What is Medicare and how does it work?
Medicare is federal health coverage that starts at 65 for most people. Here is what each part pays for and the two paths you choose between.
Medicare is health insurance run by the federal government. Most people become eligible the month they turn 65. Some people qualify earlier through disability, and a few qualify through end stage renal disease or ALS.
It is not one plan. It is four separate pieces that were added over the years, which is why it feels more complicated than it needs to.
The four parts, in plain terms
- Part A pays for hospital stays, skilled nursing after a hospital stay, hospice and some home health care.
- Part B pays for the everyday side: doctor visits, lab work, imaging, outpatient surgery, durable medical equipment.
- Part C is Medicare Advantage. It is not extra coverage. It is a private plan that replaces the way A and B are delivered to you.
- Part D pays for prescriptions you pick up at the pharmacy.
Part A and Part B together are what people call Original Medicare. That is the government paying your providers directly.
What it costs
Most people pay nothing for Part A, because they already paid for it. If you or your spouse worked and paid Medicare taxes for about 10 years, Part A comes with no monthly premium.
Part B has a monthly premium that nearly everyone pays, and it usually comes straight out of your Social Security check. Higher earners pay more through a surcharge called IRMAA. The exact figures change every January, so we cover the current numbers in what Medicare costs per month.
The part that trips people up
Original Medicare does not cap what you pay out of pocket. There is no maximum. After Part B pays its share, you are responsible for 20 percent of most services, and 20 percent of a very large bill is still a very large bill.
This is the single most important thing to understand about Medicare. Almost every decision that follows exists to solve this one problem.
So you pick one of two paths to cover that gap.
Path one: Original Medicare plus a supplement
You keep Original Medicare, then buy a Medicare Supplement policy, also called Medigap, to pay the 20 percent. You add a standalone Part D plan for your prescriptions.
You can use any doctor or hospital in the country that accepts Medicare, with no network and no referrals. You pay a monthly premium for the supplement in exchange for very predictable bills.
Path two: Medicare Advantage
You stay enrolled in A and B, but a private insurance company administers your coverage. These plans usually bundle in prescriptions, and often add dental, vision and hearing. Many have a zero dollar monthly premium beyond what you already pay for Part B.
In exchange you use a network, you may need referrals, and you pay copays as you go up to an annual out of pocket maximum.
Here in Hidalgo County the large majority of people on Medicare are on an Advantage plan, well above the Texas average. Networks here are deep and the plans are competitive, which is a real part of why.
When you sign up
Your first chance is a seven month window around your 65th birthday: the three months before your birthday month, the birthday month itself, and the three months after. Signing up in the three months before is what gets your card in hand on day one.
After that, changes happen during Annual Enrollment, October 15 through December 7.
If you are still working at 65 with real employer coverage, the rules are different and you may be able to wait. Read whether you have to sign up at 65 if you are still working before you do anything, because getting this wrong is expensive.
What Medicare does not cover
- Routine dental, vision and hearing under Original Medicare
- Long term custodial care, which is the day to day help most people picture when they hear nursing home
- Most care outside the United States
Some of these are covered by Medicare Advantage plans as extra benefits. It depends entirely on the plan.
Common follow-up questions
Is Medicare the same as Medicaid?
No. They sound alike and some people have both, but they are different programs with different rules. See Medicare vs Medicaid in Texas.
Do I get Medicare automatically?
Only if you are already drawing Social Security before you turn 65. Then A and B start on their own. If you are not drawing Social Security yet, nothing happens until you enroll.
Can I have Medicare and employer insurance at the same time?
Yes, and which one pays first depends on how many employees your company has. Twenty is the number that changes the answer.
Want this looked at properly?
We are an independent agency in McAllen serving Hidalgo, Cameron and Starr counties. No cost to talk it through.
Call (956) 687-3334Read next
Medicare Annual Enrollment in South Texas: dates, rules and what to do
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