Medicare is a federal government program to fund most mainstream health care (other than long term care) for U.S. citizens. Non-citizens can obtain Medicare if they have been permanent legal residents of U.S. (e.g. holder of a “green card”) for at least five years. Most people qualify at earlier of age 65, having received Social Security Disability benefits for two years, or on contracting ALS (Lou Gehrig’s Disease) or end stage renal disease.
Medicare has four parts– A, B, C, and D. They equate to three flavors– Original Medicare (Parts A and B), Medicare Advantage Plans (Part C), and Medicare Prescription Plans (Part D). Part A covers hospitalization and rehabilitation. Part B funds typical doctor care and certain equipment. Part C combines the services that Original Medicare covers (and sometimes additional benefits) in managed care plans. Part D covers drugs and sometimes is combined with a Part C Medicare Advantage Plan.
Medicare Advantage Plans may be cheaper than Original Medicare, but because they are managed care plans, they typically have provider networks and gatekeepers. In contrast, Original Medicare has no networks or gatekeepers, but it has co-pays and deductibles although private insurers offer Medigap supplements to go along with Original Medicare.
Medicare Part A carries no premium if you or your spouse paid at least 40 quarters of Social Security or Railroad Retirement Medicare payroll taxes. If you and your spouse can’t satisfy the 40 quarters requirement you can buy Part A coverage if you are eligible. If you are disabled or have ALS or end stage renal disease, you may not be subject to the 40 quarter requirement.
Medicare Parts B, C, and D have premiums, but Medicaid may pay them for low income participants. Conversely, high income participants may pay an additional premium.
The initial Medicare enrollment period for a person eligible at age 65 is 3 months before to 3 months after the month in which you reach age 65. After receiving Social Security Disability for 24 months you should automatically receive Medicare Parts A & B and can elect to enroll in Parts C and D. If you’re covered under a group health plan based on your or your spouse’s current employment, you have a Medicare Special Enrollment Period to sign up for Parts A and B, and if you do so, you also can enroll in Parts C and D.
Medicare may be primary or secondary depending on various factors. If Medicare is primary, Medicare rather than other health insurance (such as COBRA or retiree coverage) pays first. Where Medicare normally would be primary but you don’t sign up for full Medicare coverage, other health insurance typically won’t pay costs Medicare normally covers.
Medicare usually is primary to small employer health plans, retiree health plans, COBRA, Medigap insurance, and some other coverages. For instance, if you are eligible for Medicare but don’t take Medicare because you are covered by your spouse’s retiree health insurance, your spouse’s plan may not cover you for most costs.
When through no fault of the secondary insurer, you fail to obtain Medicare that would be primary insurance, the secondary coverage may pay either nothing or only what it would pay if you had Medicare. In that case you would be liable for costs Medicare normally would cover!
EXAMPLE- Because you have great health insurance through work, you don’t take Medicare at age 65. At age 66, you have surgery costing $100,000, which is fully covered by your employer plan. When you retire at age 68, the company’s retiree coverage kicks in, but you still don’t take Medicare. Your surgeons then charge $200,000 for a complex follow-up operation for which Medicare would pay 80% if you had Medicare. You are liable for at least $160,000 since Medicare is primary to retiree coverage. The secondary retiree coverage may or may not cover the remaining 20%. Even worse, the surgeons may charge uninsured rates, which typically far exceed what Medicare would pay.
Delaying Medicare enrollment also can lead to late penalties. You are not subject to late enrollment penalties in limited cases such as if you have qualifying employer health insurance.