Sign up for Medicare on time to avoid gaps in health care coverage and late enrollment penalties.
You may be able to delay joining Medicare if you’re going to work after 65—or if you have access to health insurance that meets Medicare standards.
Medicare costs may include premiums and other out-of-pocket expenses such as deductibles, copayments, and coinsurance.
By the time you hit your 60s, memories of age-related milestones—getting your driver’s license, registering to vote, having your first alcoholic drink—may be sweet but distant. But there’s another significant birthday on the horizon: your 65th.
That’s when most people can first sign up for Medicare.
As with other transitions in life, becoming eligible for Medicare can bring up a lot of questions and concerns. Here’s some advice to make your shift to Medicare a bit smoother and simpler.
Medicare differs from other types of health care coverage
While your employers over the years probably offered a small selection of health plans and helped you sign up, Medicare enrollment is a more self-directed, individual process.
It can feel overwhelming and stressful, especially when it’s your first time. But a little preparation goes a long way. Even if you plan to continue working, take some time—before you turn 65—to learn some Medicare basics.
Check out the information below to give you a sense of which questions to ask and how to find answers as you select your first plan.
When to sign up for Medicare
An essential first step is determining when to sign up for Medicare. Many people sign up during the Initial Enrollment Period (IEP), which begins three months before the month of your 65th birthday and ends three months after your birthday month.
However, depending on your individual situation, you may get signed up automatically or have another enrollment window available to you.
- If you start collecting retirement benefits from the Social Security Administration (SSA) or the Railroad Retirement Board before age 65, you’ll automatically be enrolled in Medicare Part A (hospital insurance) and Part B (medical insurance) on your 65th birthday.
- If you (or your spouse) work past your 65th birthday, you may qualify for a Special Enrollment Period (SEP) when you (or your spouse) stop working or employer coverage ends, whichever comes first. An applicable SEP could let you sign up without late enrollment penalties or limitations. However, you must have:
- Employer- or union-sponsored coverage based on your (or your spouse’s) active employment. COBRA and retiree coverage don’t count in this case.
- An employer with 20 or more employees.
- Employer- or union-sponsored coverage that is considered “creditable,” which is defined as equal to or greater than what Medicare provides.
Other Medicare SEPs may apply in specific circumstances.
Which Medicare options to consider
Another important step is learning about Original Medicare, administered by the federal government. Original Medicare includes both Part A and Part B. You can choose to enroll in them together or individually. Then, depending on your health and financial situation, you may choose to add one or more of the following plan options to reduce the expenses not covered by Part A and Part B:
- Medicare Advantage (Part C) plans are private, all-in-one managed care plans, that provide all the coverage of Part A and Part B, plus additional benefits and services. Medicare Advantage plans, which may have defined networks of doctors and hospitals, can be configured with or without prescription drug coverage.
- Medicare Part D, also offered by private health insurance companies, provides prescription drug coverage. You can add it to Original Medicare, often alongside a Medicare Supplement (Medigap) plan (see next bullet).
- Medicare Supplement plans, available through private insurers, may provide access to doctors or hospitals throughout the U.S. For prescription drug coverage, you must purchase a separate Part D plan.
How much Medicare costs
Many people who have paid into the Medicare system for decades expect their coverage in retirement will be free—and are surprised it is not. While ideally you may want to choose a plan based on how well it suits your health status, you may need to take a close look at costs and budget carefully. Medicare out-of-pocket expenses can include premiums, deductibles, copayments, and coinsurance.
Here are some regular costs you can expect with the two parts of Original Medicare:
- Part A: If you (or your spouse) have paid Medicare taxes for at least 10 years, you may qualify to get premium-free Part A. If not, you can pay a premium to get the coverage. Other costs could include hospital-related copayments and deductibles, although Medicare Supplement or Advantage plans may help reduce those expenses.
- Part B: The base monthly Part B premium is set annually. Most people pay this, and some pay more based on their modified adjusted gross income. Medicare generally pays 80% of the cost of medical care, services, and items covered under Part B. If you only have Original Medicare, you pay the other 20%. (Sign up for Part B when you first become eligible to avoid a lifetime late-enrollment penalty.)
While having responsibility for 20% of costs with Original Medicare may seem manageable at first glance, paying 20% of the cost of a doctor’s visit is much different from paying 20% of a major surgery. That’s why many people choose additional coverage through a Medicare Advantage plan or a Medicare Supplement plan. Here are some of the costs associated with those plans:
- Part D: Premiums and other out-of-pocket costs for Part D prescription drug plans vary between health insurance companies and plans.
- Medicare Advantage: Unlike Original Medicare, Medicare Advantage plans have caps on yearly out-of-pocket costs for medical expenses and services. These maximums are set by Medicare. However, the caps don’t apply to costs for prescription drugs, even if you have drug coverage as part of your Medicare Advantage plan. You pay your premiums for Part A and/or Part B, as well as any monthly premiums and other out-of-pocket costs your Medicare Advantage requires.
- Medicare Supplement: A Medicare Supplement plan can help defray expenses not covered by Original Medicare. While supplement options in the same category have the same benefits, different insurers may offer them at different rates, taking into account your age, gender, and ZIP Code. Monthly premiums are generally higher than Medicare Advantage, but the out-of-pocket spending for medical services may be lower.
Why you should review your Medicare plan annually
As you’re budgeting, consider the potential for changes in health and income in the coming years. You can’t prepare for every possibility, but try to plan for the possibility of unexpected costs in the future as you’re considering what your health care expenses may be.
While your first Medicare plan may be the best option for you for years to come, you don’t have to stick with it forever. Plan to review your Medicare plan each year during Medicare’s Annual Enrollment Period (Oct. 15–Dec. 7), especially if your health changes or you want to find ways to save. There’s nothing like the peace of mind that comes from being confident that your health care plan suits your current circumstances.
Fidelity Medicare Services, an official NCOA partner, meets NCOA Standards of Excellence for Medicare Consumer Education and Brokerage Services. At Fidelity Medicare Services, our licensed Medicare advisors provide complimentary Medicare guidance—from your initial enrollment to coverage review to year-over-year support.