Are you retiring soon, recently retired or nearing your 65th birthday? If so, you need to understand Medicare and the necessary steps you need to take to ensure proper healthcare coverage in retirement. Even if you don’t fall into one of the categories above, I’m sure you know someone who does… so keep reading!
Types of Medicare Plans
Medicare is health insurance for people who are 65 years or older as well as for those under 65 with certain disabilities or of any age with End-Stage Renal Disease.
Medicare has four different types of coverage: Part A, B, C and D.
- Part A covers trips to the hospital
- Part B covers doctor visits, medical equipment and outpatient procedures
- Part D covers prescription drugs, and
- Part C, also known as Medicare Advantage plans, are provided by private insurance companies and offer additional coverage to that provided by Medicare Part A, Part B and sometimes Part D.
- These plans are usually set up as a HMO (Health Maintenance Organization) or PPO (Preferred Provider Organization) and require patients to see doctors that are in-network or pay more to see out-of-network providers.
What Medicare does NOT cover
The most common services which are not covered are long-term care, dental care, eye care, dentures and hearing aids.
There’s also something called the Medicare “donut hole”. So what is the Medicare donut hole, and why is it important?
- The Medicare doughnut hole references a coverage gap in Medicare Part D (prescription drug) coverage.
- Traditionally, Medicare and the participant share the cost for any covered drugs, up to the annual limit (this is $3,750 for 2018). Once this limit is reached, the participant is required to pay an increased portion for his/her prescription drugs, until their total out-of-pocket costs reach the annual maximum ($5,000 for 2018). After the annual maximum out-of-pocket is satisfied, the participant will only be required to pay up to 5% of their additional drug costs. This period between the annual limit and the annual maximum out-of-pocket is termed the “donut hole,” and can result in significantly higher out-of-pocket costs for prescription drugs.
- Private insurance companies offer supplemental policies which can reduce the impact of the donut hole, and it’s important to review these options when signing up for Medicare.
When to Enroll
Knowing when you should enroll for Medicare is important in order to maintain coverage and avoid penalties. There are three periods during which a person can enroll for Medicare:
Initial Enrollment Period: A person can first sign up for Medicare during the Initial Enrollment Period, which is a seven-month period that begins three months prior to the month of their 65th birthday. For example, if you turn 65 in April, you can sign up from January to July.
Special Enrollment Period: Special enrollment is for individuals who are working and covered under a group health plan with 20 or more employees and have a change in coverage. This “special” period lasts 8 months from either the time employment ends OR when the employer sponsored health insurance coverage ends (not including COBRA coverage).
General Enrollment Period: There is also an annual General Enrollment Period from Jan 1st – March 31st, which can be used if you do not sign up when you’re first eligible or if you are not eligible for the Special Enrollment Period.
Late penalties may apply if sign up is not completed during either the initial or special enrollment periods discussed above. For instance, the monthly Part B premium will increase by 10% for each 12-month period that a person could have had Part B coverage but did not take it. This increased premium will apply for as long as Part B coverage is in place.
- Know your Medicare enrollment “due date” and complete your enrollment on time in order to avoid paying higher premiums
- Price and compare Medicare Supplemental and Medicare Advantage insurance plans, which may reduce your out-of-pocket expenses
- Check if your existing doctors and hospital accept Medicare
- Consider using Part D (prescription drug) Medicare and supplemental coverage and price out policy options using any current prescriptions
- Do not drop your current health insurance coverage until you receive confirmation that Medicare and any applicable supplemental coverage is in effect
There are many moving parts you need to keep in mind when dealing with Medicare, and time is of the essence! If you want help understanding your specific situation and best options, contact a Round Table Wealth Management Wealth Advisor today.