How Does Medicare Work After Retirement?

How Does Medicare Work After Retirement?

Even if you love your job, there will come a day when you want to retire. Whether that means doing something you love, relaxing and enjoying life, or a little bit of both, you’ll need medical insurance to cover you.

Stephanie Faris

Published October 5th, 2020

Updated April 24th, 2022

Table of Contents

Key Takeaways

  • Medicare has four parts: Parts A, B, C, and D.
  • Part A is premium-free for most retirees, while B, C, and D come with premiums.
  • You’ll have the option of Medigap, also known as a Medicare Supplement.

That’s where Medicare comes in. If you’re planning your retirement, though, one of your first questions will likely be how does Medicare work? Learning the ins and outs can help you better know what to expect.

Medicare Parts

Medicare and retirement go hand in hand, although you don’t have to stop working to collect Medicare. As long as you’ve worked the minimum number of years, you’ll qualify starting at the age of 65.

Medicare comes in multiple parts. Part A enrollment is automatic when you are approved for Social Security, but you may need Part B, C, and/or D. Here are the different Medicare parts.

Part A (Hospital)

Part A is the plan that applies to most people. When you turn 65, you should pay attention to when does Medicare kick in. You’ll have a seven-month enrollment period, starting three months before your 65th birthday. For most people, Medicare Part A will be free, so it’s typically in your best interest to sign up.

Part A covers your hospitalization, including care you receive in the following areas:

  • Hospital-based inpatient
  • Skilled nursing facilities
  • Nursing homes
  • Hospice
  • Home healthcare

This will at least ensure you’re covered for those unexpected emergencies that come up during your Medicare retirement. From there, you can decide whether you want to add other parts, which aren’t free.

Part B (Medical)

When someone asks what does Medicare do, the answer usually refers to Part B, which takes care of your basic medical expenses after retirement. You’ll get coverage for many of your medical visits and preventive care with this plan. It also covers ambulance services, clinical research, and durable medical equipment.

Unlike Part A, Part B isn’t free. When someone asks what does Medicare cost retirees, this typically applies only to Parts B, C, and D. Part B has a sliding scale for premiums, depending on your annual income. The amount also changes each year. In 2022, most people will pay $170.10 per month. This premium applies to those making $91,000 or less, or $182,000 or less if you file jointly.

Part C (Medicare Advantage)

You can’t discuss how does the Medicare system works without mentioning the other two parts. One is Part C, which is also known as Medicare Advantage. Part C is offered by a third-party provider that has been approved by Medicare.

If you opt for Part C, the plan will cover all the services that would otherwise be covered by Parts A and B. How does Medicare work with insurance? Medicare pays a fixed amount every month to cover your care. You’ll need to shop around if you go this route because each plan has different copays, deductibles, and coverage types. Some, for instance, cover vision and dental care, while others don’t.

Part D (Prescription Drugs)

Although your care will be covered by Medicare Parts A and B, you’ll still need coverage for your prescription medications. If you’ve opted for retirement supplemental insurance through Part C, you may have some or all of your medications covered there, which means you may not need Part D. As with Part C, Part D is administered by third-party insurers.

What is Medigap?

Now that you know how does Medicare coverage work, there’s another feature available to you. Medigap exists to fill in any “gaps” in your Medicare coverage. This insurance is offered by third-party companies and is sold as “Medicare supplemental insurance.”

Medigap has become an important part of retiree health insurance and Medicare for a reason. It’s designed to cover your copays, coinsurance, and deductibles. Basically, your insurance claim is submitted to Medicare, which pays its part, then Medigap takes care of the rest.

Initial Enrollment Period

It’s important to know when to apply for Medicare Part B after retirement. As with Part A, you’ll be expected to apply within the seven-month enrollment period surrounding your 65th birthday. This begins three months before your birthday, includes your birthday month, and ends three months after your birthday.

You may ask, “Do I have to retire to get Medicare?” You do not. You can start participating in Medicare Part A even if your employer provides medical benefits. If that’s the case, you’ll work with your benefits administrator to enroll in Medicare while still staying enrolled in your employer’s plan.

Special Enrollment Period (SEP)

Each year, Medicare has a general enrollment period that runs from January 1st through March 31st. If you miss the deadline related to your 65th birthday, you can apply during this timeframe. However, by waiting, you could be subject to a penalty of 10 percent for Medicare Part B for each month you failed to sign up.

Medicare Costs

Whether you’re still working, on Medicare and going back to work, or retire completely, you’ll have some out-of-pocket expenses with Medicare. Here’s how it breaks down:

PremiumsDeductibles and Copays
Part AIn most cases, you won’t pay a premium. If you haven’t worked the minimum number of years, though, you may be required to pay. The cost for those who pay is no more than $499 in 2022, calculated based on how many quarters you paid Medicare taxes.Deductible $1,556 each benefit period in 2021. Your coinsurance payments: $0 for the first 60 days; $389 per day for days 60-90; $778 per lifetime reserve day for days 91 and beyond; all costs once you’ve exhausted your lifetime reserve days.
Part B$170.10-$578.30 a month, depending on your income.Deductible: $233. After meeting the annual deductible, your out-of-pocket cost will usually be 20% of the Medicare-approved amount.
Part CSet by insurerSet by insurer
Part DSet by insurerSet by insurer

Which Option is Right for You?

Before you enroll in Medicare, it’s important to know exactly the coverage you’ll need. If you’re one of the many Americans who get Part A for free, signing up for that is a must. But whether you need Parts B through D depends on whether you intend to keep working and have coverage from your employer. If you do plan to sign up for Parts C and D, look into how Medicare works with private insurance and shop around to find the best deal.

For many retirees who no longer have employer-provided insurance, Part B will be essential, as well. It covers all your medical visits, whether you’re getting your annual physical or being treated for a cold. Based on your needs, you may find Medigap provides the same coverage for a better price than Parts C and D.

Final Thoughts

Whether you’re asking do I still pay Medicare after I retire or you just want to know which plan to choose, it’s important to shop around and find the best deal. A skilled Certified Financial Planner® can help you plan for retirement, including advising you on the best insurance coverage for you.


Medicare Basics

Medicare Benefits

Medicare 2022

Applying for Medicare

Medicare Considerations

Medicare Taxes

Healthcare Considerations

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Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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