Medicare covers a lot, but many older Americans who enroll in the health care program need other insurance as well.
Some people 65 and older still work and have access to their employer’s health benefits. Others can still access health benefits during retirement.
Still, others qualify for veterans benefits or even Medicaid — all while still qualifying for Medicare benefits.
When you have several layers of insurance coverage available, how do you know which plan should be paying for which services? Some kind of coordination of benefits will be a must.
What Medicare Covers for Older Americans
About 44 million Americans use Medicare for health insurance. The federal program has grown more complex over the decades.
When President Lyndon B. Johnson signed Medicare into law in 1966, the program paid for hospitalization and a few post-hospital services.
Now the program also pays toward outpatient care including physician visits, and many prescription drugs, along with hospital stays and short-term care after a hospital stay.
What Does Medicare Cost?
Originally, Medicare patients paid no premiums for the coverage because payroll taxes and other public money covered the bill.
Even now, most people who enroll only in Medicare Part 1, which covers hospital visits, pay no premiums.
Medicare Part B and Part D members pay premiums; often these monthly payments cost significantly less than a comparable private insurance plan.
Medicare enrollees also pay deductibles and copays. Again, enrollees can typically save on fees compared to a private plan.
Despite these cost savings, Medicare patients may have a hard time closing the gap between what Medicare pays and what they need. Also, Medicare doesn’t pay at all for some services.
What Medicare Does Not Cover
While the list of services Medicare covers has grown over the half-century since Congress passed legislation creating the program, some forms of care still fall outside the program’s umbrella.
For example, Medicare does not cover:
- Routine eye exams
- Hearing aids
- Dental care
- Cosmetic surgeries
- Long-term care
Even when Medicare does pay, it does not always pay 100 percent of the bill. Along with deductibles and copayments, a patient could be responsible for about 20 percent of a medical bill in some cases.
To put it into context, 20 percent of a $200,000 hospital bill would be $40,000 — still a significant bill, especially when you’re retired.
How Will You Fill the Medicare Gap?
To cover their portion of a large medical bill, or to pay for services Medicare doesn’t cover, Medicare enrollees need another source of coverage.
Possible sources of payment include:
- Paying Out of Pocket: If patients have the savings to cover copays, deductibles, and services like vision, hearing, or dental, they may choose to pay out of pocket for some of these services, especially if they plan to stick to preventive care.
- Using Medicare Advantage: Private insurers offer Medicare Advantage Plans in conjunction with the federal government. These plans must cover everything Medicare would cover (except Part D prescription coverage). These plans can also add dental, vision, and other similar coverages.
- Buying Supplemental Coverage: Medicare enrollees can buy supplemental coverage specifically to fill the gaps in coverage Medicare leaves open.
- Using Existing Insurance: Others can keep their existing health insurance policies either through their employers or through their retirement benefits. Using Medicare and private insurance in tandem can often cover most, if not all, necessary expenses.
With Americans working longer than in decades past, many new Medicare enrollees still have private insurance through their jobs, making this option the simplest solution.
However, coordinating two forms of primary health coverage can get complicated: Which service pays first? Which service then steps in to cover any remaining costs?
Coordinating Private Insurance With Medicare
A patient with two or more forms of insurance needs a hierarchy to determine which plan should pay first. Insurance agents often use the word “payer” when they’re talking about an insurance plan, so we’ll do the same.
You’ll need to share this hierarchy with the billing departments of your health care providers:
- Your Primary Payer: When you go to the doctor or receive medical services in a hospital setting, the billing office will first send the claim to your primary insurance.
- Your Secondary Payer: After your primary payer has paid the amount your plan allows, the bill moves on to your secondary payer who will often cover the remaining balance.
Some people have more than two payers — Medicare, a private health plan, and a supplemental health plan, for example. In such cases, the third payer may need to pay only if it covers a procedure the primary or secondary insurance plans won’t cover.
How will you assign your primary and secondary payers? That depends on which kinds of coverage you have along with Medicare.
For example, if you have Medicare and:
- Insurance through work: Your employer’s group plan will likely be the primary payer and Medicare will pick up the remaining balances, assuming the services you’re getting qualify for coverage. If your employer has 20 or fewer employees, it’s more likely Medicare will pay first.
