Medicare basics for people who are not yet on it

Medicare is the federal health program primarily for people aged sixty-five and over, and for some younger people with disabilities or specific conditions.

It is more complicated than most people expect, and several of its deadlines carry permanent consequences.

The parts

Part A — hospital insurance. Inpatient hospital care, skilled nursing facility care after a qualifying stay, hospice and some home health care.

Generally premium-free for people with sufficient work history. It has a deductible per benefit period and coinsurance for extended stays.

Part B — medical insurance. Physician services, outpatient care, preventive services, durable medical equipment.

Carries a monthly premium, which is higher for people above certain income thresholds, and an annual deductible followed by coinsurance — typically twenty percent of the approved amount with no cap.

The absence of an out-of-pocket maximum in original Medicare is a significant feature and the main reason supplemental coverage exists.

Part C — Medicare Advantage. Private plans that provide Part A and Part B benefits, frequently including prescription coverage and additional benefits.

These have networks, may require referrals, and typically have an out-of-pocket maximum, which original Medicare lacks.

Part D — prescription drug coverage. Provided through private plans, either standalone or included in a Medicare Advantage plan.

Has its own formulary, tiers and cost structure, and recent legislation has introduced an out-of-pocket cap on prescription costs.

Medigap

Supplemental policies sold by private insurers that cover cost sharing left by original Medicare — deductibles, coinsurance and copays.

Plans are standardized and identified by letter, so a plan of a given letter provides the same benefits regardless of insurer, though premiums differ.

Medigap works with original Medicare, not with Medicare Advantage. You cannot have both.

The critical timing point. There is a Medigap open enrollment period, generally six months beginning when you are sixty-five and enrolled in Part B, during which you have guaranteed issue rights — insurers must sell to you regardless of health.

Outside that window, in most states, Medigap insurers may medically underwrite and may decline or rate you.

Which means the decision between Medicare Advantage and original Medicare with Medigap is, practically, much harder to reverse than it appears. Someone who chooses Advantage and later wants Medigap may not be able to obtain it.

A few states have rules providing broader guaranteed issue rights. Most do not.

Enrollment periods and penalties

Initial enrollment period, a seven-month window around your sixty-fifth birthday.

Late enrollment penalties apply to Part B and Part D for those who do not enroll when first eligible without qualifying coverage.

The Part B penalty is a percentage added to the premium for each full year of delay, and it applies for as long as you have Part B — permanently.

The Part D penalty operates similarly, calculated on months without creditable coverage.

These penalties are significant and permanent, which makes the enrollment decision one of the more consequential deadlines in personal finance.

Special enrollment periods exist for people with qualifying employer coverage past sixty-five, allowing later enrollment without penalty.

The rules here are specific. Coverage must generally be based on current employment, and COBRA and retiree coverage do not qualify for this purpose — a common and expensive misunderstanding.

Someone on COBRA at sixty-five who delays Part B enrollment can incur a lifetime penalty and a gap in coverage.

Working past sixty-five

The rules depend on employer size.

Where the employer has twenty or more employees, the group plan is generally primary and Medicare secondary, and enrollment in Part B may be deferred without penalty.

Where the employer has fewer than twenty employees, Medicare is generally primary and enrolling in Part B is usually necessary — failing to do so can leave you with very limited coverage.

Note also that contributions to a health savings account must stop upon Medicare enrollment, and that Part A enrollment can be retroactive by up to six months in some circumstances, creating excess contributions.

Anyone in this situation should get specific advice.

What Medicare does not cover

Routine dental, vision and hearing care in original Medicare, though many Advantage plans include limited benefits.

Long-term custodial care, which is the largest gap. Medicare covers skilled care in defined circumstances for limited periods, not ongoing assistance with daily living.

Most care outside the United States.

Preparing before sixty-five

Understand the timeline and mark the enrollment window.

If working past sixty-five, confirm in writing whether your employer coverage is creditable and how it coordinates.

Understand the Advantage versus original-plus-Medigap decision before the guaranteed issue window closes, because it is much harder to change later.

Check whether your physicians accept Medicare assignment, and if considering Advantage, whether they are in the plan's network.

And check the drug formulary for your medications, which varies between Part D plans as much as between commercial plans.

General information about government programs, not insurance, legal or financial advice. Medicare rules, premiums, penalties and enrollment periods change. Consult official Medicare resources or a State Health Insurance Assistance Program counselor.