Turning 65 is a milestone for many reasons. One of those reasons is that it is now time to enroll in Medicare. Medicare is America’s federal insurance program for those who are age 65 and over, certain people with disabilities, and people with end-stage renal disease. Medicare can be confusing at times due to all the different parts, plans, and carriers. This 101 Medicare guide breaks it down for you.

Enrolling in Medicare

Your Medicare Initial Enrollment Period begins three months before you turn 65, includes your birthday month, and extends for three additional months. During this time, you can choose between Original Medicare plus a Medicare Supplement Plan and Part D or a Medicare Advantage plan. 

If you are receiving Social Security or Railroad Retirement benefits, you will be automatically enrolled in Original Medicare; you only need to watch for your ID cards and info pack in the mail. If you aren’t automatically enrolled, you can sign up online at SSA.gov or in person at your local Social Security office.

It’s important to sign up for Medicare when you are first eligible, unless you are covered by an employer or group plan. Otherwise, you could owe a late enrollment penalty of 10% of your monthly premium for twice the amount of time you went without coverage. For example, if you delay Medicare enrollment for one full year, you’ll pay the premium penalty for two years. 

Part A

Part A covers your room and board when you are admitted into a hospital or skilled nursing facility. Part A does not cover long-term care, however. 

Most people qualify for premium-free Part A based on their work history. Even if you don’t qualify for free Part A, you can still buy the coverage. The Part A premium in 2020 is $458.

Part B

Medicare Part B covers your outpatient care, which includes doctor visits, preventative services, lab work, and durable medical equipment. Medicare coverage is limited to medically necessary services; it doesn’t pay for cosmetic procedures, routine dental, vision, or hearing services.

The 2020 Part B premium is $144.60 a month. Medicare Part B covers 80% of the approved cost after you meet the annual deductible, which is $198 in 2020.

Part D

Medicare Part D first became available in 2006. Part D is voluntary prescription drug coverage. It pays for l prescription drugs you take at home. Part D is not part of Original Medicare. You need to purchase a separate Part D plan if you want prescription drug coverage. Most people have access to over 20 different Part D plans. If you need help choosing the best one for your needs, consult a licensed Medicare broker or use an online comparison tool. 

Part D premiums are set by the insurance carrier and vary by plan type and coverage. Most people will pay between $10 and $50 a month for Part D coverage.  

Although the coverage is voluntary, you should enroll in Part D when you become eligible for Medicare or you’ll pay a late enrollment penalty if you don’t have other creditable drug coverage. 

Out of pocket costs

There is no cap on your out-of-pocket costs with Original Medicare. For this reason, most people buy a Medicare Supplement Plan, or Medigap, to help pay their Part A and Part B coinsurance. 

Alternatively, Medicare Advantage plans offer more predictable out-of-pocket costs, since you typically pay a flat copayment at the time of service as opposed to a percentage of actual costs. Medicare Advantage plans also have a maximum out-of-pocket limit; once you reach the limit, your plan pays 100% of your costs. 

Medicare is a bit different from the group insurance you’re probably used to, but most people are very happy with their coverage. If you need help navigating your Medicare journey, a licensed Medicare broker is a great resource. You can also check out the Medicare.gov website for useful tips.

Danielle K. Roberts is the Vice President and co-founder at Boomer Benefits, where her team of experts help baby boomers with their Medicare decisions nationwide.