One of the most prominent areas of concern for those nearing retirement is the cost of health care. For those who are age 65 or older, Medicare can play a crucial role in addressing this issue. However, the system is quite complex and can feel overwhelming to figure out all its various aspects.
We’ll look at the following three common misconceptions about Medicare and not only debunk these common ideas, but also help you make informed and timely decisions.
MISCONCEPTION #1: I can enroll whenever I want
While most people know they are eligible to enroll at age 65, many do not realize that enrollment is mandatory. Everyone who is 65 must enroll in Medicare, with the exception of current workers and spouses who are covered by a comprehensive employer group health plan that covers 20 or more employees.
If you have already started taking Social Security benefits (before turning 65), you will automatically be enrolled in Medicare Part A and Part B. Three months before you turn 65, you will receive a package in the mail that contains a letter and your Medicare card. The card and letter will explain that you have been automatically signed up for both Medicare Part A and Part B and how Medicare works.
However, if you are 65, and eligible for, but not yet receiving Social Security benefits, you will not be automatically enrolled. You will need to enroll at a Social Security office or online.
The Initial Enrollment Period is the seven-month period that includes:
- The three months before you turn 65
- The month you turn 65
- The three months after you turn 65
To avoid a possible delay in coverage, it is typically best to sign up in the three months before you turn 65. For those that had not enrolled in Medicare or refused Medicare when they initially became eligible for it, there is a General Enrollment Period from January 1st through March 31st of every year. General Enrollment coverage begins July 1st in the year you sign up.
If you do not have other health insurance, you could incur a very costly late-enrollment penalty if you fail to sign up when you are initially eligible. The penalty for late enrollment in Medicare Part B is a 10% higher premium for each full 12-month period you were eligible but failed to enroll. For instance, let’s assume your Initial Enrollment Period ended February 1, 2018, but you waited until June 2020 during the General Enrollment Period to enroll.
Since this delay includes two full 12-month periods, your penalty would equate to a 20% hike in your annual Medicare Part B premiums. Unlike Medicare Part A, you may have to pay this higher premium permanently for as long as you’re covered by Medicare.
MISCONCEPTION #2: Medicare covers everything
Contrary to what many people believe, Medicare pays for very few of the costs pertaining to long-term care. Medicare covers up to 100 days of care in a skilled nursing facility, but only if the need is triggered by a hospital stay of at least three days. It also covers hospice care for the terminally ill.
However, Medicare does not cover the costs of care in a retirement community, nursing home, or assisted living facility. In addition, only the first 20 days of a skilled nursing facility stay are completely covered.
Here is a list of other prominent health care needs that Medicare does not cover:
- Regular eye exams
- Most eyeglasses
- Hearing aids
- Routine dental care
- Most care provided outside the U.S.
As a result of these gaps in coverage, some form of supplemental insurance is recommended. These are the most common types of supplemental policies:
- Medicare Advantage (Part C)
- Part D
- Retiree insurance
MISCONCEPTION #3: Medicare is free
Perhaps one of the biggest misconceptions about Medicare is that, since it is a critically important social program, it does not cost anything. In reality, while certain aspects of the program are offered for “free,” retirees are expected to cover certain expenses on their own.
For example, Part A, otherwise known as hospital insurance, has no premium attached if you’ve earned at least 40 work credits throughout your lifetime. However, Medicare Part B (outpatient services) has a standard premium of $134 in 2018 which increases based on income level. Part D, or prescription drug plans, also requires a monthly premium.
In addition to premiums, consumers could be responsible for deductibles and out-of-pocket costs. There are no annual out-of-pocket limits with original Medicare, meaning that retirees are often responsible for about 20% of their medical expenses. To learn more about the costs of Medicare, we recommend going to the official site.