Medicare is the federal health insurance program for people aged 65 or older and certain younger people with disabilities. While Medicare has provided healthcare coverage for millions of seniors and disabled individuals since it was established in 1965, the program also has some downsides that may make it less than ideal for certain groups.
What is Medicare?
Medicare is a national health insurance program administered by the federal government that provides health insurance coverage to:
- People aged 65 and older
- People under age 65 with certain disabilities
- People of any age with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant)
There are four parts to Medicare:
- Part A (Hospital Insurance) helps cover inpatient care in hospitals, skilled nursing facilities, hospice care, and some home health care services. Most people do not have to pay a premium for Part A because they or their spouse already paid for it through their payroll taxes while working.
- Part B (Medical Insurance) helps cover doctor visits, outpatient care, preventive services, ambulance services, durable medical equipment, and some home health care services. Most people pay a monthly premium for Part B.
- Part C (Medicare Advantage) allows private insurance companies to provide Medicare benefits through Medicare Advantage plans like HMOs and PPOs. People still pay their Part B premium.
- Part D (Prescription drug coverage) adds prescription drug coverage from private plans that are approved by Medicare. People pay an additional premium for Part D coverage.
Together, these parts of Medicare provide fairly comprehensive health insurance coverage for seniors and younger disabled individuals. However, there are some notable gaps in Medicare coverage, such as dental care, vision care, hearing aids, and long-term care.
Who is eligible for Medicare?
The following groups are eligible for Medicare:
- People aged 65 and older who are U.S. citizens or permanent legal residents who have lived in the U.S. for at least 5 consecutive years.
- People under age 65 with certain disabilities, including end-stage renal disease (ESRD) and amyotrophic lateral sclerosis (ALS).
People become eligible for Medicare when they turn 65. If someone chooses to delay receiving Social Security retirement benefits, they can still enroll in Medicare. Some people may qualify for Medicare earlier if they have received disability benefits from Social Security or the Railroad Retirement Board for at least 24 months.
Advantages of Medicare
There are good reasons why Medicare has provided valuable health coverage for tens of millions of Americans over the years. Some key advantages of Medicare include:
- Guaranteed issue – Medicare cannot deny coverage or charge more due to pre-existing conditions.
- Large provider network – Most doctors and hospitals accept Medicare patients.
- Outpatient & preventive coverage – Medicare covers things like doctor visits, preventive care, lab tests, X-rays, ambulance transport, durable medical equipment, and physical therapy.
- prescription drug coverage – Part D prescription plans are available to help cover medication costs (premiums apply).
- No lifetime limits – There are no caps on how much Medicare pays over your lifetime.
Medicare also provides protections and peace of mind for seniors who may have difficulty getting affordable individual health insurance at their age. The program pools risk across millions of enrollees to keep premiums and out-of-pocket costs reasonable.
Disadvantages of Medicare
However, Medicare also has some weaknesses and gaps in coverage that may make it less than ideal for certain groups and situations:
- High cost-sharing – Original Medicare has deductibles, copays, and coinsurance that can result in significant out-of-pocket spending.
- No out-of-pocket spending limit – There is no annual limit on your out-of-pocket costs under Original Medicare.
- No dental, vision, or hearing coverage – These are common senior health needs not covered by Medicare.
- No long-term care coverage – Medicare does not pay for custodial long-term care in nursing homes or at home.
- Coverage gaps – Things like gym memberships, eyeglasses and routine foot care are not covered.
- Prescription drug coverage not automatic – You need to purchase a separate Part D prescription drug plan.
- Medigap plans have premiums – Additional premiums are required if you want a Medigap plan to cover gaps.
As a result, Medicare beneficiaries can still face potentially significant out-of-pocket costs. The gaps in Medicare coverage also mean that many seniors need to purchase additional kinds of insurance on top of Medicare, which can get complicated and expensive.
Is Medicare free?
Medicare is not entirely free for beneficiaries. While Part A hospital insurance tends to be premium-free for most people, other parts of Medicare require premium payments:
- Part B medical insurance premiums are $170.10 per month in 2023 for most beneficiaries, but can be higher for individuals earning above $97,000 annually.
- Part D prescription drug plan premiums average around $32 per month in 2023 across all plans, but can vary significantly depending on the plan.
- Medicare Advantage plan premiums average around $50 per month in addition to the Part B premium, but can range from $0 to over $200 per month depending on plan and benefits.
- Medigap supplemental plan premiums vary by plan, benefits, and location but often fall in the range of $100-$300 per month.
In addition to these premium expenses, Original Medicare also has deductibles and coinsurance that contribute significantly to out-of-pocket spending for beneficiaries. The standard Part B deductible will be $226 in 2023. Hospital copays in 2023 will be $1,600 for days 1-60 of an inpatient stay.
Taken together, these various premiums, deductibles, and cost-sharing amounts mean Medicare is certainly not free for most people. The expenses can add up, especially for those needing more healthcare services or Medigap coverage.
What does Medicare cover?