- Insurance through retirement benefits from a former employer: Medicare will likely be your primary payer and your health plan will be the secondary payer if you’re accessing health benefits as a part of your retirement plan.
- Insurance through veterans benefits: While you can maintain both veterans benefits and Medicare benefits simultaneously, many patients find it difficult to get these coverages to work together. It’s usually easier to use one or the other. Work with your health care provider’s billing department to find the best solution.
- You filed a successful Workers’ Comp claim: For health care services resulting from on-the-job injuries, your Workers’ Compensation benefits should pay first, followed by Medicare.
- Insurance through Medicaid: If you have Medicare and Medicaid, a similar program for lower-income or disabled Americans, Medicare will always pay first. (Medicaid only pays first when it’s your only coverage.)
Coordinating benefits can be tricky, especially when you have unusual circumstances. The billing department at your health care provider may be able to help. Your state’s Medicare coordinator can answer questions, too.
How To Qualify for Medicare
Despite its shortcomings and its frequent need for a secondary payer to close the gap, Medicare remains one of the most popular government programs in the nation.
Since older people tend to have more expensive health care needs, the program alleviates a lot of strain on private insurers. And older Americans benefit from relying less on their employer or an expensive private plan for coverage.
In most cases, you must be at least 65 years old to qualify for coverage. As your 65th birthday approaches, you’ll start getting mail about Medicare, both from the program itself and from private insurers offering supplemental or Medicare Advantage plans.
In most cases, you’ll need to take some action to enroll in Medicare even if you are 65 years old.
How to Enroll in Medicare
As your 65th birthday approaches, you enter your Medicare enrollment period. Your enrollment period includes the month in which you turn 65 along with the three months preceding and following your birthday month.
During your initial seven-month enrollment period you should enroll online at the Social Security Administration’s web site or by calling or visiting your local Social Security office.
Some people will be automatically enrolled in Medicare when they reach age 65, including:
- Someone who already receives disability benefits through the Social Security Administration.
- Someone who worked on the railroad and qualifies for Railroad Board Benefits which are administered by the federal government.
Additionally, patients with kidney failure or amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s Disease, will qualify for Medicare even before age 65.
If you missed your enrollment period, you can still enroll either during a special enrollment period following the loss of your employment-based health benefits or during the first three months of any following year.
The Different Parts of Medicare
A new enrollee does not have to join all aspects of Medicare:
- Medicare Part A: Also known as “original Medicare,” Medicare Part A covers hospital visits. This coverage resembles a catastrophic plan and requires no premium. If you or your spouse didn’t earn wages long enough to qualify for Medicare, you may be required to pay a premium for Part A.
- Medicare Part B: This component pays for doctor’s visits and it typically requires a premium which is currently about $135 a month, though people with low incomes can qualify premium-free. (Premiums and income requirements may change each year.)
- Medicare Part C: This part of the Medicare program allows private insurers to offer Medicare-like plans.
- Medicare Part D: The most recent addition covers prescription drugs and also requires a premium of about $34 a month. (Premiums may change each year.)
Some new enrollees want to join Medicare Part A but continue using another insurer for doctor’s visits and prescription drugs, especially if premiums are paid through an employer or a retirement fund.
At the same time, delaying enrollment in Part B can lead to higher premiums once you do enroll.
Bottom Line: Find Your Right Fit
For years, many Americans have looked forward to their 65th birthdays so they can claim Medicare benefits and stop paying high health care premiums.
While Medicare provides a reliable source of health care payments, simply canceling your current insurance and enrolling in Medicare may not be the best approach.
- Coordinating any existing insurance you have with Medicare to provide the most thorough coverage. Check with your current plan administrator for recommendations.
- Enrolling in only Part A of Medicare if you already have reliable coverage for doctor’s visits and prescriptions. Be aware of higher fees you may face for delaying Part B coverage.
- Buying supplemental coverage when you enroll in Medicare. Supplemental plans can help pay for your copayments and deductibles.
- Finding a Medicare Advantage plan to provide Medicare benefits along with additional benefits Medicare doesn’t offer.
Medicare is a remarkably flexible government program. Adapting the program to meet your specific needs will be the key to maximizing this resource throughout your retirement years.