Your guide to Medicare: 5 key questions answered

AT AGE 65, YOU’RE FINALLY ELIGIBLE to enroll in Medicare and reap some benefits from a program you’ve contributed to all these years. Yet getting the most out of Medicare can be daunting. It’s important to understand your options and the rules that apply. For instance, missing your enrollment date may mean penalties that raise your premiums for the rest of your life. At the same time, you don’t want to pay for additional coverage you don’t need, especially if you’re still working. Whether you’re approaching enrollment age yourself or helping your parents understand the process, start by considering these five questions.

Q: How do I sign up?

A: If you are already receiving Social Security, you are automatically enrolled in Medicare Parts A and B (known as Original Medicare) at 65. You'll receive a Medicare card two or three months before your birthday, and coverage starts on the first day of your birthday month.¹

Part A covers hospitalization and usually comes with no premiums, assuming you or your spouse paid into Medicare while working.² Part B, which covers medical services, does require premiums, but you have the option of withdrawing if you wish.

If you aren’t yet receiving Social Security, you will need to apply for Medicare during one of the designated annual enrollment periods. Your initial enrollment period lasts for seven months, beginning three months before the month in which you turn 65. To help avoid a potential gap in coverage, consider enrolling during the three months prior to your 65th birthday.

Q: Should I enroll at 65 if I'm still working and covered?

A: Consider enrolling in Part A anyway, as it is generally premium-free and may cover some expenses not included in your employer’s health plan. Premiums for Part B may be higher because of your income, so it may be wise to delay enrollment in Part B until after you retire as long as you work for a company with 20 or more employees. If your company has fewer than 20 employees, consider enrolling in Part B as well because Medicare is considered your primary insurance. You can enroll without penalty at any time during the eight months after you stop working or your employee health coverage ends. If you miss that window, you may be subject to penalties that could last as long as you remain covered. (For insights on what you can consider doing if you lose your health-care benefits before you turn 65, read “Staying Covered Until Medicare Kicks In.”

Q: Where do Parts C and D come in?

A: Part C, known as Medicare Advantage, includes plans administered by private companies such as health maintenance organizations and preferred provider organizations. They offer the benefits of Parts A and B, and often include such additional benefits as vision, hearing and dental coverage. Costs for Part C plans vary according to the insurer. Some plans may require referrals or restrict you to doctors in a network, and you must already have Parts A and B in order to enroll. Another consideration: Some plans may limit their coverage to a certain geographic area, so if you anticipate traveling a great deal or plan to split time between two locations during retirement, Medicare Advantage might not be for you.

Part D offers prescription drug coverage for both brand-name and generic prescription drugs. You must be enrolled in Medicare to enroll in a Part D plan, which you purchase from a private insurer. Although premiums, deductibles and copays vary by plan, your annual out-of-pocket costs for prescription drugs is currently limited under federal law. Before enrolling in Part D, check whether you’re already covered for prescription drugs under a Part C Medicare Advantage plan. You may not need it. And if you decide later on that you need additional coverage or want to change your existing plan, you can do so during designated Medicare enrollment periods.

Q: Which services aren't covered by Medicare?

A: Original Medicare (Parts A and B) won’t cover copays, coinsurance or deductibles, nor will it cover medical care when you travel outside the United States. Some services, such as long-term care, acupuncture and cosmetic surgery, also aren’t covered. Some of these services are likely to be covered if you enroll in a Part C plan. Long-term care, however, is not among them.

As an alternative to Part C, you may supplement Original Medicare with Medicare Supplement Insurance, also known as Medigap. Plans providing such coverage follow strict federal and state standards, and costs vary by policy and insurer. To buy a Medigap policy, you must be enrolled in both Parts A and B. To guarantee availability, you must sign up within six months of enrolling in Part B.

Q: Where can I learn more?

A: The official Medicare site, medicare.gov, offers detailed information on signing up; the specifics of Parts A, B, C and D; costs associated with Medicare; penalties for missing enrollment; and other important issues. Go to the site’s “Find health & drugs plans” section to sort through and compare the plans available in your region.

Your financial advisor can help you gain a deeper understanding of how health-care costs could affect your need for income in retirement. Together you can discuss ways to incorporate future health-care costs into your planning.