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Understanding your Medicare options

Answers to frequently asked questions.

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As the first among her group of close-knit friends to reach age 65, Diane S. became their de facto expert on Medicare. When each one got closer to his or her Medicare eligibility date, she got a frantic call for help.

Even though they were smart business people and professionals, "they were flummoxed by the new language and process for managing their health care coverage," she remembers. "Since I had already made my way through the decision maze, they figured I'd have some of the answers for them."

Unfortunately, as Diane and her friends soon discovered, "you really do need to do your own homework on this, because every situation is unique." While she could direct them to some of the places where she found information, she couldn't give them the individual answers they needed.

Diane and her friends are not alone in their plight, says Kurt Czarnowski, a former executive at the Social Security Administration and now principal at Czarnowski Consulting, a retirement education firm in Norfolk, Mass. To help people get the free education and assistance they need, Czarnowski recommends visiting the Social Security site or the Medicare site, or getting in touch with the local State Health Insurance Assistance Program (SHIP) office for free one-on-one assistance. Available in every state and U.S. territory, SHIP program counselors are uniquely trained to help people navigate the maze of Medicare options.

Most of the questions he gets from the people in his seminars have to do with Medicare eligibility, coverage, and cost, Czarnowski says. Here's a quick rundown of the questions most frequently asked—with answers you'll find at the Social Security and Medicare sites.

1. When am I eligible?

Quick Fact

Medicare is the nation's largest health insurance program, insuring more than 48 million older and disabled Americans.

Source: Brief Summaries of Medicare & Medcaid Title XVIII and Title XIX of The Social Security Act - 2012 Edition; CMS

Normally, your health insurance coverage under Medicare begins when you reach age 65. However, you also may be eligible for Medicare at any age if you are diagnosed with end-stage renal disease or another qualifying disability.

When you do become eligible, you'll want to remember to sign up within the seven-month time frame that begins three months before the month you turn 65 and ends three months after the month you turn 65. "If you miss this initial deadline, your coverage will be delayed because you'll have to wait until the next January to March general enrollment period and your coverage won't be effective until the following July," Czarnowski cautions. You also may have to pay more for some of your coverage. You can enroll on the phone or at your local Social Security office.

If you're still working when you're 65 and get health insurance through your employer or your spouse's employer, you don't have to enroll right away, as long as you can prove that you had this coverage when you sign up later on. But it may be a good idea to sign up for the basic Medicare coverage (Part A) anyway. "If you're eligible, it costs you nothing to have this extra insurance, and the Medicare coverage may help pay for some of your health care costs," explains Czarnowski.

2. What are my choices?

While the decisions you need to make are similar to what you may be used to with employer-provided health insurance, the structure of the Medicare health insurance program is very different. Not only are there different categories of insurance to sort out, but there are many options within each category. Here's a quick rundown:

Part A: Hospital Insurance
Medicare Part A coverage was first introduced in 1965 to help seniors manage the high cost of hospital care. After you pay an annual deductible, this insurance kicks in to pay for hospital stays, certain treatments and procedures performed in the hospital, care at a skilled nursing facility, and hospice care.

Part B: Medical Insurance
Medicare Part B was designed to pay for many of the health care costs not covered by Part A, including doctor visits and services, outpatient hospital care, physical and speech therapy, lab tests, blood transfusions, medical equipment and supplies, and ambulance services. This portion of basic Medicare is voluntary, and, because it is subsidized by Medicare funds, you’ll pay a low annual premium for the coverage.

Alternative insurance with a Medicare Advantage Plan
With Medicare, you can purchase an all-in-one managed care Medicare Advantage plan that provides your Part A and Part B coverage. Some Medicare Advantage plans also cover other services that are not covered under Parts A and B, and many include Part D prescription drug coverage. Some Medicare Advantage plans provide coverage only for network providers for non-emergency services. The type of plan you choose depends on what types of services you want to include (such as eye glasses or dental care) and whether you prefer to choose your own doctor or health care facility.

