Original Medicare is part of a program signed into law in 1965. It was designed as a way to offer low cost health insurance to senior citizens who have retired. At the time and to a lesser extent today, a large percentage of Americans received their health insurance through their employers. This became commonplace throughout the 40’s and 50’s. But by 1965, the prevalence of employer sponsored major medical plans had priced out retirees looking for private health insurance. So, Medicare was a solution to this problem.
At the time (and currently), the goal was to provide low cost health insurance to those no longer receiving insurance through their employer.
How Does Original Medicare Work?
Throughout your employment history, you’ve probably noticed a portion of your paycheck deducted for FICA. FICA stands for the Federal Insurance Contributions Act. This tax goes to pay for social security benefits as well as Medicare. So, you pay into it while you’re working with the thought that you’ll reap the benefits upon retirement.
You can become eligible for Medicare through yours or your spouse’s work history. You have must have worked at least 40 quarters. This will make you eligible for premium free Medicare Part A upon your 65th birthday. Most American citizens become eligible this way. However, some people are eligible even if they are under 65.
You are eligible for Medicare benefits if:
- You are over 65 and a U.S. citizen OR you are over 65 and a permanent legal resident who has lived in the United States for at least five years
- You are receiving social security or railroad retirement benefits OR have worked long enough (40 quarters) to be eligible for benefits even if you are not collecting them yet
- You are also eligible if you are over 65 and you or your spouse is a government employee or retiree who has NOT paid into social security, but who HAS paid into Medicare payroll taxes while working, meaning a Medicare-covered job.
If you are under 65, you are eligible for Medicare Parts A & B benefits if:
- You have received social security benefits for at least 24 months. These months do NOT have to be consecutive. So, it is ok, if there are breaks in between, but it must be at least 24 months total.
- You have ALS
- You have end-stage renal disease
Most people are automatically enrolled upon your 65th birthday. You should receive your card in the mail. Should there be any issues, you’ll need to contact social security.
Original Medicare may work a little differently than the insurance you’ve had in the past. Original Medicare is comprised of Medicare Part A & Medicare Part B. These were the parts introduced in 1965, of course there have been many changes in the years since.
Medicare Part A is part of Original Medicare. You can consider it your hospital insurance. Generally speaking it helps to cover:
- Inpatient care in a hospital
- Nursing facility care
- Nursing home care
- Hospice care
- Home health care
If you or your spouse have paid into Medicare for at least 40 quarters, there is no monthly premium for Medicare Part A.
You will have to meet a deductible for each benefit period and may be charged coinsurance.
Medicare Part B is also part of Original Medicare. You can consider it your outpatient insurance. It helps to cover preventative services like wellness visits and medically necessary services. Medicare Part B helps to cover:
- Doctors Visits
- Mental health services
- Outpatient Surgery
- Ambulance services
- Durable medical equipment, like wheelchairs or walkers.
- Limited outpatient prescription drugs such as injections you get in a doctor’s office, certain oral cancer drugs
Part B will always have a monthly premium. The base monthly premium for 2021 is $148.50. However, it can go up from there. The Medicare Part B monthly premium is based on your income. If your income has decreased you can apply for a reconsideration with form SSA-44.
You will have to meet a once annual deductible and will be charged coinsurance when you make use of your benefits. Usually, this will be about 20% of the costs.
Pros & Cons
Although Medicare is excellent coverage, it’s not a perfect system. There are pros and cons to take into consideration.
Broad Medicare Network
With Medicare, you are not beholden to a specific carrier as you have most likely been in the past. It is estimated that somewhere around 93% of physicians accept Medicare. Compare that to plans you’ve had in the past! This high percentage can truly expand your options.
Compared with health insurance you’ve had in the past, Medicare will likely be much less expensive.
Reports of the national average monthly premiums vary but they all come in about a couple hundred dollars more than the premiums for Original Medicare. Even when adding a Medicare Supplement Plan, you’ll usually be paying less on a monthly basis for Medicare than what you’ve paid in the past. Of course, that’s not a hard and fast rule, but it is the case for most Americans.
You’ll still have coinsurance and that will most likely be comparable or less than what you’ve paid in the past.
Most people will be automatically enrolled in Original Medicare upon their 65th birthday. You should receive your card in the mail. As long as you’re not deferring Medicare, there’s nothing further to be done. Just, don’t lose the card of course!
Original Medicare is run by the Federal Government. Specifically with Original Medicare, there are very few choices to make. Really, you just decide whether you’re going to accept coverage or defer.
However, Medicare in general is very customizable. There are additional solutions such as Medicare Supplement Plans, Medicare Advantage & Medicare Part D in which you can enroll. These are entirely voluntary and can be tailored to meet your medical and financial needs.
Cost Savings Available
Finally, there are many cost saving programs available. Make sure to do your research about:
- Medicare Savings Programs– which can provide assistance with your Medicare Part A & B Premiums, Deductibles & Coinsurance.
- SSA-44– A form which can help lower your Medicare Part B monthly premium based on your adjusted monthly income.
- DSNPs- Low cost special needs Medicare Advantage plans.
- Extra Help– Assistance paying for Medicare Part D premiums, deductibles, coinsurance & copays.
There are still some drawbacks to Original Medicare such as late penalties and limited benefits.
If you choose to defer Original Medicare for whatever reason or you’re not automatically enrolled, you may be subject to late penalties. These late penalties will be tacked onto your monthly premiums for as long as you’re enrolled in Medicare.
Health insurance in general can be confusing and Medicare is no different. You’ve probably never had this many choices before with regards to your health insurance. All of the choices can be overwhelming.
Additionally, Part A’s cost structure can be confusing. Deductibles are based on a benefit period as opposed to an annual basis. Additionally, your coinsurance is based on the length of your stay.
No OOP Limit
Most health insurance plans have a yearly out of pocket max. Once you have paid that much (for in network, covered services), your carrier will take on the remainder of the charges. This is extremely helpful should you have to undergo major medical services such as surgeries or cancer treatments.
Original Medicare does not have an OOP limit. So, you could potentially be on the hook for very large bills.
Original Medicare does not cover everything. Chief amongst noticeable absent benefits are:
- Prescription Drug Coverage
There are, of course, solutions to these missing benefits. However you’ll have to search outside of Original Medicare should you need to make use of these benefits.
If you have any questions, you can reach us at iHealthBrokers at 888-918-0518 or schedule a call today! Our services are 100% FREE.
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.