Understanding Medicare Basics
Medicare is a federal health insurance program you’ve been contributing to throughout your working life. The program primarily serves:
- Americans aged 65 and older
- Qualified individuals under 65 with certain disabilities
- People of any age with End-Stage Renal Disease (ESRD) or ALS
To qualify at age 65, you need to be a U.S. citizen or legal resident of 5+ years. For those under 65, eligibility comes after receiving 24 months of Social Security Disability Insurance (SSDI) benefits, though ESRD and ALS patients qualify immediately upon diagnosis.
Let’s clear up some common misconceptions. First, Medicare isn’t free – while most people get Part A at no cost due to their work history, Part B carries a monthly premium of $185.00 in 2025, with higher costs for high-income earners. Second, the government won’t automatically notify you when it’s time to enroll unless you’re already receiving Social Security benefits.
The Parts of Medicare
Original Medicare (Parts A and B)
Medicare started in 1965 with two main components that form what we now call Original Medicare. Think of this as your foundation:
Part A (Hospital Insurance) | Part B (Medical Insurance) |
---|---|
Inpatient hospital stays | Outpatient medical services |
Skilled nursing care | Doctor visits and preventive care |
Hospice care | Lab tests and X-rays |
Some home health care | Medical equipment |
Ambulance services |
A crucial point about Original Medicare: while it covers a wide range of services, it only pays 80% of approved costs, leaving you responsible for the remaining 20% with no annual cap on your out-of-pocket expenses.
Beyond Original Medicare
The 1965 program has evolved to meet modern healthcare needs. Two additional components complete today’s Medicare system:
Part D (Prescription Drug Coverage)
Added in 2006, Part D has been significantly simplified for 2025:
- Annual deductible cap: $590
- Out-of-pocket maximum: $2,000
- No more coverage gap (“donut hole”)
- Predictable cost structure
Medicare Advantage (Part C)
An alternative to Original Medicare that:
- Combines Parts A, B, and usually D
- Often includes extra benefits
- Typically uses provider networks
- May include cost-sharing
- Usually has lower premiums but higher out-of-pocket costs
Your Coverage Choices
You have two main paths to choose from, each with distinct advantages:
Option 1: Original Medicare + Supplements
This traditional approach provides maximum flexibility for about $300-350 monthly. You get:
- Original Medicare (Parts A and B)
- A Medigap supplement plan
- Separate Part D drug coverage
- Freedom to see any Medicare provider nationwide
- No referrals needed for specialists
- Predictable costs but higher monthly premiums
Option 2: Medicare Advantage
This all-in-one alternative typically costs less monthly but may have higher costs when you need care:
- Replaces Original Medicare
- Usually includes Part D
- Often adds dental and vision benefits
- Requires using network providers
- May need referrals
- Annual out-of-pocket maximum up to $9,350
Understanding Medicare Costs (2025)
Part A Costs
Most people qualify for premium-free Part A through their work history. Without enough work credits, Part A can cost up to $505 monthly.
Understanding IRMAA: Income-Related Monthly Adjustment Amounts
Both Part B and Part D premiums are affected by your income from two years ago through Medicare’s Income-Related Monthly Adjustment Amounts (IRMAA). This means high earners pay more for their coverage.
Part B IRMAA (2025)
Individual Income | Joint Income | Part B Premium |
---|---|---|
$97,000 or less | $194,000 or less | $185.00 |
$97,001-$123,000 | $194,001-$246,000 | $244.60 |
$123,001-$153,000 | $246,001-$306,000 | $351.40 |
$153,001-$183,000 | $306,001-$366,000 | $458.20 |
Above $183,000 | Above $366,000 | $594.00 |
Part D IRMAA (2025)
You’ll pay your plan’s premium plus an additional amount based on income:
Individual Income | Joint Income | Additional Monthly Amount |
---|---|---|
$97,000 or less | $194,000 or less | $0.00 |
$97,001-$123,000 | $194,001-$246,000 | $12.90 |
$123,001-$153,000 | $246,001-$306,000 | $33.30 |
$153,001-$183,000 | $306,001-$366,000 | $53.80 |
Above $183,000 | Above $366,000 | $74.20 |
Important IRMAA Notes:
- Based on modified adjusted gross income from 2 years ago
- Reassessed annually using most recent tax return
- Can appeal if your income has decreased due to life-changing events
- Both spouses in higher-income couples pay the adjustment
Additional Costs
Medigap Plans
- Cost range: $100-175 monthly
- Varies by: Age, location, gender, tobacco use
- Most popular options: Plan G and Plan N
- Best rates when first eligible
Part D Drug Plans
- Basic plans: Around $10 monthly
- Enhanced coverage: National average $55 monthly
- Plus any IRMAA adjustment
- Compare total costs using Medicare.gov’s plan finder
Medicare Advantage
- Many $0 premium plans available
- Still pay Part B premium
- May have additional premium for enhanced plans
- Watch for copays and coinsurance
Medicare Enrollment: A Complete Guide
Your Medicare enrollment process depends on your specific situation. Let’s break down the most common scenarios.
