Medicare 101: What You Need to Know as a Recent Retiree

Medicare 101: What You Need to Know as a Recent Retiree

May 24, 2022

If you're like most people, when you think of Medicare, the first thing that comes to mind is "health insurance for seniors." And while that's one of the things Medicare does, it's much more than that. Medicare is a federally funded health insurance program available to all U.S. citizens and legal residents who are 65 years of age or older, and people with some disabilities or conditions.

In addition to health insurance, Medicare provides coverage for some preventive care services, such as annual screenings for cancer and depression. And if you have a chronic condition like diabetes or heart disease, Medicare will help pay for the care you need to manage your condition. It also pays for some long-term care costs, such as nursing homes and hospice care. It also provides prescription drug coverage.

So as you can see, Medicare is an essential resource for many Americans, and it's one with which we should all be more familiar. Depending on your age or health status, you may soon be qualified for Medicare.

But many people don't understand what Medicare is or how it works. This blog post will break down everything you need to know - from who qualifies for coverage and what each part of the program covers to how to enroll and save money on your premiums. By the end, you'll be an expert on all things Medicare!

What is Medicare? A brief history lesson:

Medicare was founded in 1965 as part of President Lyndon Johnson's historic social reforms. Before this, health care for the elderly and disabled was largely left to individual states and private insurers, whose coverage plans were often prohibitively expensive for many people. The Medicare program has since grown from covering approximately 19 million Americans to over 55 million people today (roughly 17% of our population). Some of the key benefits of Medicare include coverage for:

  • hospitalization, 
  • lab tests, 
  • diagnostic services, 
  • skilled nursing facilities, 
  • and prescription drug costs.

In addition, all Medicare recipients have access to a wide range of preventive care options, such as screenings and immunizations. Thanks to its inclusive nature and comprehensive coverage options, Medicare is one of the most important social safety net programs in the U.S. today. 

While Medicare does not cover all medical expenses, it can help defray the cost of hospital stays, doctor visits, and prescription medications. For many people, Medicare is an essential source of health insurance coverage. There are some costs associated with Medicare, such as premiums and deductibles, or purchasing cover. However, most find the benefits of Medicare outweigh these costs.

Who is eligible for Medicare?

To be eligible for Medicare, you must be a U.S. citizen or a legal resident 65 years old or older. There are, however, some exceptions. People who qualify for Social Security Disability Insurance benefits for 24 months are eligible for Medicare, regardless of their income. In addition, those with end-stage renal disease or Lou Gehrig's disease (Amyotrophic Lateral Sclerosis) also qualify for help.

There are some other rare circumstances where you may be eligible for Medicare A coverage (which is hospital insurance), including:

  • if you were the dependent parent of a fully insured child who is now deceased, or
  • If you're 50 years or older and the child or widow(er) of someone who worked long enough in covered employment and paid Medicare taxes. Notably, this includes divorced widow(ers). 

If you meet any of the above exceptions and aren't already receiving benefits, you should contact your local Social Security office to find out how to sign up for Medicare. Generally speaking, though, most people who qualify for Medicare are 65 or older or are disabled. 

The A, B, C, and Ds of Medicare

Now that we know who is eligible for Medicare let's look at the different parts and what they cover. There are four main parts to Medicare, often split into Original Medicare (Parts A and B) and Medicare Advantage (Part C). There is also Part D, which covers prescription drugs.

Parts A and B are the traditional fee-for-service Medicare program. You can see any doctor or hospital that accepts Medicare, but you will have to pay deductibles and coinsurance for most services

Part A covers hospital visits and stays, while Part B helps to pay for outpatient services like doctor's appointments. Private health insurance companies offer Parts C and D and cover prescription drugs (Part D) and other medical services (Part C). 

Here's a more detailed breakdown of each Medicare part:


Services covered include inpatient hospital stays, skilled nursing care, hospice facilities, and some home health care services. Part A is free for most people who have worked and paid taxes for at least ten years. 

However, many pre-retirees do not realize that Medicare Part A will only cover a maximum of 100 days of nursing home care. Under the current rules: 

  • Days 1-20 of care in a skilled nursing facility are fully covered.
  • Days 21-100 require a copayment of $194.50 per day (in 2022).
  • After day 100, you are responsible for the entire bill. 

This can be a shock to people who have not planned for this eventuality. The best way to avoid this financial burden is to purchase long-term care insurance, which will cover the cost of nursing home care beyond the 100 days covered by Medicare Part A. Although it may seem expensive at first, long-term care insurance can provide peace of mind and financial security.


Part B helps pay for outpatient procedures and services like doctor's visits, laboratory tests, and preventive screenings. It also covers some home care services and medical equipment. There is a monthly premium for Part B, which is deducted from your Social Security benefits. In 2022 it amounts to $170.10 but varies annually. Your premium may be higher or lower depending on your income.

You also must pay an annual deductible of $233 in 2022 before Part B coverage kicks in, after which Medicare will cover 80% of the approved amount for most services (you pay the other 20%).


Private insurance companies administer Medicare Part C. It is like traditional Medicare, but it typically provides more coverage for things like preventive care, prescription drugs, hospitalization, and extra coverage for routine dental and vision care. Part C plans are available to people enrolled in both Medicare Parts A and B. 

If you are enrolled in Part C, you will still need to pay your monthly Part B premium and any deductibles, copayments, and coinsurance that your plan requires. While Medicare Part C plans can vary significantly in cost and coverage, they all must meet standards set by the Centers for Medicare and Medicaid Services. 

