The year 2020 is coming to an end, which means it’s time to start planning for Medicare in 2021. Medicare is America’s federal healthcare system for seniors aged 65 or older and others who qualify due to specific disabilities. Many seniors get confused by original Medicare, as the coverage is not quite like employer insurance or the marketplace.
It’s crucial to do your research before your Medicare enrollment to understand your costs and Medicare options fully. If you want to begin planning for Medicare in 2021, you should first become familiar with Medicare’s coverage and costs.
Be aware of what you are signing up for
When you sign up for original Medicare, you will receive Part A for inpatient coverage and Part B for outpatient coverage. If you do not have creditable coverage for Medicare, you will need to enroll in Part A and Part B during your Initial Enrollment Period (IEP). The IEP lasts for seven months and begins three months before your 65th birthday month and ends three months after your birthday month.
As briefly mentioned, Medicare Part A is your inpatient coverage, which means it covers your services as an inpatient at the hospital, such as your room, meals, and lab services. Part A also provides post-hospital care, such as hospice and skilled nursing. However, Part A does not cover long-term care, like a nursing home.
When you are an inpatient at the hospital, you will pay the Part A deductible per benefits period, which is $1,484 in 2021. Once you have met the Part A deductible, Medicare will cover your inpatient care at 100% for 60 days.
Part A also comes with a premium, but most beneficiaries do not have to pay for Part A. If you have worked 40 quarters (ten years) in the United States and paid payroll taxes, then you will have a $0 premium. If you have less than 40 quarters but have worked 30 quarters, you will pay $259 for Part A in 2021.
Medicare Part B gives you access to many outpatient medical services that cover preventative care, such as mammograms, vaccinations, durable medical equipment, and more. Medicare Part B can sometimes cover services you receive in the hospital, such as surgeries or chemotherapy. However, Medicare Part B does not cover services that fall under Part A.
Medicare Part B does not cover everything, though. For example, Medicare does not cover routine dental, vision, or hearing services. Medicare Part B also does not cover prescription drugs. If you want access to any of these benefits, you will need to purchase a standalone plan from a private insurance company.
There is a deductible for Part B, which is $203 in 2021. Once you have met the Part B deductible, Part B will pay 80% coinsurance for your Medicare-approved services. Therefore, you will be responsible for the remaining 20% coinsurance. Medicare does not have a maximum out-of-pocket, so the remaining coinsurance can be pricey if you receive an expensive service.
You do have a monthly premium for Part B, which is $148.50 in 2021. However, if you made a high income two years before your enrollment, you may be subject to a higher premium. You will pay the Part B premium as long as you are enrolled in Medicare.
Prescription drug coverage
Since Medicare does not cover prescription drugs, private insurance companies sell Part D plans to help with the cost of medications. So instead of paying full price for your prescriptions, you will pay a copay or coinsurance.
You can enroll in a Part D plan to work alongside original Medicare, a Medigap plan, or you can choose a plan when enrolling in a Medicare Advantage plan (will discuss below). Medicare Part D is solely coverage for your medication needs, and you will pay a monthly premium, which is around $43 in 2021.
Become familiar with your options
Since Medicare does not fully cover all your healthcare services, many Medicare beneficiaries purchase a Medigap or Medicare Advantage plan for additional coverage.
Medigap plans (Medicare Supplement) are sold by private insurance companies and help cover the Medicare gaps, such as deductibles and copayments. Medigap plans work alongside Medicare, making Medicare primary and Medigap secondary. If a doctor accepts Medicare, then he/she must take your Medigap plan.
Medigap plans do not have service areas, so you can visit any doctor in the United States that accepts Medicare with your Medigap plan. Medigap plans are very flexible and leave you with predictable spending throughout the year.
Medicare Advantage plans (Part C) differ from Medigap plans. When you purchase a Medicare Advantage plan from a private insurance carrier, you will no longer receive your Medicare benefits from the government. Medicare Advantage plans include Part A, Part B, and Part D. Although you will be receiving your benefits from a carrier, you will still be responsible for the Part A and Part B premiums.
Medicare Advantage plans have networks, which are usually local. When you purchase a Medicare Advantage plan, you will receive your healthcare services and prescriptions from the plan’s network of doctors and pharmacies.
Every Medicare Advantage carrier creates its own cost-sharing, so you may have a low copay for a doctor’s visit and a higher copay when visiting a specialist. Medicare Advantage plans have a maximum out-of-pocket, which is $7,550 in 2021. A carrier can make the maximum out-of-pocket lower but cannot increase it. You typically will spend more out-of-pocket with a Medicare Advantage plan compared to a Medigap plan.
Medicare can be a maze to understand, which is why it’s important to be familiar with your coverage and to know your costs before your Initial Enrollment Period. If you need help planning for Medicare in 2021, contact a trusted Medicare broker for help choosing the right Medicare plan for you.