Understand Medicare to Get the Most Out of It

— -- During their entire working lives, Americans pay into the Medicare system, yet many fail to understand the basics of how it works and how to use it.

Medicare is government-sponsored health insurance for Americans 65 and older. As with any insurance, the goal is to get the most out of it for the lowest cost. Medicare is a complex, often confusing system that involves choices that users must understand to configure the right coverage for their needs.

By the time you reach the Medicare eligibility age of 65, you may find that you need regular medical care for one or more conditions. This is particularly the case with the 23 million American women who are 65 or older. Women tend to have more chronic conditions than men and, because they live longer, their care lasts longer. Yet, because they earn less than men, women have fewer resources to pay it, so using Medicare advantageously is especially important for women.

Misconceptions about Medicare abound. Contrary to popular belief, the federal government isn’t necessarily going to send you a Medicare card on your 65th birthday. If you are 65 and receiving Social Security retirement benefits or Railroad Retirement benefits, then you will be enrolled in both Medicare Part A and Part B automatically. But if you aren’t receiving these benefits, you’ll need to enroll in Medicare. Also, many people think Medicare has no cost for participants, but most pay monthly premiums. And there are co-pays. However, total costs for participants are far lower than those charged by private health insurers.

Another misconception holds that Medicare is a standard package of the same benefits for everyone, and that once you’re receiving them, nothing changes. In reality, Medicare benefits must be individually configured from several options, and choices offered can change annually.

As your needs for care can change significantly over time — for example, changes in the medications you’re taking  — it’s a good idea to reevaluate current and anticipated needs against the new Medicare options as they’re presented annually. Like the private insurance industry, Medicare calls this annual opportunity to change options open enrollment.

Open enrollment for Medicare plans that start Jan. 1 is happening now, and lasts until Dec. 7. Information can be found on the federal Medicare website. (Medicare open enrollment shouldn’t be confused with the current open enrollment period for state or federally run health insurance exchanges created by the federal Affordable Care Act.)

Open enrollment for current Medicare participants is entirely different than registering for Medicare initially. To be eligible for full benefits, you must have worked 40 quarters (10 years, cumulatively) and must have paid Medicare tax during those quarters -- for most people, through payroll deduction. People who meet this requirement can enroll at any time between three months before the month that they turn 65 and three months afterward. Waiting too long can bring costly penalties that might stay with you the rest of your life. (The system imposes these penalties to maximize participation, increasing premium revenue needed to run the system.) Regardless, you’ll want to enroll before you turn 65.