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medicare eligibility
27 Mar 2021

A Complete Guide to Medicare Eligibility

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Before Medicare became available, one-third of American seniors lived below the poverty line. Within a decade of the program’s launch, that number dropped by half.

Today, many people mistakenly assume that Medicare is only for seniors. In reality, almost 60 million Americans of all ages rely on Medicare to meet their health insurance needs.

So who qualifies for Medicare? How can you know if you are eligible and what enrollment would cost you? Here’s what you need to know about Medicare eligibility today.

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What Is Medicare?

Medicare is a government-run health insurance program. Launched in 1965, it is specifically focused on serving:

  • Seniors
  • Individuals with disabilities
  • Individuals with specific health conditions

Medicare comes in two primary forms: Original Medicare and Medicare Advantage.

Original Medicare vs Medicare Advantage

Original Medicare continues to be government-run. It is comprised of several different components.

  • Medicare Part A, which covers hospital stays
  • Medicare Part B, which covers general medical and health insurance
  • Medicare Part D, which covers prescription drugs
  • Medigap Insurance, which is a separate policy that can cover copays and other expenses not covered by parts A, B, or D

Medicare Advantage is a privatized alternative to Original Medicare. Advantage plans are offered by independent insurance companies at prices on par with Original Medicare.

By law, these policies must cover everything covered by Medicare Part A and Medicare Part B. Most also include prescription drug coverage and other benefits. In order to purchase an Advantage plan, you must first enroll in Original Medicare.

Medicare vs Medicaid

It is important not to confuse Medicare with Medicaid. While both involve health care, Medicare is a form of health insurance. Medicaid is a form of public assistance.

Medicaid is for low-income Americans and requires few or no copays. Eligibility is primarily income-based.

Medicare Eligibility Basics

To be eligible for Medicare Part A, you must meet at least one of the following criteria:

  • Be 65 years of age or older
  • Have a qualifying disability
  • Have End-Stage Renal Disease (ESRD)

Individuals who paid Federal Insurance Contributions Act (FICA) taxes during their working years typically qualify to enroll in Part A free of charge. This is because they accrued credits towards enrollment via their FICA taxes. Some Americans will be eligible because FICA taxes were paid on their behalf by a third party such as a parent or a spouse.

Eligible Americans 65 years of age or older or with disabilities who apply for and receive Social Security benefits will be auto-enrolled in Medicare. Eligible parties who are not auto-enrolled can apply through the SSA. Parties who did not pay enough in FICA taxes during their working years can buy into the program by paying modest premiums.

Part B

To be eligible for Medicare Part B, you must first be eligible for Part A. Anyone who qualifies for premium-free enrollment (due to having paid adequate FICA taxes) can enroll in Part B once they have enrolled in Part A.

Enrollees who bought into Part A must meet the following criteria to enroll in Part B:

  • Be 65 years of age or older
  • Be a resident of the United States
  • Be a United States citizen or qualifying legal alien

All enrollees in Part B must pay a modest monthly premium for this coverage. Importantly, qualified individuals must enroll in Part B as soon as they become eligible. Enrollees who wait to enroll later or who cancel their Part B coverage and then re-enroll will face higher premiums for their entire enrollment due to late enrollment penalties.

Enrollees can purchase Part D and Medigap coverage once they are enrolled in both Part A and Part B.

Disabilities and Special Conditions

Special Medicare enrollment terms apply to Americans who are eligible for coverage due to disability. In general, individuals with disabilities become eligible for Medicare 24 months after they begin receiving Social Security Disability benefits. This is true regardless of their age.

There are a few exceptions to this rule. Americans with Amyotrophic Lateral Sclerosis (ALS) are eligible to begin receiving Medicare coverage immediately once they qualify for SSD benefits. Child disability benefit recipients do not qualify for SSD benefits or Medicare until they are 20 years of age.

Americans with End-Stage Renal Disease (ESRD) face additional and specific requirements related to:

  • Kidney transplants or dialysis treatments
  • FICA payments
  • SSD benefits

An individual’s status on each of these points will determine what benefits they are eligible for, when, and under what terms.

Medicare Premiums

After eligibility, potential enrollees tend to be most concerned and most confused about Medicare’s costs. Determining your premiums is less complicated than it may seem at first glance, however.

The first step is to determine if you need to buy in or if you paid sufficient FICA taxes to qualify for Part A premium-free. For every $1,410 in net earnings that you make you earn one credit, up to a maximum of four credits per year.

As of 2020, individuals with:

  • 40 or more credits pay no premiums
  • 30 to 39 credits pay $252 per month
  • 29 credits or less pay $458 per month

The second step in determining your premium is to look at your income. You may be required to pay higher premiums for coverage if you are single and make than $85,000 annually or married and jointly earning $170,000 or more.

Late Enrollment Penalties

The other major source of Medicare premiums is late enrollment. Individuals can pay up to 10 percent more each month for Part A if they did not enroll when they first became eligible.

Similarly, premiums go up on Part B for individuals who did not enroll when they first became eligible. For Part B, the premium increases by up to 10 percent for each full year of delayed enrollment. So, for example, if you did not enroll until four years after you became eligible, you could pay up to 40 percent more.

You can use CMS’s official online calculator to get a more precise understanding of what your personal premiums might be.

Making Good Choices

Understanding Medicare eligibility is the first step to making good financial choices where health insurance is concerned. Check out our personal finance learning center for more great information on how to make the best financial choices for you and your family at every stage of life.