Medicare provides fairly broad coverage of medically necessary healthcare services when national coverage criteria are met. Some of the main things covered by Medicare Parts A and B include:
- Hospital stays (after deductible)
- Skilled nursing facility care (limited days)
- Hospice services
- Home healthcare (if criteria met)
- Doctor visits & services
- Preventive services like cancer screenings and annual wellness visits
- Outpatient procedures & surgeries
- Ambulance transportation (if criteria met)
- Durable medical equipment like wheelchairs, walkers, oxygen (if criteria met)
- Many prescription drugs (under Part D)
Medicare Advantage plans must cover all the services covered by Original Medicare. They often offer extra benefits not covered by Original Medicare, such as dental, vision, hearing, gym memberships, and worldwide emergency coverage.
What does Medicare not cover?
There are some significant exclusions and gaps in Original Medicare coverage. Some services not covered under Medicare Parts A and B include:
- Routine dental care like cleanings and X-rays
- Routine vision care like eye exams and glasses
- Hearing aids
- Long-term custodial care
- Cosmetic surgery
- Acupuncture
- Routine foot care
- Dentures
- Exam for fitting of eyeglasses
- Gym memberships
These coverage gaps mean many seniors need to pay for additional kinds of insurance policies or services not covered under traditional Medicare. This can end up being quite expensive over the years.
How much does Medicare cost?
The amount Medicare beneficiaries pay depends on several factors:
- Which parts of Medicare you are enrolled in
- Original Medicare or Medicare Advantage plan
- Whether you have supplemental insurance like Medigap
- Your income level and premium bracket (for Part B and D)
- How much healthcare you utilize during the year
Some examples of typical annual Medicare costs for an individual with relatively low healthcare needs could be:
| Medicare Component | Sample Cost |
|---|---|
| Part B Premium | $1,724 |
| Part D Premium | $384 |
| Medigap Plan F Premium | $1,620 |
| Part B Deductible | $226 |
| Total Estimated Cost | $3,954 per year |
However, costs can rise significantly for those with more healthcare needs. 20% of Medicare beneficiaries end up spending over $10,000 per year out of pocket according to estimates.
How does Medicare work with other insurance?
The way Medicare interacts with other health insurance you may have depends on the situation:
- Employer plan – If you are still working at 65+ and have employer coverage, that is usually the primary payer and Medicare is secondary.
- Military coverage – TRICARE and VA benefits act as primary with Medicare secondary.
- Medicaid – For low-income seniors, Medicaid can help pay Medicare premiums and cost-sharing.
- Medigap – Medigap plans specifically supplement Medicare costs, covering deductibles, copays, etc.
- Retiree coverage – Some retiree plans coordinate with Medicare, paying secondary to Medicare.
It is important to evaluate how any other insurance you have will work with Medicare. Failing to coordinate properly can lead to incomplete coverage.
Should I get Medicare if I already have health insurance?
Once you become Medicare-eligible at 65, it is usually wise to enroll in Medicare even if you have other health coverage for a few reasons:
- Prevents lifetime penalties – Delaying Part B or D enrollment past initial eligibility periods can lead to permanent premium increases if you enroll later.
- Secondary payer – Medicare can help fill coverage gaps even when primary after another policy.
- Coverage changes – If you lose your other health benefits, you’ll already have Medicare coverage.
- COBRA alternative – Signing up for COBRA from an employer plan can be very expensive. Medicare provides an option.
Unless you will have excellent retiree coverage, Medicare typically plays an important role. Having Medicare in place prevents gaps in coverage and financial surprises down the road if your situation changes.
When should I enroll in Medicare?
You have a seven-month Initial Enrollment Period (IEP) to sign up for Medicare:
- Begins 3 months before the month you turn 65
- Includes the month you turn 65
- Ends 3 months after you turn 65
It is best to enroll in Medicare as early as possible within your IEP. Delaying enrollment can lead to penalties and delays in coverage taking effect. If you have qualifying group health insurance from an employer, you may be able to delay Part B enrollment without penalty under certain circumstances.
How do I apply for Medicare?
You can apply for Medicare in a few different ways:
- Visit your local Social Security office – you can enroll in person
- Call Social Security at 1-800-772-1213 to enroll by phone
- Go to ssa.gov to enroll in Medicare online
- Work through an insurance broker or your State Health Insurance Assistance Program (SHIP)
Contact Social Security up to 3 months before turning 65 to allow time for processing. Be sure to have your personal information and healthcare coverage information available when you apply.
Conclusion
Medicare provides valuable health coverage for millions of seniors, offering broad access to medical care at a relatively low cost. However, there are some significant gaps in Medicare coverage and potentially high out-of-pocket costs that Medicare beneficiaries can face. The program falls short when it comes to important benefits like dental care, vision coverage and long-term care services. As a result, Medicare should not automatically be viewed as covering all the health needs of seniors. Careful planning and supplemental insurance is often required to avoid unexpected healthcare costs not covered under traditional Medicare plans.