All U.S. citizens are eligible for Medicare beginning three months before they turn 65. And while Medicare Parts A and B help defray the costs of healthcare, such as hospitalization and medical care, neither part covers all of those expenses in full. Plus, if you want additional coverage, like dental, vision and prescription drug coverage, you’ll need to enroll in other parts of Medicare.
To help you sort it all out, here are six important things many Americans don’t know about the cost of Medicare.
Medicare Isn’t Free
“Many also assume that Medicare will cover all their healthcare costs,” said Shawn Plummer, the CEO of The Annuity Expert. “And while Medicare does provide for health care coverage in retirement, it does not cover everything. Premiums, deductibles, copays, co-insurance are just some of the costs you will be responsible for.”
Most people don’t pay for Medicare Part A, which covers hospitalization, because they paid Medicare taxes while working. If you do have to pay Part A, you’ll pay up to $471 each month.
However, Medicare Part B is not free. Individuals who made $88,000 or less in 2019 or those who are married filing jointly who made $176,000 or less in 2019 will pay the Standard Part B premium amount of $148.50 per month in 2021, plus a deductible of $203 per year.
“Furthermore,” Plummer said, “if you want coverage for prescription drugs, vision and dental services, you will be required to purchase additional coverage. That’s why so many other insurance plans such as Medicare Advantage, Medicare Part D, long term care insurance and Medigap policies are available to plug the gaps.”
Medicare Only Covers Limited Long-Term Care Expenses
“Many people believe that government programs like Medicare will pay for most or all of their long-term care expenses,” Plummer said. “However, this may not be the case. For example, Medicare doesn’t cover stays longer than 90 days in a skilled nursing facility. In fact, many people will have to rely on a separate long-term care insurance policy to meet all of their needs.”
If You Need Nonmedical Assistance at Home, Medicare Won’t Pay
“Medicare does not cover non-skilled nursing or homemaking services at home,” said Gabrielle Juliano-Villani, MSW, LCSW, owner of Colorado In-Home Counseling, which serves seniors and disabled adults. “This is a big gap in services for a lot of folks who need some assistance at home, like light house cleaning, help running errands, etc. Medicare does not cover this, and these agencies have an hourly minimum per week many clients can’t afford.”
A Higher Income May Mean More Expensive Medicare
“You can pay more for Medicare if you have a higher income,” said Emily Gang, owner of The Medicare Coach. “There are ways to appeal the high-income penalty, but Medicare doesn’t adjust this amount on their own, so you need to be proactive.”
In 2021, the highest earners will pay up to $504.90 per month for Medicare Part B Premiums.
Veterans Will Incur a Penalty for Not Taking Part B Medicare
“Veterans often think that they don’t need to sign up for Part B because they have VA benefits,” said Kathe Kline, founder of MedicareQuick. “However, VA Medical benefits are not considered ‘creditable coverage’ and are generally not guaranteed (meaning Congress can change the benefit or take it away).”
Creditable coverage is coverage that is just as good as Medicare’s coverage.
“If [VA medical benefits] are taken away in the future, then the veteran will have to pay a 10% penalty for every year they did not have Part B,” Kline said. “To make it more confusing, Veteran’s drug benefits are considered creditable.”
If You Delay Signing Up for Medicare, Late Penalties Apply
Although you may already know about the late penalties, this information bears repeating.
Most people sign up for Medicare Part A (hospitalization) and Part B (medical) during their initial Medicare enrollment period, which begins three months before you turn 65 and ends three months after you turn 65. However, if you don’t, late penalties will apply.
If you have to pay for Part A coverage, and you don’t sign up during your enrollment period, you may have to pay a 10% higher monthly premium for twice the number of years you delayed signing up.
If you don’t sign up for Part B during your initial enrollment period, a lifetime penalty gets added to your monthly Part B premium and increases 10% for each year you wait to enroll unless you qualify for a Special Enrollment Period.
To avoid a Medicare Part D (prescription drugs) enrollment penalty, you have to either have creditable prescription drug coverage through sources such as a former employer or union, Veterans Affairs or individual health insurance coverage.
If you don’t, Medicare suggests that you consider enrolling in Medicare drug coverage once you’re eligible. It’s important to note that if you don’t sign up for Medicare drug coverage when you’re initially eligible and you don’t have creditable prescription drug coverage for a period of 63 days in a row, you may pay a penalty if you sign up for Medicare drug coverage at a later time.
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Last updated: Sept. 29, 2021