As an enrollee in the Medicare and Medicare Advantage system, it is important to consider your options for health care. Although there are many people who all fall under the coverage of it, coverage can differ greatly from person to person. This is due to the fact that there are multiple options for coverage and benefits.

It is very important to compare plans to make sure you are saving money where you can while getting the coverage you need. Click here for more information about what is not covered.

Timing, as they say, is everything. It’s especially important when it comes to enrolling in Medicare. As you approach 65, you’ll want to enroll during what the government calls your initial enrollment period (IEP). This seven-month period goes from three months before the month in which you turn65 until three months after.

If you don’t sign up during your IEP, you will get another chance to enroll during Medicare’s annual general enrollment period, from Jan. 1 through March 31 of each year. However, if you enroll at that time, your coverage won’t begin until July. And, because you enrolled late, your monthly premiums for Medicare Part B —which covers your doctor visits and other outpatient services —will likely cost you more.

If you are 65 or older, when you stop working and lose your health insurance coverage or when the insurance you have through your spouse ends, you’ll need to sign up for Medicare. Medicare has created a special enrollment period (SEP) that lets you do that without facing a late enrollment penalty.

Again, timing is everything. What many people don’t realize is that you can only use this SEP either while you are covered by job-based insurance or for eight months after you no longer have job-based insurance.

Note: Medicare does not count retiree health insurance or COBRA as job-based coverage. So, if that’s the insurance you have, you’ll need to reread mistake No. 1 and sign up when you turn 65 or face that late enrollment penalty.

Parts A and B (Original Medicare) cover several medical and hospital services, but there are some other services that are not covered, like prescription drugs. You do have the option to buy drug coverage through Medicare Part D.

Here’s a list of some other services that are not covered by Parts A and B. Some people may have to pay for such services unless they have other insurance that pay for them. Some Medicare Advantage (Part C) plans may cover some of these services as well.

Parts A and B don’t cover:

• Routine dental exams, most dental care or dentures
• Routine eye exams, eyeglasses or contacts
• Hearing aids or related exams or services
• Most care while traveling outside the United States
• Help with bathing, dressing, eating, etc. (custodial care)
• Comfort items such as a hospital phone, TV or private room
• Long-term care
• Cosmetic surgery
• Most chiropractic services
• Acupuncture or other alternative treatments
• Routine foot care

You also have the option to add Supplement Insurance to help you with some costs that will not be covered, or you may want to look for an Advantage plan (Part C) that provides additional benefits while covering Parts A, B and D (prescription drugs.)

Part A is sometimes called “Hospital Insurance.” In general, it covers inpatient care in hospitals, care in skilled nursing facilities, home health services, and hospice care. It can even help cover nursing home care (as long as it is not custodial or long-term care).

Some individuals are automatically enrolled in Part A when they turn 65. However, if you aren’t getting Social Security or RRB (Railroad Retirement Board) benefits on your 65th birthday, you need to sign up for Part A. Another reason you might need to sign up is if you qualify for because you have End-Stage Renal Disease (ESRD).

Many people do not have to pay a monthly premium for Part A. If you or your spouse paid Medicare taxes for a total of 10 years while working, you will not have to pay this premium. For individuals with limited income and resources, your state may help you pay for Part A.

Even if you, or your spouse, did not pay Medicare taxes before retirement, you can still buy Part A if you are over 65 years old, meet U.S. citizenship and residency requirements, and aren’t entitled to Social Security, or if you are under 65, disabled, and lost your Part A coverage because you went back to work. Medicare does not require you to buy Part B, but you will be assessed a late penalty if you do not take it when it becomes available. If you have limited income, your state may provide financial assistance for your Part A and Part B coverage.

Part A Hospital Coverage

Part A will cover hospital stays if a doctor makes an official order which says you need two or more nights of medically necessary treatment and the hospital formally admits you. Part A also covers you if you need the kind of care that can only be given in a hospital and the hospital accepts Medicare. Hospital services such as anesthesia, chemotherapy, and inpatient dialysis are covered by Part A as long as they are deemed medically necessary. Personal care items and private rooms are not covered by Part A unless they are considered medically necessary.

