Turning 65 can be one of the most exciting times in your life. Retirement is on the horizon and you’ve surely got lots of fun things planned.
One of the things that is not so fun is having to figure out Medicare. Most of your working life, your employers have chosen your health insurance coverage for you. Although you may have paid your fair share of the cost of that coverage as an employee, you didn’t have to go out and find the insurance company and sort through dozens of plan options.
At age 65, however, you must join a national health insurance program and then do both of those things. With four different parts, Medicare itself can be downright confusing. What’s more is that it doesn’t cover everything, so you also have choices to make on supplement coverage and drug coverage.
Fortunately, there are a few things you can do to simplify everything. The first thing you need to do is to understand how to sign up for Medicare and what Medicare itself covers before you can begin looking at additional coverage to fill in the gaps.
The Parts of Medicare
When Medicare was rolled out back in the 1960s, it was modeled after Blue Cross and Blue Shield plans of the time, which separated hospital and outpatient benefits. Original Medicare, therefore, has two parts: Part A Hospital Benefit and Part B Outpatient Benefits.
You are eligible to enroll in these two parts via the Social Security office or the Railroad Retirement Board if you are a railroad retiree. Everyone has a 7-month initial enrollment window that begins 3 months prior to your 65th birthday. If you apply before your birthday month, then your benefits will usually begin on the first of the month in which you turn 65.
Part A covers inpatient hospital, skilled nursing, blood transfusions, and hospice benefits. Part B provides pretty much everything else from doctor visits to ambulance rides to medical equipment. Part B also covers some big-ticket items like chemotherapy, radiation, and dialysis.
Medicare also offers a voluntary drug program called Part D. These plans are provided by private insurance companies and there are dozens to choose from in every state.
What It Costs
Many people are under the assumption that Medicare will be free when they enroll in it because they paid taxes toward it during working years. Unfortunately, those taxes only go to pre-pay Part A. Anyone who has worked at least 40 quarters during their lifetime or who is married to someone who did will pay nothing for Medicare Part A at 65.
Parts B and D, however, have premiums that you pay monthly for as long as you are enrolled. In 2019, the standard base premium for Part B is $135.50 for most people, but some people who earn high incomes will pay more. You can find a chart that explains the higher income levels and how those affect your Part B premiums here.
Part D premiums are set by the insurance companies who offer them and can range from as low as $10/month to well over $150/month depending on the plan you choose.
In addition to the premiums for the coverage itself, there is cost-sharing that you pay as you use your benefits. Both Part A and B have deductibles that you must satisfy up front before benefits kick in. Part A has expensive daily copays as well if you have a hospital stay longer than 60 consecutive days.
Part B has a small annual deductible up front and then covers 80% of your outpatient expenses. You pay the other 20%.
Covering the Gaps
Now that you know the basics of what Medicare covers and what it costs, you can begin to think about what supplemental coverage you’d like to have to fill in the gaps. There are two primary routes you can go with this.
Medicare Supplements are private insurance policies that pay after Medicare to help cover your Part A and B deductibles, coinsurance and copays. Medicare pays its share of your claim and then submits the remaining balance of those invoices to your Medicare supplement carrier to pay its share.
There are ten standardized plans that make it fairly easy to compare benefits between insurance companies. One thing many people like about Medicare supplements is that you can use them any Medicare provider across the United States no matter which company you bought your supplement policy from.
These plans do not, however, cover outpatient drugs, so you would need to add a separate Part D standalone drug plan.
The other option you can consider for filling in the gaps is Medicare Advantage plans. These plans pay instead of Medicare but cover all the same Part A and B services. You’ll get your care from the private insurance company’s network of doctor and hospitals.
Medicare Advantage plans fall under Part C of Medicare and they are optional. You can look at the benefits offered by various companies and decide if you’d like to enroll in this type of plan instead of Original Medicare and a Medicare Supplement.
With most Advantage plans, you have low premiums up front, but you’ll pay copays for services as you go along. Many plans have Part D drug coverage built right in, so there is a convenience factor that many people enjoy about them.
Your best bet for finding the right plan for you is to work with a Medicare insurance broker who specializes in these plans and can help you.
Guest Post Blog by Danielle Roberts:
Danielle is a Medicare insurance expert and co-founder at Boomer Benefits, a licensed insurance agency that specializes in helping baby boomers navigate their entry into Medicare.