As I wrote in last month’s Retirement Report, February marked a special anniversary for me professionally, 10 years as a Certified Financial Planner™ professional. March also marks a special anniversary, 17 years ago on St. Patty’s Day I completed my Series 7 exam to become an officially licensed advisor in the financial services industry. When I reflect on the many things I have learned and experienced, I really appreciate how fortunate I have been to be able to help people plan for what lies ahead. For many, retirement is within their sights and one of the major changes to their lifestyle will include participation in the Medicare program to receive health insurance benefits.
It is a good idea to begin to understand how you will receive medical care once the big day arrives and your health insurance is shifted away from your employer and to the federally managed plan. This month’s feature article The A, B, C, & D of Medicare is a good primer to help you understand the basics and the costs associated with participation in the program. Even if you consider retirement to be some distant dream, I am encountering many individuals who are helping their parents manage the costs and complexities related to the health care system.
Breaking down the basics & what each part covers.
Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover, and where they come from.
Parts A & B: Original Medicare. America’s national health insurance program for seniors has two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care, and nursing home care – but not for long and only under certain parameters. 1
Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $164.50 daily coinsurance payment may be required of you. 2
If you stop receiving SNF care for 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A. 2
Part B is medical insurance and can help pick up some of the tab for physical therapy, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings. 1
Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level. The standard monthly premium amount is $134 this year, but your Part B premiums will average $109 if you pay them out of monthly Social Security benefits. The current yearly deductible is $183. (Some people automatically receive Part B coverage, but others have to sign up for it.) 3
Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and more. To enroll in a Part C plan, you need have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums. 4
To say that not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (Oct. 15 – Dec. 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa; although, any such move is much wiser with a Medigap policy already in place. 5
How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance, and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You have to pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect. These plans no longer offer prescription drug coverage; in fact, they have been sold without drug coverage since 2006. 6
Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going. 7
Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications, and the website will do the legwork for you. 8
Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst; five stars being best) according to member satisfaction, provider network(s), and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings. 9
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – mymedicarematters.org/coverage/parts-a-b/whats-covered/ [2/14/17]
2 – medicare.gov/coverage/skilled-nursing-facility-care.html [2/14/17]
3 – medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [2/14/17]
4 – https://www.medicareinteractive.org/get-answers/medicare-health-coverage-options/medicare-advantage-plan-overview/medicare-advantage-basics? [2/14/17]
5 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html [2/14/17]
6 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [2/14/17]
7 – ehealthinsurance.com/medicare/part-d-cost [11/5/16]
8 – medicare.gov/part-d/coverage/part-d-coverage.html [2/14/17]
9 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [2/14/17]