Blood is another service that the Part A program covers. As long as the hospital receives blood from a blood bank without any charge, you do not need to worry about payment. However, if the hospital needs to purchase blood for you, you must either pay the hospital costs for the first 3 units of blood you get in a calendar year or have the blood donated. This service includes blood transfusions as well as other blood work you are given in a hospital. For more information on hospital coverage click here.

Part A Hospice Coverage

Hospice, skilled nursing facility, and home health services are also covered by Part A. If you have a terminal illness, and your doctor has confirmed that you have 6 months or less to live, your hospice care (including pain relief, grief counseling, and other services) will be covered by Medicare. In order to receive skilled nursing facility care, a doctor must declare that you are in need of daily skilled care like physical therapy as long as you need and get the therapy services each day they’re offered. Home health services are also covered, provided you are under the care of a doctor and are also cared for by a Medicare-certified home health agency. You must be determined home-bound in order to receive these services, and the home health services are again limited to medically necessary care.

Part A Does Not Cover Private Nursing or Private Rooms

Part A provides you with a semi-private room and meals in hospitals and nursing facilities. These services do not include private nursing or private rooms, and unless deemed medically necessary, also do not cover long-term or custodial care. Televisions and telephones are also not covered if they incur an additional charge.

Part B generally covers two main types of service. The first is medically necessary services and supplies that are needed to treat or diagnose your medical condition. These must also meet accepted standards of medical practice. The second type of service that Part B covers is preventive services to help discover issues early when treatment is most likely to work best. For example, some shots and vaccines are covered.

You can enroll in Part B medical insurance during the Initial Enrollment Period, which begins three months before your 65th birthday and extends through the three months that follow your birth month. There is also a special enrollment period for those who are covered by a group health plan offered by a union or employer.

If you are already receiving benefits from Social Security or the Railroad Retirement Board, you will be automatically enrolled in Part B the first day of the month you turn 65. Anyone who is not receiving Social Security or RRB benefits when they turn 65 must enroll in Medicare through Social Security .

If your birthday is on the first of the month, you will enroll in Part B on the first day of the previous month. If you are disabled and under the age of 65, you will likely automatically get Part B once you receive Social Security disability benefits. Most people must pay a monthly premium, the cost of which may change depending on their income, to ensure Part B coverage. The premium is usually deducted from your monthly Social Security payments, depending on income.

If you were automatically enrolled in Part B and received a card in the mail, you can choose to opt out by sending the Part B card back: by keeping the card, you keep Part B and keep paying its premiums. If you signed up for Medicare through Social Security, contact Social Security.

If you chose not to enroll during your Initial Enrollment Period, you have the opportunity to sign up during the General Enrollment Period, which lasts between January 1 and March 31 each year. In many cases, if you don’t sign up for Part B when you’re first eligible, you have to pay a late enrollment penalty. For every one year period that you were qualified to enroll in but opted not to, your Part B monthly premium increases by 10 percent. You pay this penalty for the entire time you have Part B. If you meet certain conditions that allow you to sign up during the Special Enrollment Period, you may not have to pay this enrollment penalty.

Part B Outpatient Care

Part B provides patients with medically necessary outpatient health care. Physician services, nursing services, vaccinations, cardiovascular and diabetes screenings, lab services, and other preventive services are all covered by Part B. In addition, Medicare encourages all beneficiaries to complete an annual Wellness Visit. Part B will not pay for cosmetic surgery, custodial care, prescription drugs, dental or vision care, as well as some other services.

Medicare does not cover every health-related service or item. You may have co-payments and deductibles on services even if they are covered. After you meet your deductible, your co-payments will generally cost around 20% of the Medicare-approved amount for most doctor services. If a service you need is not covered, you must cover the costs yourself unless you have separate insurance that does. Learn more about the cost of Part B at Medicare.gov.

