If you'd like to make the most of benefits you're entitled to in retirement, and would like to spend as little as possible, too, then you should learn more about Medicare. After all, it's likely to be your key health-insurance program for a big chunk of your life. These smart Medicare moves can improve your life -- financially and otherwise.
No. 1: Learn when to sign up for Medicare -- it's critical
One of the most important things you should know about Medicare is when to apply for it -- because if you're late, it can really cost you.
You're eligible for Medicare at age 65, and can sign up anytime within the three months leading up to your 65th birthday, during the month of your birthday, or within the three months that follow. That's your seven-month-long "Initial Enrollment Period" (IEP). Miss it and you may face more-expensive premiums for the rest of your life. Specifically, your part B premiums -- which cover medical services, but not hospital services -- can rise by 10% for each year that you were eligible for Medicare, but didn't enroll.
If you fail to enroll during that period, you can still enroll during the "general enrollment period," which is from January 1 through March 31 of each year -- though that coverage won't begin until July, and the late penalty might apply.
Many people won't end up penalized because they didn't know about the deadline, though -- because if you're already receiving Social Security benefits as you approach 65, you'll likely be automatically be enrolled in Medicare. You'll know this has happened because you'll receive your Medicare card in the mail three months before your 65th birthday. The most common age when people start collecting Social Security is 62, and many people also start at 63 and 64, so the majority of retirees won't face this penalty peril.
You might also avoid the penalty and be able to skip the deadline if you're still working, with employer-provided healthcare coverage, at age 65, or if you're serving as a volunteer abroad. Such people will get a special enrollment period based on when they return, when they stop working, or when their employer-provided coverage ends.
No. 2: Plan to spend a lot on healthcare in retirement
Another smart move related to Medicare is not assuming that it will take care of the vast majority of your healthcare needs and costs. It probably won't. According to Fidelity Investments, a 65-year-old couple retiring today will spend, on average, a total of $245,000 out of pocket on healthcare. (That's an average, of course -- meaning you might spend less, or more.)
Medicare Parts A and B respectively cover hospital expenses and medical expenses, and they make up what is now often referred to as traditional or "original" Medicare. Part D offers prescription drug coverage, including insulin supplies.
Original Medicare covers inpatient hospital care, skilled nursing-facility care, hospice care, some home healthcare providers, some lab tests, certain doctors' services, outpatient care, preventive services, durable medical equipment (such as blood sugar monitors and home oxygen equipment), mental-health care, and limited prescription drugs. Overall, it aims to cover "medically necessary" services needed to diagnose or treat you, as well as preventive and early detection services, such as certain vaccines and screenings for cancers and other conditions.
Original Medicare generally doesn't cover vision, hearing, or dental expenses, as well as basic home health help. Alternative medicines or treatments, such as acupuncture, acupressure, homeopathy, or chiropractic care, are generally not covered, nor is care you receive while outside the U.S. Coverage through Part D does not include weight-loss pills, erectile dysfunction treatments, fertility drugs, or over-the-counter medicines.
As you plan and save for retirement, be sure to factor healthcare costs into your future budget. Even for the covered services above, deductibles and 20% co-pays will generally apply, and those costs can add up.
No. 3: Learn about Medicare Advantage plans
Ever since 1995, though, you've had a new option in the Medicare world: The Medicare Advantage plan. It's sometimes referred to as Part C, and you can opt for such a plan instead of the "original" Part A and Part B combo. (It's not a permanent decision, either. At least once a year, you can switch from one to the other.)
Medicare Advantage plans are administered by private insurers such as Blue Cross Blue Shield and UnitedHealth Group, but are regulated by the U.S. government. Each must offer at least as much coverage as original Medicare's Part A and Part B, and in order to attract customers, many offer more, such as hearing, vision, and/or dental care. Most include prescription drug coverage, too.
While original Medicare doesn't cover healthcare provided outside the U.S., some Medicare Advantage plans do. While original Medicare will often have you footing 20% of many bills, a Medicare Advantage plan might charge you a low copay per doctor visit or service. Medicare Advantage plans also have out-of-pocket limits, beyond which the plan will pick up all your healthcare costs for the year. In other words, they feature a spending cap for the customer, so that you know the most you'll have to pay. In contrast, your costs can, theoretically, be unlimited with original Medicare.
Original Medicare lets you see any healthcare provider who accepts Medicare, but Medicare Advantage plans will typically limit you to a network of doctors -- though these networks are sometimes very big. If you think you might be interested in a Medicare Advantage plan, see which ones are offered in your area.
No. 4: Get fit and stay fit
Finally, consider this a very smart Medicare move: getting healthier than you are. It can be an unwelcome task, if you're not fond of vegetables and exercise; but by being healthy, you can reduce the likelihood of suffering from various costly (and unpleasant) conditions, and you will probably live longer, too.
According to a 2014 study from the Insured Retirement Institute, "A 65-year-old male in excellent health can expect to live to age 87, while the same male in poor health (e.g. high blood pressure, high cholesterol, and tobacco use) has a life expectancy at age 65 of approximately 81years." For women, excellent health offers a life expectancy of 89 and poor health only 84 years. That's five or six extra years of life!
It's good to look forward to being covered by Medicare, or to already be enjoying its services. To get the most for your money, though, learn more about your options, and the smart Medicare moves you can make.