits after you enroll in an Advantage plan. These plans typically have lower monthly premiums than Medigap plans and can sometimes come with Part D coverage. For many of these plans, you need to stay in-network for your healthcare services and pay copays and other out-of-pocket costs as time passes.
How does Part D work?
Medicare Part D is where you can get coverage for your prescription drugs. Private insurance carriers offer these Part D drug plans but must meet federal guidelines. Anyone can enroll in a Part D plan if they are enrolled in Parts A and B and live in a region with available plans. The federal government sets the yearly deductible, so private insurance carriers can choose to waive it all together or set theirs to be lower or the same, but they cannot increase the prices above Medicare’s rate.
The insurance carriers set Medicare Part D monthly premiums. The costs vary, but you can find cost-effective rates for as little as under $20 a month in most states. The additional out-of-pocket expenses you face will be your copays, and an additional fee will be tacked onto your copays once you reach the coverage gap.
Part D Penalty
Yes, you could face a penalty for Part D as well. Like before, if you have proof that you had creditable coverage for your prescription drugs, there will be no penalty. If that’s not the case, a penalty fee will be permanently added to your monthly premiums. There is a 1% penalty for each month you go without prescription drug coverage.
Make the right choices early
Once the time comes to make these decisions and figure out your deadlines, you can begin your research and develop a plan for your future health coverage.
After you understand how the whole Medicare process works, you can start to move forward with your plans. With the Medicare parts explained, you can now decipher what is necessary for you and what you can expect to pay for each portion of your insurance.