The benefits of Part C, Medicare Advantage, allows you to receive your benefits from a private insurance company approved by Medicare. If you have Part A and Part B, you can receive your benefits from an Advantage plan. The plans are not supplemental insurance, but rather health insurance plans of their own. Medicare Advantage can also include prescription drug coverage in addition to vision, hearing, and dental. In most cases, you can join even if you have been diagnosed with a pre-existing condition, except for End-Stage Renal Disease. Medicare Advantage plans must follow established guidelines, but they can vary in terms of costs and rules.

With an Advantage plan, you may be able to lower your out-of-pocket costs. Some Advantage plans have lower co-payments than Parts A and B, but are also limited to certain service areas and often involve networks. You may have to pay a premium each month due to the extra benefits you may receive from the plan.

You can enroll in an Advantage Plan during your Initial Enrollment Period, the Advantage and Prescription Drug Plan Annual Enrollment Period and there are also Special Enrollment Periods for certain situations. The amount that you pay yourself varies from plan to plan, so it is necessary to compare plans in order to find the plan most suitable to your needs. You can enroll in plans by paper, telephone or an online application.

What are my Options?

Health Maintenance Organization (HMO) plans are required to cover both Part A and Part B health care, but can also offer additional benefits. You will only be able to visit physicians and hospitals that are within the HMO network unless there is an emergency. However, HMOs can lower costs, making them (in some cases) less expensive than Parts A and B.

Preferred Provider Organizations (PPOs) allow you to use doctors, hospitals, and specialists within the PPO network. However, you are permitted to use health providers outside of the network at an additional cost to you without a referral.

With a Private Fee for Service (PFFS) you are able to use any doctor or specialist, so long as they accept the terms, fees, and conditions of the PFFS. The plan chooses how much it will pay for the services, and you can spend more or less on PFFS plans than Parts A and B.

In a Medicare Medical Savings Account (MSA) you combine a medical savings account with a high-deductible. Medicare gives the plan an amount of money each year for your health care and the plan deposits this money into your account. You can use this money to pay for health care costs, even if they’re not covered. If you use it for Part A and Part B services, you can count this towards your deductible. If you have used the money provided but have additional health care costs, you’ll have to pay for the Medicare-covered services out-of-pocket. After you reach your deductible, the plan will cover Medicare-covered services.

Find more information on these and additional Advantage Plans at Medicare.gov.

Are there any risks and what if I’m not satisfied?

If you have an Advantage Plan, you can’t have a Medigap policy, because Advantage Plans cover many of the same benefits.

With an Advantage Plan, you are still in the Medicare program and can still get complete Part A and Part B coverage through the plan. If the plan opts to end its involvement with Medicare, you will need to choose another plan or enroll in Parts A and B.

Find more details on risks and benefits of Advantage Plans at ssa.gov.

Part D prescription drug coverage helps beneficiaries pay for covered prescription drugs bought at certain centers, including retail locations and pharmacies. This benefit could help reduce prescription drug costs significantly.

Prescription drug coverage is available to every beneficiary. But, if you don’t choose a Part D plan when you are eligible, and you don’t join a Part C plan (Medicare Advantage) that includes prescription drug coverage, you could pay a late enrollment penalty if you try to join later. Exceptions exist if you have creditable prescription drug coverage or if you receive Extra Help where you can make changes to your prescription drug coverage for the next year.

January 1 – December 31: You can enroll in any Prescription Drug Plan during the Initial Enrollment Period listed above*.

When you join, you’ll give your Medicare number and the dates of when your Part A and Part B coverage started.

Prescription Drug Coverage

Part D adds prescription drug coverage to Parts A and B, some Medicare Cost Plans, Private Fee-for-Service Plans, and Medical Savings Account Plans. They are offered by insurance companies and other Medicare-approved private insurers. The cost of each plan depends on the provider and your location. The Medicare Advantage and Prescription Drug Plan Annual Enrollment Period (AEP) takes place from October 15 to December 7 each year. During this period, you can get a prescription drug plan or a Part C plan.

