Understanding Medicare: Basics You Need to Know

Federal health program

Chances are, if you’re not on Medicare, you don’t know very much about the federal health program. You’ve likely noticed Medicare taxes come out of your paychecks but probably haven’t thought about how much you’ll be paying for healthcare once you become eligible.  Here we will provide an introduction to understanding Medicare.

What is Medicare?

Medicare is national health care coverage in the United States, primarily for individuals ages 65 and over. You can also enroll if you’ve received Social Security Disability Insurance (SSDI) for more than 24 months or are diagnosed with end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS). The term “Original Medicare” refers to Parts A and B

Part A

Medicare Part A provides inpatient coverage, which pays for hospital-related costs. These costs include semi-private rooms, hospital meals, special care units, lab tests, x-rays, skilled nursing facility care, short-term nursing home care, hospice, and more. People who have paid into Medicare taxes for at least 40 quarters, or ten years, are eligible for premium-free Part A.

Part B

Medicare Part B covers outpatient care, such as doctor visits. This part of Medicare also includes laboratory tests, mental health care, and ambulance services. The standard premium for Part B in 2021 is $148.50. For higher-income earners, this amount is subject to adjustment based on their income bracket.

Part C (Advantage)

These plans stand-in for Original Medicare as long as you have them. Private health insurance companies offer Part C plans, often for low monthly premiums. Often, the plans include dental, vision, hearing, and prescription drug coverage. Original Medicare doesn’t cover any of these benefits.

Part D (Prescription Drug Plans)

The prescription drug portion of Medicare is Part D. In 2006, Medicare introduced this component to provide coverage for outpatient prescription drugs. This coverage is optional, but it can be beneficial to sign up as soon as possible. If you delay Part D enrollment without creditable coverage you will have to pay a late enrollment penalty.

Making Wise Choices About Your Coverage

When planning to enroll in Parts A, B, and D, consider whether you have creditable coverage so you can avoid the late enrollment penalties. Enrolling as soon as you’re eligible or lack creditable coverage can save money in the future that you would otherwise spend on inflated premiums.

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