While there are Medicare Advantage plans, there are also Medigap plans. Medigap plans are more robust than Advantage plans and there are a number to choose from. The most comprehensive will cover your out-of-pocket costs for Medicare, just by paying an additional monthly premium for the Medigap plan.

If you are unsure of what to select, you can call the Retirement Matters Medigap broker, found here.


Private insurance companies provide part D, and each offers a different selection of drugs. Seniors can choose a plan that best meets their needs. Part D plans have an annual deductible, and then seniors pay a copayment for their prescriptions. 

The Doughnut Hole

Most Medicare Part D also have a coverage gap, known as the "doughnut hole." The doughnut hole means that seniors must pay up to 25% of their prescriptions out of pocket once they reach a certain limit. In 2022, this limit begins when you and your plan have spent $4,430 on covered drugs. It ends when you have spent $7,050 in total drug costs, at which point you cross over the "catastrophic coverage" threshold (and from that time, you will only pay 5% of the cost of your drugs for the rest of the year).

To help recipients close the doughnut hole, nearly the entire cost of the prescription (95%, not just your 25% coinsurance) is applied to the out-of-pocket total until you reach $7,050. Your limit resets at $0 again every year, so the doughnut hole will close and open as your drug costs ebb and flow.

Enrolling in Medicare

If you receive Social Security benefits, you're already enrolled in Part A and Part B. If you're not receiving benefits, you need to sign up for Medicare during your initial enrollment period. This is a seven-month period that begins three months before you turn 65. You can also enroll in a Medicare Advantage plan or Part D during this window.

You can enroll in Medicare through the government website by calling the Social Security Administration at 1-800-772-1213 (TTY 1-800-325-0778) or visiting your local Social Security office.

If you are interested in enrolling in a Medicare Part C plan, you can contact private insurance companies directly or work with a financial advisor who can help you compare plans and find one that meets your needs. 


If you miss your initial enrollment period, you can sign up for Part A and Part B during the general enrollment period, which runs from the 1st of January to the 31st of March each year. However, there may be a late enrollment penalty if you don't enroll when you're first eligible. Also, be aware that you won't be covered until the 1st of July. 

There are some circumstances in which you may be eligible for a special enrollment period (SEP). For example, if you lose your job-based health insurance, you have eight months to enroll in Medicare Part B.

You can also enroll in a Medicare Advantage plan or Part D prescription drug plan during the annual election period, from the 15th of October to the 7th of December. This is also when you can drop or swap Medicare plans. Coverage takes place from the 1st of January.

You may also be able to switch plans outside of this period if you have a special circumstance, such as moving out of your plan's service area or losing other coverage. If you're enrolled in Medicare Advantage, you may dis-enroll from your plan and return to Original Medicare during the annual enrollment period.

Your Medicare expenses

Medicare is a vital program that helps keep seniors healthy and active, but it comes at a cost. In 2018, the average Medicare beneficiary paid $6,150 in premiums and out-of-pocket costs, according to the Kaiser Family Foundation.

Once you enroll in Medicare, you'll need to pay any applicable premiums, as well as any deductibles, copayments, and coinsurance. Part A is free for most people, but you'll likely need to pay a standard premium for Part B of $170.10. If you have a Medicare Advantage plan, you also need to pay a monthly premium to your private insurer. 

Part C and D plans may have different premiums, deductibles, and copayments, so you'll need to check with your insurer for more information. Often you can reduce your Medicare costs by signing up for a prescription drug plan with a low monthly premium. You can do this during your initial enrollment period or during the annual election period.

When to Enroll in Medicare

Even if you have health insurance from your employer, it's wise for most people to join Medicare Part A on schedule at age 65. Most individuals will have contributed to Medicare throughout their working life and therefore do not pay a monthly premium for Part A. However, in some rare cases, it may make financial sense to wait to enroll in Medicare Part A. These situations include:

  • if you're still working and have health insurance from your employer, 
  • if you're covered under your spouse's employer's health insurance 
  • if you're contributing to a Health Savings Account (HSA). 

You should also be aware that you're automatically enrolled in Part A and Part B if you're receiving Social Security benefits when you turn 65. If you don't want Part B coverage, you'll need to opt-out within 30 days of getting your welcome packet from Medicare.

If you're still working and have health insurance through your employer or a family member, you can delay enrolling in Part B without penalty. You'll need to sign up for Part B during a special enrollment period when you stop working and lose your job-based health coverage. If you're not covered, and you wait to enroll in Part B, there is a late-enrollment penalty of 10% for each year you didn't sign up.

You can postpone Part D if you have "creditable prescription drug coverage," which is considered as good as or better than the standard Medicare coverage. But suppose you decide to enroll in Part D later and were not covered. In that case, you may have to pay a late-enrollment penalty for as long as you have Medicare, based on 1% of the "national base beneficiary premium" multiplied by the number of months for which you were uncovered.

The bottom line is that Medicare can be confusing, but it is critical to know your coverage options as you approach retirement age. If you have any questions about enrolling in Medicare, speak to your financial advisor or contact the Social Security Administration.


This is just an overview of what recent or soon-to-be retirees need to know about Medicare. For more detailed information, consult your financial advisor or the Retirement Matters Medicare broker.

Despite the costs, Medicare is an essential program that provides vital protection. While Medicare provides health coverage for seniors, there are some gaps. Long-term care insurance can help to fill these gaps and provide financial security. Medicare Advantage plans can be an excellent option for people who want comprehensive health insurance with additional benefits.

I encourage you to look at all your options under Medicare before deciding on your health care coverage. Talk to your financial advisor about whether long-term care insurance is right for you. There's nothing more important than safeguarding your health when it comes to enjoying your retirement.