One of the biggest decisions to make in retirement is ensuring you have the health care coverage you need, when you need it. It’s helpful to understand the basics of Medicare to help you choose the best options for your health and budget. With certain parts of Medicare offered by the government and other options available to purchase through private insurers, putting all the pieces of the puzzle together can be complicated. Here are the main features of Medicare to be aware of as you determine your needs and when you should opt into Medicare coverage:
Eligibility: Medicare is available to individuals ages 65 and older, younger people with certain disabilities, and those with End Stage Renal Disease (ESRD).
Coverage: The Medicare program is broken down into four main parts: A, B, C, and D. Each covers different areas of health care. Some plans are government offered and some are offered by private healthcare companies for a separate cost. Here are the overarching coverages of each plan:
- Part A: Hospital-related services & emergency care. This covers inpatient hospital stays, hospice care, and qualified nursing care that individuals may need after
suffering a serious health issue or injury that requires rehabilitation or short-term nursing care.
- Part B: Doctor visits, lab work & preventive care. Includes routine doctor visits, lab tests, preventive medicine, medical equipment, ambulance transportation, x-rays, and some outpatient prescription drugs.
- Part C: Medicare Advantage: Medical Health Plans for purchase through private insurers that contract with Medicare to provide at least all of the services provided in Part A and B with additional offerings such as dental, vision, hearing, or prescription drug coverage. The coverage and cost vary from plan to plan.
- Part D: Prescription drug coverage. Drug insurance plans purchased through private insurers designed to help cover the cost of prescription medications. What types of medications are covered are determined by a formulary published by the federal government that is subject to change every year. Part D plans cover both generic and name-brand medications, with limitations. Some medications aren’t covered, in that event, an exception can be filed but there is no guarantee it will be granted.
Enrollment Periods: As you plan to incorporate Medicare into your long-term healthcare plan, it’s essential to be aware of the different dates for enrollment. Missing
these deadlines can cost you, sometimes permanently, and you could suffer a lapse in coverage when you need it most. Here are important dates to know:
- Initial Medicare Enrollment Period: The Initial Enrollment Period (IEP)for Medicare spans the full three months before, the month of, and the three months after your birthday month the year you turn 65 (unless your birthday is on the first of the month, then your IEP is four months before your birthday month and two months after your birthday month. If your birthday is on the first of the month, Medicare will allow you to start Medicare the month before you turn 65). Within this seven-month period, you are eligible to sign up for Medicare parts A, B, C, and D. Your coverage begins based on when you enrolled, but no earlier than your birthday month. If you miss the Initial Enrollment Period, you can enroll later. However, if you don’t by age 65, and if you don’t qualify for a Special Enrollment Period, you’ll be penalized by 10% for every 12 months you could have been enrolled but were not.
- Special Enrollment Period: If you are 65, have employer-sponsored health insurance, and your employer has more than 20 employees, you are eligible for a Special Enrollment Period (SEP). Special Enrollment eligibility varies and usually does not incur a late enrollment penalty.
- General Enrollment Period: If you miss both your IEP and your SEP, you can still enroll in Medicare by signing up Parts A and B between January 1st and March 31st of each year. In that case, your coverage would begin on July 1st of the same year, and you may incur a penalty for late enrollment.
- Open Enrollment Period: There are two separate open enrollment periods each year. During this time, current Medicare users get a chance to evaluate their coverage and potentially make changes. Medicare has one main open enrollment window from Oct 15th to Dec 7th each year. There is also a Medicare Advantage open enrollment period annually from Jan 1st to March 31st.
Premiums: While most don’t pay a premium for Part A, premiums for Part B & D are dependent on income, higher-income earners will pay escalated premiums. If you do not receive Part A for free, you will be responsible for paying a premium for that part, as well. You can click here to see Medicare premiums at a glance.
The particulars of Medicare can be intimidating and budgeting for this expense in retirement is crucial. We can help you create a plan that suits both your medical and financial needs. Please let us know what questions you have and how we can help!
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