If you are about to turn 65 or otherwise become eligible outside of the AEP, you have seven months to enroll in the following year’s plan in order to avoid a Late Enrollment Penalty.

Those seven months consist of:

1. The three months before your 65th birthday
2. The month of your birthday
3. The three months after your birthday

Coverage begins on the first day of your birthday month if you enroll during the three months before your birthday. If you join during or after your birthday month, your coverage begins on the first day of the month after you enroll.

Here is an example for someone born on August 22:

• If you join in May, June, or July, your Part D coverage begins on August 1
• If you join in August, your coverage starts on September 1
• If you join in September, your coverage starts on October 1
• You can join up to and including the month of November

Here are the important dates for enrolling in a Mediare Part D plan in a given year:

October 15 – December 7: This is the Annual Enrollment Period, where you can make changes to your prescription drug coverage for the next year.

January 1 – December 31: You can enroll in any Prescription Drug Plan during the Initial Enrollment Period listed above*.

When you join, you’ll give your Medicare number and the dates when your Part A and Part B coverage started. 

Late Enrollment Penalty

If you go 63 consecutive days, or more, without prescription drug coverage after your Initial Enrollment Period ends and don’t have a Medicare Prescription Drug Plan, an Advantage Plan (that offers prescription drug coverage), another health plan that offers prescription drug coverage, or creditable prescription drug coverage, you may face a penalty should you choose to enroll later. The penalty depends on the length of time you went without the coverage.

At present, Medicare multiplies 1% of a “national base beneficiary premium figure” ($32.74 in 2020) by the number of months you went without coverage. This penalty is rounded to the nearest $0.10 and added to your monthly Part D premium.

For example, if your Initial Enrollment Period ended on February 22, 2017, but you didn’t join a plan until October 14, 2018 (which may mean your effective coverage began on November 1), you would be 19 months late. This would lead to the following penalty (based on 2020 figures):

$0.3274 x 19 = $6.22, which would round to $6.20

As a result, you would have to pay an extra $6.20 each month on top of your Part D premium.

Cost of Coverage

Most Part D plans charge a monthly fee, or premium, that varies according to the plan you choose. The charges can be complex, and you’re likely to pay different prices for prescription drugs depending on their “tier” (more on that later). You may have your monthly premium deducted from your monthly Social Security payment. To do this, contact your prescription drug plan.

Another cost is your annual deductible. The annual deductible is the amount you pay for your prescriptions before Part D coverage starts to pay its share of your covered prescription drugs. Although deductibles can vary according to the plan you choose, no plan can charge more than $435 per year in 2020.

Co-pay/Co-insurance

This is what you pay for each prescription after the deductible, when applicable. A co-payment is the set amount you pay for all prescription drugs in a specific tier. Different tiers correspond to different types of prescription drugs, and how much your insurance will cover each type. For example, you may pay less for a generic prescription drug than for a brand one.

Co-insurance works similarly, but instead of paying a fixed fee, you’ll pay a percentage of the prescription drug’s cost. For instance, you may pay 25 percent co-insurance on a $100 prescription drug; this means you would pay $25 towards the cost while your plan covers the rest.

The Coverage Gap

Sometimes nicknamed the “donut hole,” the coverage gap represents a temporary limit on what your plan will cover for prescription drugs. In order to reach the coverage gap, you and your prescription drug plan need to spend a certain amount on covered prescription drugs in a calendar year. In 2020, you will only reach the coverage gap after you and your plan spend a combined $4,020 on covered prescription drugs.

Once you’re in the coverage gap, you will only pay 25 percent of the plan’s cost for covered brand-name and generic prescription drugs in 2020.

Catastrophic Coverage

The out-of-pocket spending threshold for policyholders in 2020 for covered prescription drugs is $6,350. After you reach this figure, you’re out of the coverage gap and automatically receive catastrophic coverage. This reduces the amount you have to pay out-of-pocket for covered prescription drugs.

