Medicare

What is Medicare? Medicare is health insurance for people 65 or older. You may be eligible to get Medicare earlier if you have a disability, End-Stage Renal Disease (ESRD), or ALS (also called Lou Gehrig’s disease).

Let’s go over the history of Medicare, the basics of what Medicare is, what it covers, who is eligible, and when they should enroll. We’ll cover what Medicare costs as well how people fill in the gaps in Medicare. And we’ll examine Medicare Supplement plans (Medigap), Medicare Advantage plans, and Part D prescription drug plans.

Also, what you'll need to know if you plan on working past 65.

For AEP (Annual Enrollment Period) - to research plans, make an appointment or to sign up, go to the Medicare Open Enrollment page

• History of Medicare

• Medicare Parts

• When to enroll

• Medicare costs

• Medigap / Medicare Supplement

• Medicare Advantage Plans

• Working beyond 65 years old

The beginning, the day Medicare began-

• July 30, 1965: President Lyndon Baines Johnson signed Medicare into law

• Former President Harry Truman was the first recipient. He and his wife Bess received cards 1 and 2

• 19 million beneficiaries were initially enrolled

A, B, C, D ?

We’re talking about Medicare, not the alphabet - It’s all about “the parts”

Part A = Hospital Coverage

Medicare Part A- What does it cover?

• Inpatient hospital stay- semi-private room, three meals a day

• Inpatient meds - Drugs administered as part of a hospital stay

• Skilled Nursing Care (up to 100 days) - Covers care of up to 100 days in a Skilled nursing facility after a qualifying three-day hospital stay – DOES NOT cover long term care!

• Blood transfusions

• Hospice

Part B= Outpatient Coverage

Medicare Part B- So what does it cover?

• Doctor visits

• Lab work

• Preventative care

• Outpatient surgeries

• Physical therapy

• Diagnostic imaging

• Dialysis

• Chemotherapy

• Part B drugs

Part B covers 100% of preventive care, and 80% of all other outpatient care

While some preventive care (i.e. flu shots, yearly wellness exams, mammograms, etc.) are covered at 100%, Part B covers most other outpatient services at 80%.

Original Medicare
Under Original Medicare, you get your benefits directly from the federal government

Part A + Part B= Original Medicare

Back in the 1960s, Blue Cross plans were popular, providing hospital care and outpatient care. Medicare was modelled after these plans and that’s why it has the two parts we just covered; Part A for hospital care and Part B for outpatient care. These two parts are often referred to as Original Medicare or Traditional Medicare, and these are the only two parts where you get your benefits directly from the federal government.

Medicare Part C and D came later and are provided by private insurance companies

Part C: Medicare Advantage

Private insurance plans that pay instead of Medicare.

Part A + Part B + Part D = Part C, Medicare Advantage

Medicare Part C is also known as the Medicare Advantage program. It was signed into law by President Clinton as part of the Balanced Budget Act of 1997. It’s an optional way to get your Part A and B benefits through a private insurance company instead of from Medicare itself.

Part D: voluntary drug program

How it works

• Pick your plan through a private insurance carrier in your area

• Pick up your prescriptions from an in-network pharmacy

• Shop your Part D plan each year during the fall open enrollment

Medicare Part D is the newest part of Medicare. It’s optional private insurance to help reduce the cost of your outpatient prescription drugs.

Although it is optional, if you do not sign up when you are first eligible and you do not have other creditable drug coverage, you will incur a penalty for not enrolling. The penalty is cumulative and gets larger with time.

Once you enroll with a private insurance carrier, you will receive a coverage card and be able to purchase your drugs at a reduced cost from in-network pharmacies.
It is recommended that you shop your Part D plan each year during the fall enrollment period to make sure you have the best coverage for you based on your current medication needs.

Enrolling in Original Medicare

• You enroll for Parts A and B through Social Security or Railroad Retirement Board (RRB)

• If you’re already receiving Social Security benefits: your enrollment is automatic

Most people sign up for Medicare online at socialsecurity.gov or in person at their local Social Security office. Railroad retirees sign up through the Railroad Retirement Board (RRB).
The only people who don’t need to actively enroll in Medicare are people who are taking SS income benefits prior to age 65. These people are auto-enrolled in Medicare Parts A and B at age 65. The card will just arrive in your mailbox about one to two months before you are eligible for Medicare at 65.

Initial enrollment period (IEP)

It is a 7-month window- It begins 3 months before and ends 3 months after your 65th birth month for a total of 7 months

For example: If you turn 65 on May 20, your Medicare IEP would run from February 1 to August 31.

Your Medicare start date depends on when you enroll

•Medicare start date is the first of the month after application date

Enroll prior to birthday month:

Enroll inor after your birthday month:

Medicare start 1st of the month of your 65th birthday

Unless you're born on the 1st

Your Medicare start date will depend on WHEN you enroll during your 7-month enrollment window. If you want benefits to begin on the 1st day of the month you turn 65, then you need to enroll in the 3 months before your birthday. If your birthday is on the first of the month, your coverage starts the first day of the prior month.

