Turning 65 here in America can be an exciting time. Chances are that you are planning to retire soon and are looking forward to time for travel, visiting family and spending time with friends. However, there is one part about turning 65 that is not so exciting, and that’s figuring out how your Medicare benefits work and what they will cover.
Most of us spend our careers working for companies that choose our insurance options for us. Then when we finally reach that golden age, we suddenly must figure out a national healthcare program. What’s worse is that it isn’t free, and it doesn’t cover everything, so we also must figure out how to cover those gaps.
Fortunately, there are some specific steps we can take in the six months prior to turning 65 that can make the transition easier.
Learn the Medicare Parts
Medicare has two Original parts, and you’ll sign up for these at the Social Security office. Part A covers our hospital benefits and Part B covers our outpatient needs. These two parts are necessary if Medicare will be our primary coverage.
Each Medicare beneficiary can then decide whether they want to sign up for Parts C and D. Part D is an optional drug coverage program. You can enroll in these voluntary benefits to help you manage the costs of your prescriptions throughout your retirement. I’ll discuss Part C further below.
Plan to spend an hour reading up on what your Original Medicare benefits cover. You can find great information online at Medicare.gov that explains the various types of healthcare services that are covered. There are also several great preventive care services that will cost you nothing, so you’ll want to be aware of those.
Estimate Your Costs
Many people believe that Medicare is free and feel shocked and dismayed when they learn that there are costs for which they’ll need to pay. Although most people pay taxes during their working years to pre-pay for Part A benefits, the Part B benefits and Part D benefits have monthly premiums that you’ll need to pay.
In 2019, Medicare Part B will be $135.50 for most people. However, around 5% of Medicare beneficiaries pay significantly more for Medicare due to higher incomes. You can find a chart that details Medicare costs on Medicare’s website. Use the chart to look up your income as filed on your recent tax returns to determine what you can expect to pay for Part B once you sign up.
Part D drug plans vary in cost. There are inexpensive plans starting around $15/month in most states and then there are plans that cost well over $100/month. You can use the Plan Finder Tool on Medicare’s website to find a drug plan that covers the medications that you are most important to you at the lowest costs. Note that people in higher income brackets may also pay more for Part D, just like they do for Part B.
Evaluate your Options for Gap Coverage
Medicare has deductibles, copays, and coinsurance that you’ll pay for as you use various healthcare services. Part B also only covers about 80% of your outpatient expenses. No one wants to get stuck paying 20% of things like surgeries or chemotherapy, so it’s important to enroll in additional coverage to fill in those gaps.
There are really only two main routes you can go with this. The first is to buy a traditional Medicare supplement that pays after Medicare to help cover the expenses that would normally be your responsibility. These plans let you see any Medicare doctor in the nation with no referrals required. There are ten standardized plans to choose from, ranging from coverage that covers all the gaps to coverage that only covers after you’ve met a certain deductible.
These plans do not include outpatient drug coverage, so you would purchase a standalone Part D plan to go alongside your supplement policy.
The other route you can choose is to enroll in a Medicare Advantage plan. The Medicare Advantage program is also referred to as Part C of Medicare. If you opt for Part C, you are agreeing to get your Medicare-covered services through a private insurance company. Many of these plans have networks, so it’s important to make sure your physicians are in the plan’s provider network before you join.
Medicare Advantage policies typically have less expensive premiums than Medigap plans and many of them also include Part D coverage built in. However, you’ll have some spending on the back end for copays and deductibles as you use your benefits.
Do some reading in your spare time to learn more about how each type of coverage works so that you can choose the route that best fits your individual needs.
Plan Your Enrollment
Your Initial Enrollment Window for Medicare begins three months before your 65th birthday. This is the time when you should sign up for Medicare Parts and B if you won’t have any other coverage. Once you receive your Medicare card in the mail, then it’s a good time to consult with a Medicare insurance broker who can guide you through the plan options in your area and help you enroll in the supplemental coverage that you desire. Most people set up their supplemental benefits to star the same day that their Medicare benefits begin.
Some individuals these days, however, work past age 65. If you work for an employer with more than 20 employees, your group health coverage there will be your primary insurance and Medicare will be secondary. In this case, you can decide to delay enrollment into Parts B and D if you’d like to save on those premiums while you are still working. Later when you retire, you’ll be given a Special Enrollment Period to join Part B and a guaranteed issue window to enroll in a Part D drug plan if you so desire.
Getting all these steps accomplished in the few months before you turn 65 will take the weight of the world off your shoulders and give you confidence in your coverage so that you can go on and enjoy your retirement years.