Again, it is important to remember that this coverage only begins after the policyholder has spent the above amount – not their plan.

Prescription Drugs Covered by Part D

Each individual Part D plan has its own covered prescription drug list, also known as a Formulary. It is common for these plans to classify prescription drugs by tiers, which also means they have a different cost. Prescription drugs in lower tiers generally cost less than prescription drugs found in higher tiers.

Your plan may alter its Formulary during the year. If these changes include a prescription drug you are taking, your plan has two options. One, it either must provide you with written notice at least 60 days before the change takes place. Alternatively, it can give you a 60-day supply when you request a refill as well as provide written notice of the change. See below for an example of levels of tiers and the general cost associated with them. Please keep in mind, each plans’ tiers may structure differently. Check with your plan to learn more about its specific tier structure.

• Tier 1/Lower co-payment: Most generic prescription drugs
• Tier 2/Medium co-payment: Preferred, brand-name prescription drugs
• Tier 3/Higher co-payment: Non-preferred, brand name prescription drugs
• Specialty tier/Highest co-payment or co-insurance: Unique, high-cost prescription drugs

Prescription drug plans may create their own formularies and don’t have to cover every Part D prescription drug. However, they may not create a “discriminatory” formulary that excludes specific prescription drugs in order to discourage certain beneficiaries from enrolling. If your plan won’t cover a prescription drug that you need, you can ask for a written explanation from your prescription drug plan. You can also ask for an exception.

Formularies generally must include at least two prescription drugs in each category, and cover almost all of the prescription drugs in these protected classes of prescription drugs:

• HIV
• AIDS
• Antidepressant
• Antipsychotic
• Immunosuppressant
• Anticonvulsant

Part D must cover all commercially available vaccines, when medically necessary to prevent illness, except for vaccines covered under Part B.

For more detailed information regarding Part D visit medicare.gov.

For every 12 months you delay enrolling in Part B, your monthly Part B premium may be 10 percent higher. The penalty won’t apply if you have job-based insurance or are still under your special enrollment period.

For every 12 months you delay signing up for a Part D plan, your monthly premium may be 1 percent higher. Part D plans cover prescription drug costs. You won’t have to pay the Part D penalty if you can show Medicare that you have drug coverage as good as that provided by a Part D plan.

You should receive a letter from your employer — or insurance plan — in September of each year letting you know if you have drug coverage comparable to a Part D plan. If you lose your drug coverage, you’ll be eligible for a two-month special enrollment period, during which you can sign up for a Part D plan without a penalty. But keep that letter so you can show Medicare you did have Part D-comparable prescription drug coverage when the time comes to enroll in Part D.

Note: Usually, these penalties last for as long as you have Medicare. But if you are paying this penalty and qualify for and enroll in a Savings Program or the Extra Help program — which helps low-income older adults pay for Medicare out-of-pocket costs — you will no longer have to pay the penalty.

Delay Buying a Medigap Plan?

Medigaps are supplemental health insurance policies that work with original Medicare. If you have a Medigap policy, it pays part or some of the out-of-pocket costs that are not covered, such as your Part A hospital deductible or the 20 percent coinsurance in Part B. Depending on where you live, you can choose from as many as 10 different Medigap plans. Each policy has a different letter name (for example, Plan A) and offers a different set of standardized benefits. Policies with the same letter name offer the same benefits, but premiums can vary from company to company.

The best time to buy a Medigap policy is during your Medigap open enrollment period. That six-month window starts when you are 65 years old and have enrolled in Part B. It’s important to enroll then because during that time the insurance companies that sell Medigap policies cannot deny you coverage if you have a preexisting condition, and they have to sell you a plan at the best available rate. If you try to buy a plan outside of this window, companies may refuse to sell you a policy or may deny you coverage for your existing health problems.

Some states have their own rules governing Medigap policies, so if you made this mistake and didn’t sign up during your enrollment period, check with your State Health Insurance Assistance Program (SHIP) at www.shiptacenter.org to ask about state-specific Medigap rights.