Example:

Mr. Smith’s 65th birthday is July 20. If he signs up for Medicare in April, May or June, his coverage will start on July 1.

Now assume Mr. Smith’s 65th birthday is July 1. If he signs up for Medicare in March, April or May, his coverage will start on June 1

If you enroll in your birthday month or the 3 months after your coverage will start the first of the month following the application date.

People who are still working for a large employer may enroll in just Part A at 65 and delay Parts B and D until later when they retire – more on this later in the presentation. Note that if you do enroll for Part A, you can no longer contribute to an HSA (Healthcare Savings Account)

Medicare Cost Sharing

How much is this all going to cost?

Some perspective…

Before applying for Medicare, If you’re insured through an employer-

You pay a premium, often through paycheck deduction

This is the cost of the insurance. It’s referred to as a monthly premium

You pay co-pays and/or co-insurance when you use medical services,and you likely have an annual deductible-

This is the cost-sharing

Just like with the insurance you may have had while you were under 65, Medicare has two types of costs that you will share in.

The first is the premium you pay for the coverage itself and the second is the cost-sharing you pay as you use health services.

Medicare’s costs –
Out-of-pocket expenses

Medicare Part A- Hospital

• Part A costs nothing if you have worked and paid FICA taxes for at least 40 quarters (10 years.) Most people pay $0 for Part A because you paid FICA taxes during your working years.

• You’re considered “paid up” so Part A will cost $0.

• You can qualify for this free Part A under your own work history or a spouse’s work history if you have been married at least 1 year. Spouse must be eligible for SS benefits.

• You can qualify under a divorced spouse’s work history if married at least 10 years and spouse is eligible for SS and you are single.

• You can qualify if you are widowed and were married for a least 9 months before spouse died and you are single.

• What happens if you don’t have enough work history? Well, in that case you can pay for Part A.

The costs:

• If you have between 30–39 quarters of work history, you can buy Part A pro-rated at $278/month in 2024

• If you have less than 30 quarters of work history, you can buy Part A at $505 in 2024

Medicare’s costs
Out-of-pocket expenses

Part B and Part D - YOU pay monthly premiums.

The Monthly Premiums:

Part B- Monthly premium is $185/month in 2025 for new enrollees

•Deduction monthly from SS check, or billed quarterly if not taking SS yet

IRMAA for high-earners - Individuals earning more than $106K (individual) $212K (joint) have a sliding scale for Parts B and D based on modified, adjusted gross income on your tax returns

• For Parts B and D you will pay monthly premiums.

• Most Medicare beneficiaries pay the standard base Part B premium of $185/month in 2025

• It is deducted monthly from your social security check or billed quarterly if not yet receiving social security benefits.

• However, around 5% of beneficiaries pay more because of higher incomes. When you have higher income (over $106,000 if you are single, over $212,000 if you are married), you pay what is referred to as an Income-Related Monthly Adjustment Amount (IRMMA) on top of the base premium.

Monthly premiums for Part B new enrollees
Based on your 2023 modified adjusted gross household income, your 2025 Part B premium will be based on a 2-year lookback:

• Social Security calculates your Part B premiums each year based on your tax return from two years prior.

• The Social Security Administration mails you a letter each December to notify you of the new calculated Part B premiums for the upcoming year.

• If your income was higher before due to working, but you have now retired and that income is lower, you can file an appeal with SS office indicating work stoppage, and request that the premiums be lowered. There is no guarantee of approval but it costs nothing to appeal.

• To appeal:

• Submit Form SSA-44, which can be found on the Social Security Administration (SSA) website

• Select the life-changing event reason for appeal: work stoppage, work reduction, marriage, divorce, or death of a spouse, loss of a pension, loss of an income producing property or employer settlement payment that has affected your income

Part D premiums- What to expect

Part D drug plan premiums are set by the insurance company who is offering the specific Part D plan.

There is a wide range of premiums (from as low as $0/month to over $100/month), but if you averaged every beneficiary out there on a stand-alone Part D plan, you would find the national average Part D premium to be around $55.50.

Just as with Part B, if your income is higher, you will be assessed an Income-Related Monthly Adjustment Amount on top of your Part D premiums.

Medicare doesn’t offer Part D plans itself, but it does track whether you enroll in Part D and maintain coverage. If you don’t and you don’t have other creditable coverage, you are assessed a late penalty of 1% for every month that you waited to enroll and is paid each month–forever–once you do finally sign up.

Monthly premiums for Part D new enrollees
Based on your 2022 modified adjusted gross household income, your 2025 Part D premium will be (2-year lookback):

Medicare recalculates these rates annually based on your IRS tax returns.

If you appeal your Part B premiums because you have lower income now than you did two years ago, that appeal will also apply to any Part D and Income-Related Monthly Adjustment Amount (IRMAA) that is assessed. In other words, only one appeal needs to be filed.