Enrolling at Age 65
If you’re new to Medicare and turning 65, your Initial Enrollment Period (IEP) is your first opportunity to sign up. This seven-month period includes:
- The 3 months before your birth month
- Your birth month
- The 3 months after your birth month
For the smoothest transition, complete your enrollment in the first three months of your IEP. This ensures your coverage begins on the first day of your birth month.
Adding Part B After Having Part A
Many people enroll in Part A at 65 but delay Part B because they’re still working. When you’re ready to add Part B, you have two main scenarios:
Still Have Employer Coverage:
- Get your employer to complete Form CMS-L564
- Complete Form CMS-40B
- Submit both forms within 8 months of losing coverage or stopping work
- Coverage starts the first of the month after enrollment
Lost Employer Coverage More Than 8 Months Ago:
- Must wait for General Enrollment Period (January 1 – March 31)
- Coverage won’t start until July 1
- May face late enrollment penalties
- May have a coverage gap
Enrolling After Age 65
If you’ve missed your Initial Enrollment Period, your options depend on your situation:
With Qualifying Employer Coverage:
- Special Enrollment Period extends 8 months from loss of coverage or employment
- No late penalties if you enroll during this period
- Need employer verification (Form CMS-L564)
Without Qualifying Coverage:
- Must use General Enrollment Period (January 1 – March 31)
- Coverage starts July 1
- Permanent late enrollment penalties apply
- Possible coverage gap
How to Complete Your Enrollment
Online Enrollment (Recommended):
- Visit www.ssa.gov/medicare/sign-up
- Create or sign in to your my Social Security account
- Have ready:
- Employment details
- Current health coverage information
- Dates of any group health coverage after 65
- Social Security number
- Proof of citizenship if not born in U.S.
Phone Enrollment:
- Call Social Security: (800) 772-1213
- Best times: Early morning, Wednesday through Friday
- Expect to schedule a callback appointment
- Have all documents ready before the call
In-Person Enrollment:
- Schedule an appointment at your local Social Security office
- Bring all required documents
- Useful for complex situations requiring direct assistance
Special Situations
Working Past 65:
- Large employer (20+ employees): Can delay Part B
- Small employer (under 20): Must take Medicare at 65
- Document employer coverage with Form CMS-L564
COBRA Coverage:
- Not a substitute for Medicare
- Must enroll in Medicare when first eligible
- COBRA becomes secondary to Medicare
Veterans with VA Coverage:
- Can have both VA and Medicare
- Medicare provides coverage at non-VA facilities
- Consider at least Part A for hospital coverage
Beyond Basic Medicare Coverage
Dental and Vision Coverage
These essential services require planning beyond basic Medicare. Your options depend on your Medicare path:
With Medicare Advantage:
Many plans include basic dental and vision coverage, but review the benefits carefully. Coverage often includes:
- Routine cleanings and exams
- Basic X-rays and fillings
- Annual eye exams
- Basic eyewear allowance
With Original Medicare:
You’ll need standalone coverage:
- Dental plans average $40 monthly
- Vision plans average $12 monthly
- More comprehensive coverage than most Medicare Advantage plans
- Free choice of providers
Long-Term Care Planning
One of Medicare’s biggest coverage gaps is long-term care. The numbers are significant:
- Private room cost: Over $100,000 annually
- Average stay: 3 years
- Medicare provides limited or no coverage
Your protection options include:
Traditional Long-Term Care Insurance
- Comprehensive coverage
- About $500 monthly for $300,000 in benefits
- Best purchased before age 65
Short-Term Care Insurance
- Coverage up to 360 days
- $75-150 monthly
- Easier to qualify for
- Good bridge coverage
Life Insurance with Long-Term Care Riders
- Combines life insurance and care benefits
- Flexible premium options
- May be more affordable than traditional long-term care insurance
Common Questions Answered
“What happens if I miss my enrollment deadline?”
Late enrollment penalties are permanent and increase with time. For Part B, the penalty is 10% of the premium for each 12-month period you could have had Part B but didn’t enroll.
“Should I get Part D if I don’t take medications?”
Yes. Enroll when first eligible to avoid permanent late enrollment penalties and ensure coverage when you need it.
“How do Medicare brokers get paid?”
Brokers receive commissions from insurance companies that are already built into plan premiums. You pay the same whether you use a broker or enroll directly.
Need personalized guidance? Schedule a free consultation at stromaninsurance.com/appointment.
This guide is current as of January 2025. Medicare rules and costs change annually.