One of the most important decisions most retirees will make is what to do about Medicare, the government-sponsored healthcare program for persons age 65 and older. This is so for many reasons, but perhaps the most urgent one is the peace of mind that comes from knowing that your medical and other healthcare needs are covered during your retirement. After all, concern about healthcare costs consistently ranks among the top worries of those approaching retirement.
Maybe a good place to start is by asking: What is Medicare? Basically, Medicare consists of four parts:
- Medicare Part A (“Basic Medicare”), which covers most hospital costs and is free for most enrollees;
- Medicare Part B, which covers outpatient costs, doctor visits, and most diagnostic tests, for which you will pay a monthly premium based on your income;
- Medicare Part C (“Medicare Advantage”), which is offered by private insurers subject to government oversight and can replace many of the benefits offered by Medicare Parts A, B, and (usually) D, in addition to other coverages not offered by Medicare;
- Medicare Part D, which covers your prescription drugs, for which you pay a monthly premium that varies by plan and is provided by private companies who are contracted through the government.
In addition to these aspects, you will also hear a lot about “Medigap” or Medicare supplement plans. These are offered by private insurers—not the government—and combine aspects of Parts A and B, and we’ll say more about them below.
You should sign up for Medicare during your initial enrollment period, which begins three months before your 65th birthday and extends three months afterward. If you fail to sign up during this period, you could be subject to penalties later, when you do sign up. There is an exception to this rule for persons 65 or older who have “creditable coverage” that offers the same or better benefits than Medicare, usually from an employer with 20 or more employees or various government-sponsored plans.
Should you consider Medicare Advantage or Medigap coverage instead of Medicare? Well, that depends on the plan you’re looking at and your personal circumstances. For one thing, in order to obtain a Medigap plan, you must be enrolled in Medicare Parts A and B. Remember, this is a program offered by private insurers, and though it must meet certain government-required standards, you will pay a monthly premium for the plan. What most Medigap plans offer in addition to Medicare is coverage of co-payments, deductibles, length-of-stay charges, and other out-of-pocket costs not covered by Medicare, which can easily add up to several thousand dollars per year, in some cases. Medigap typically does not cover prescription drug costs.
For any of the non-government plans above requiring a premium—Part C (Medicare Advantage), Part D, and Medigap—it is important for you to compare plans and benefits before you sign up (you don’t have a choice about your Part B premium; it is established by the government according to your income). You’ll also want to check with your primary care physician to make sure that they accept Medicare (93% of them do). If you are considering Medicare Advantage, you’ll also want to make sure your doctor is “in-network” for your particular plan; not all of them are.
As a fiduciary financial and wealth advisor, Empyrion Wealth Management is committed to helping our clients make the best decisions possible for their unique situations, and this includes providing dependable information and sound advice about retirement healthcare choices. To learn more, click here to review our helpful checklist, “Medicare: Making the Right Calls.”
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