On average, Medicare will cover about half of your health care costs after you turn age 65. Most retirees sign up for traditional Medicare, which includes Part A for hospital coverage and Part B for coverage of doctor visits and outpatient care. Part D provides coverage for prescription drugs. A “Medigap” policy is usually added to further limit the out-of-pocket medical expenses that are not covered in Parts A and B.
Medicare coverage is funded from payroll taxes collected over your lifetime of work. It takes 10 years of covered work to qualify for Part A without paying any further premiums toward its future coverage costs. Future premiums for the various parts of Medicare coverage will be automatically deducted from your monthly Social Security income benefit amount. In addition, there will be an extra additional premium charged if your retirement income is too high. If it is more than $170,000 for married couples or $85,000 for single retirees you will pay a higher amount for Part B and Part D than others will pay who are below these levels.
Enrollment Decisions:
If you decide to start your Social Security early at the age 65, you will usually be enrolled automatically when you apply for your Social Security benefit.
You can also enroll during a seven-month period that starts three months before you turn age 65. It is important to make sure to enroll within this period. Otherwise, a 10% additional premium will be assessed forever for every month on your Part B premium. This penalty increases an additional 10% for each year you delay enrolling. (Part D also has a monthly penalty premium assessed if you do not keep coverage in place for 63 days or more.)
If you are still working past age 65 and are covered under an employer health insurance plan, you are permitted to delay enrollment up to eight months after the date that your employer health insurance coverage ends. Retirees with continuing health care coverage from a previous employer and employees receiving Cobra coverage will not be able to extend this period, since those coverages are not considered to be qualified continuing employer health care coverages.
The Various Parts of Medicare and What is Covered:
· Medicare Part A covers all costs incurred during the first 60 days of a hospital stay and up to 20 days at a skilled nursing facility and/or hospice care. Unless there is a medical need, the additional cost of having a private room is not covered.
· Medicare Part B covers 80% of most doctor visits, lab tests, medical devices, and other outpatient costs including physical and occupational therapy. It will also cover annual wellness checkups and mammograms.
· “Medicare Advantage” Part C is an alternative plan of coverage that private insurers offer through HMO (Health Maintenance Organizations), PPO (Preferred Provider Organizations), PFFS (Private Fee-for-Service Plans), and SNP (Special Needs Plans) plans that combine together Part A and Part B and sometimes Part D coverages into one plan with lower co-pays. It will limit your out-of-pocket costs and often includes dental coverage. To be covered you must use a listed provider. This limitation causes most people to choose the traditional Medicare Parts A, B, D, and Plan F instead of an Advantage Plan.
· Medicare Part D (Drug Coverage) is purchased through private insurance companies. Plans that are offered vary greatly in coverage and cost, so consider getting help from an advisor specializing in comparing coverages best suited for your medical needs. Most common drugs are covered, but sometimes higher priced specialty drug coverage will be limited to 70% of the cost.
Coverage changes every year, so you should consider whether a change of plans and/or insurer may be beneficial during the annual open enrollment period that occurs every October through December. Medicare has its own website with a helpful search tool to find the plans that best cover the cost of any prescription drugs you are on at https://www.medicare.gov/find-a-plan/questions/home.aspx
· Medicare Plan F (Medigap Coverage) is available through private insurance companies and is the most comprehensive and most often chosen Medigap plan for covering out-of-pocket medical costs that Medicare does not cover. It will pay for co-pays, deductibles, and coinsurance that is not covered by Part A and Part B. It also covers medical costs when you are traveling outside the United States. To avoid having pre-existing conditions excluded, you must enroll within 6 months of applying for Part A or Part B.
· Other Medigap Plan Options: There are various optional plans that can be chosen other than Plan F that provide lesser coverage resulting in lower premium costs. Plans G, K, L, M, and N offer differing levels of deductibles, coinsurance, out-of-pocket limits, and types of coverage. You can compare all available plan at https://www.medicare.gov/supplement-other-insurance/compare-medigap/compare-medigap.html
Greg Tinaglia
Last Updated: 04/11/2017