Part of retirement planning involves locating appropriate and affordable healthcare coverage. For Americans 65 and older, any discussion regarding healthcare must include Medicare. One great thing about Medicare is that your age often makes eligibility much easier, and preexisting conditions are always covered.
There are four components to Medicare:
- Part A: Overnight stays in hospitals, nursing homes, skilled nursing, some home health services and hospice care.
- Part B: Preventive services, medical supplies, limited outpatient drugs.
- Part C: Medicare Advantage plans, which are sold privately and work in place of Parts A, B and in many cases, D.
- Part D: Formulary-based prescription drug coverage based on a tier system.
Because Medicare has many holes and leaves many expenses uncovered, you want to either add a Medicare supplement plan to your Medicare or get a Medicare Advantage plan (Part C), both of which will limit your out-of-pocket exposure. With greater flexibility and the ability to cover out-of-pocket expenses that Medicare will require, it’s easy to see why so many choose this option.
There’s a six-month enrollment window when you turn 65, provided you’re also enrolled in Part B. When that window opens, you’re allowed to enroll in any Medigap plan sold in your state regardless of current health. Beyond that enrollment period, you may be penalized or forced to pay higher premiums just for enrolling late.
We discuss Medigap in greater detail here, including whether or not Medicare Advantage would be a suitable alternative for those needing flexibility.
Enrollment in Medicare Parts A – D begins three months before turning 65 and lasts until the end of the third month after your birthday, totaling seven months. Missing your enrollment period could result in premiums much higher than you actually need to pay, although a special enrollment period (SEP) may apply with qualifying conditions.
Special enrollment is reserved for those who turn 65 but are still enrolled in an employer sponsored health plan through your work or your spouse’s work. The SEP requires enrollment in your new plan within eight months of your last day of employment or group plan’s termination, whichever happens first. If they both end during your initial enrollment period, you do not qualify for the special period.
Medicare Advantage and prescription drug enrollment period varies based on state. Normally, that runs October 15th to December 7th.
Most common premiums are broken down here:
- Part A: Nothing, provided you contributed enough through your employer to the Medicare system.
- Part B: $135.50 was the 2018 premium. If you fell under the “hold harmless” provision and paid less than $134.00, you will pay more in 2019 but no more than your 2.8% Social Security cost-of-living adjustment (COLA).
- Part C: No charge. Some copays for doctor visits may cost anywhere from $30 up to $50.
- Part D: How much you pay depends on plan choice. The national average is $35.02.
Sorting it out
With many options, stipulations and potential for coverage gaps, many folks ready for retirement may wonder how they’ll cover health care costs. It’s confusing, somewhat intimidating and many feel they’ll never choose the right plan or will overpay for the options best suited for their needs.
From Medigap to Medicare and all the premiums between, I’ve simplified the basics of Medicare and what retirement means for your health care costs in The Medicare Playbook. Get your copy now and see why millions of Americans are beginning retirement with one less thing to worry about: how to pay for health care after retirement.
Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage. For more information visit www.MediGapAdvisors.com.