Medigap (supplemental) policies
You may have other health care costs that won’t be covered by either Part A or Part B of Medicare, such as deductibles and co-pay amounts, and certain other services, Unless you have other health insurance—for example, if you are a veteran, a union member, or a retiree with an employer health benefit—you may want to consider purchasing a policy that gives you the extra coverage you may need. To supplement Medicare Parts A and B, you can purchase a "Medigap" policy. Medigap policies are offered by private insurance companies, and there are a variety of plans to choose from, based on the services you would want to have covered.

You can find out which insurance companies sell Medigap policies in your area by visiting The Medicare Plan Finder at www.medicare.gov and selecting "Compare Medigap Policies."

Part D: Prescription Drug Coverage
Prescription drug coverage is not included in the original Medicare (Parts A and B) or Medigap supplemental policies. So unless you have this coverage elsewhere—or it's already included in your Medicare Advantage plan—you may want to think about buying a Medicare Part D policy to help pay for your prescription medications.

The plan you select for Part D coverge may depend on whether the plan includes the types and doses of medications you need (and how these fit with their formulary), how frequently you need them, and what pharmacy you use.

3. How do I choose my Medicare supplement options?

The decision-making process you've used to buy your health insurance in the past still applies when evaluating your Medicare supplement options. Begin by looking at the coverage you have now with your current health care provider and deciding what you want to duplicate or change. Then consider these questions to help narrow your choices:

  • How much can I afford to spend on monthly premiums?
  • What benefits do I really need? You can save money if you don't buy coverage for benefits that you don't mind paying for out of pocket, such as Part B deductibles, for example.
  • Do I want to choose my own doctors or health care providers?
  • Does the plan include coverage for my unique situation? Paying for emergencies outside the U.S. may be important if you travel frequently.
  • How does the plan's cost compare with that of other plans with the same benefits?

You can go to www.medicare.gov or call your local SHIP office to find out which insurance companies sell supplemental Medigap or Medicare Advantage policies in your state. Ask if they have any guides or rate cards so you can begin to compare plan features and costs.

4. What do the plans cost?

Part A
As long as you or your spouse paid Medicare taxes for at least 10 working years (40 quarters), your basic Part A coverage is free. But you are still responsible for paying an annual deductible (which is $1,184 in 2013), and a portion of the expenses for hospital stays that last longer than 60 days or nursing home stays beyond 100 days. Individuals who don't qualify for free Part A because they did not pay Medicare taxes long enough can generally purchase this coverage for an additional cost.

Part B
The cost (premium) for Part B is set by Medicare each year at a fixed rate for most participants ($104.90 a month for 2013), but it increases for individuals with annual income over $85,000 and married couples with annual income above $170,000. The cost for these higher-earning participants can range from $146.90 to $335.70 a month in 2013. Part B premiums also can be higher if you don't enroll when you're first eligible.

As with Part A, you will pay an annual deductible for Part B ($147 in 2013). And some covered services require that you pay a percentage of the charges or a co-payment amount approved by Medicare. If you are already receiving Social Security benefits, payment for your Part B coverage is deducted directly from your Social Security checks. If you're not yet collecting benefits, Social Security will send you a quarterly bill.

Medicare Advantage Plans
With a Medicare Advantage plan, you typically have a set premium, which includes your Part B cost, no (or low) deductibles, and co-pays for doctors, doctor's office visits, and other services. Everyone who enrolls in the same Medicare Advantage plan pays the same premium, regardless of age, gender, or health status.

To compare the cost of Medicare Advantage or Managed Care plans in your area, use the online Medicare Plan Finder.

Part D
The amount that insurance companies charge for prescription drug coverage will vary widely, based on how they structure their deductibles and their co-pays, and the brand name and generic drugs that are covered.

There is also a span of time for every Part D plan (aptly called the "doughnut hole")—after you hit a certain expense level and before your coverage kicks in again—when Part D insurers reduce what they pay for your prescriptions and require you to pay more. But this often exasperating arrangement will be phased out by 2020, as insurers gradually fill in the amount they cover during the doughnut-hole period.