Part A Cost-sharing (2025)

• Part A deductible: $1,676 (for each benefit period)

• $419 Daily copay on Day 61

• $838 Daily copay on Day 91

• ALL COSTS after Day 150

• First 3 pints of blood

• $209.25/day coinsurance for days 21–100 in skilled nursing

Whenever you seek healthcare services, Medicare will pay a portion of the costs and you’ll pay a portion.

A daily copay of $419 starting on Day 61 to day 90. After day 90 the co-pay goes up to $838/day for what are called lifetime reserve days. Each person has only 60 of those over their lifetime. After day 150, you pay all costs.

You will also pay for the first three pints of blood if the hospital has to pay for blood instead of getting from a blood bank

A Medigap plan will help to cover these and will also provide you an extra 365 days in the hospital beyond day 150.

Part B Cost-sharing (2025)

• Part B deductible: $257

• Medicare pays 80%, you pay the other 20% coinsurance

• No cap – you pay 20% forever

On the Part B side, you owe:

• A calendar year deductible

• Then Medicare pays 80% you pay 20%.

• Here’s the very important part to consider when making your decision on coverage… There is no cap or out of pocket limit – you pay the 20% co-pay on everything.

There are options to limit these costs existing in the form of Medigap or Medicare Advantage plans

Private Market Plan options

= Higher premiums, less cost-sharing

=Lower premiums, higher cost-sharing

There are two routes you can go to cover the gaps with Medicare: a Medicare Supplement plan (also called a Medigap Insurance Plan) or a Medicare Advantage plan. You can only have one or the other, not both.

Generally speaking, a Medicare Supplement has higher premiums and less cost sharing whereas a Medicare Advantage plan has lower premiums and higher cost sharing. Both are offered through private insurers.

Medicare Supplements Plans (Medigap)

The facts

Medigap plans have been around since the 1960s and these private policies pay after Medicare first pays its share of your bills. Medigap plans allow you to see any doctor that accepts Medicare. You don’t have to choose a primary care provider (PCP) or get a referral in order to see a specialist. You can see any of the over 1M providers who accept Medicare and it doesn’t matter which insurance company you buy your Medigap plan from.

This works well for people who travel a lot in the United States as they can see doctors in any state.

Medigap plans were standardized in 1990 to make them easy for consumers to compare. They’re offered by many different insurance companies.

Medicare Supplements (Medigap)
Coverage by plan

Currently there are 10 standardized Medigap plans, each one covering a different set of benefits. The two most popular plans are Plan G and Plan N. You can choose a very comprehensive plan like Plan G that covers everything except for the Part B deductible. Or you can choose a plan with lesser coverage because you agree to do some cost-sharing. Plan N is an example where you can get lower premiums than Plan G but you agree to pay doctor copays and E.R. copays and any excess charges you might incur from non-participating providers.

Plan F is the most robust plan on the chart, and it covers all of the gaps in Medicare Part A and B.

However, only people who were eligible for Medicare prior to January 1 of 2020 can get Plan F. This is because Congress passed legislation that outlaws Medigap plans that cover the Part B deductible. It wants everyone to have to incur a deductible so that people think twice before running to the doctor for minor things

Medigap monthly premiums
What to expect

Monthly rates vary based on age, zip code, gender, tobacco use, and eligibility for household discounts.

Rates are lowest in IA, IN, OK, MS, NM

Rates are highest in FL, CT, WA, ME and NY

Medigap companies set their own rates. Insurance agents/brokers can’t change them.

Medigap companies base their rates on several factors. The rate is the rate–a broker cannot change that, so whether you call an insurance company directly or you call a broker who works with multiple companies; both will quote you exactly the same rate for a policy based on things like age, zip code, gender, tobacco use, and eligibility for household discounts

Putting it together
Adding up the costs for a monthly estimation (2025)

Medigap premiums are in addition to what you pay for Medicare itself, so you would add the Part A, B, and D premiums together plus the Medigap premium to get your total monthly expenditure. Plans vary widely in price based on region and the costs of healthcare in that region. For example, someone in Florida might pay twice the premium that someone in Texas pays.

Brokers can quote all the companies in your area to see who is offering the lowest price for the plan you want.

Qualifying for Medigap
Your eligibility for enrolling in a plan varies

Beneficiaries new to Medicare have a limited, one-time, six-month open enrollment window to get any Medigap plan they want, with no health questions asked. Coverage is guaranteed when you enroll during this window.

That window starts with your Part B effective date and ends six months later. Applying after that point will require health questions and the carrier can turn you down for preexisting health conditions.

There is also a more limited window called a guaranteed issue period (depending on the state you live in). This applies in special situations, such as when someone is already enrolled In Parts A and B and is losing employer health coverage that coordinates with Medicare. These people will have a shorter, guaranteed issue window to apply for certain Medigap plans with no health questions asked. State rules may apply.

States with exceptions

Some states have adopted more lenient rules. Here are some examples:

While beneficiaries in most states will get just the one, six-month Medigap open enrollment window, there are expanded rules in some states. For example, people in New York have year-round open enrollment. People in California can change during a limited period of time surrounding their birthday each year if they have an existing Medigap plan and want to switch to a cheaper plan with equal or lesser benefits.