You can get help comparing costs among Part D insurance providers at www.medicare.gov or by contacting your local SHIP office. As with all prescription drug plans, you'll need to present your Part D card at the pharmacy you use and pay the copayment amount when you pick up your prescription.

Medigap (supplemental) Policies
Although the benefits offered under a Medigap or supplemental insurance policy are standardized across the U.S., the premiums, deductibles, and co-payments for these policies can vary widely. So be sure to compare costs before you buy one.

The cost of a Medigap policy may also depend on whether the insurance company offers discounts (e.g., for nonsmokers or if you pay your premiums online), or a lower-cost option for using certain hospitals or doctors within its network.

The Medigap Policy Search on the Medicare Web site can help you compare the costs and benefits of the Medigap and Supplemental insurance policies available in your state.

5. When and how do I sign up?

The government has a 5-Star Special Enrollment Period for Medicare Advantage plans and Medicare prescription drug plans. With this option, you can switch from your existing plan to a five-star rated Medicare Advantage Plan or a five-star Medicare prescription drug plan once a year between the dates of Dec. 8 to Nov. 30 as long as a five-star plan is available in your area.

Parts A and B
Every eligible Medicare participant is entitled to receive Part A and Part B coverage upon reaching age 65, but you still need to sign up for your benefits. If you're already receiving Social Security payments, you'll be notified automatically. If not, you'll need to contact your local Social Security office or go to www.socialsecurity.gov to request your ID card and benefits.

Medicare Advantage Plans
You may enroll in a Medicare Advantage policy during the same enrollment opportunities that apply to Parts A and B. The annual open enrollment period for Medicare Advantage policies takes place every year from October 15 to December 7.

Medigap (supplemental) policy
You can purchase a Medigap policy when you are first eligible for Medicare, or during the Medicare open enrollment period. Some insurance companies may allow the purchase of a Medigap policy at other times.

Part D
If you're new to Medicare, consider enrolling in a prescription drug plan during the initial seven-month enrollment period that begins three months before you turn 65. If you sign up after that, your premium can increase for each month you delay. After you enroll, you can always change to a different prescription drug plan during the annual open enrollment period in October.

Plan Medicare
Part A
Medicare
Part B
Medicare Advantage Plan "Medigap"
Supplemental Policy
 
Medicare
Part D
What it does
  • Covers cost of your hospital stay for up to 60 days
  • Partially covers costs beyond 60 days
  • Also covers skilled nursing and hospice care
  • Covers outpatient care and nursing home care after the hospital for up to 100 days
  • Provides HMO/PPO-like coverage
  • Combines Part A and B
  • May offer coverage for other services
  • May require using network doctors
  • May include Part D
  • Pays for deductibles and co-pays for Parts A and B, plus services not covered
  • Allows you to select your own provider
  • May cover non-U.S. care
  • Helps with cost of prescription drugs
Who
provides
  • U.S. government–(CMS)
  • U.S. government—(CMS)
  • Private health insurance companies
  • Private health insurance companies
  • Private health insurance companies
Monthly
costs
  • None for most participants
  • $104.90 (up to $335.70 for higher income) in 2013
  • Varies by plan; all participants in same plan pay same amount
  • Varies by plan
  • Varies by plan
Annual deductible in 2013
  • $1,184
  • $147
  • Usually none
  • Varies by plan and service
  • Varies by plan
Other
costs
  • You pay some or all of the costs for care after 60 days in a hospital
  • 20% co-insurance for some services
  • Co-pays for most services
  • You may pay more if you enroll late
  • Costs increase during donut hole

6. Where can I go for more help?

In addition to the resources offered by your state’s SHIP program, check out the services, seminars, and publications available through your local Office of Elder Affairs or Council on Aging. The official Medicare site also has many helpful guides and interactive tools to help you compare your Medicare options.

While understanding your options and comparing plans can at first be a bit overwhelming, if you can take a few minutes now to get your questions answered and start sorting through the alphabet soup of Medicare choices, you'll be well positioned to select the best coverage for your situation and get more from your health care dollars.

Learn more

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