More than 59 million Americans rely on Medicare to cover their health expenses in retirement, but some people are still confused about how the program works.
If you're one of them, you could overlook benefits you didn't know you had, or even be underprepared for expenses that Medicare doesn't cover. Here's a closer look at five of the most important things seniors should understand about Medicare.
1. It doesn't cover everything.
Medicare Part A (hospital insurance) covers visits to the hospital, surgeries, lab tests, and other in-patient services. Part B (medical insurance) covers outpatient care and some preventive services. Part D covers prescription drugs. There's also a Part C, which is essentially an alternative to Parts A and B purchased from a private insurer rather than the government.
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Among the different parts, Medicare covers a lot of ground, but there's also a lot that it doesn't pay for. Long-term care, dental care, and hearing aids are just a few of the common items not covered under Original Medicare (Parts A and B).
If you want coverage for these services, consider purchasing a supplemental insurance policy, like a Medigap policy or long-term care insurance. For dental coverage, you could sign up for a dental discount plan that helps you save on common dental procedures. It's also a good idea to have some extra savings of your own in case you need to purchase items like hearing aids that aren't covered by Medicare or other health insurance. A Health Savings Account (HSA) is a great place to save money for future healthcare costs, but you can only open one if you have a high-deductible health plan (HDHP).
2. It'll cost you, but how much depends on your income.
Medicare, like traditional health insurance, has monthly premiums, annual deductibles, and co-insurance. But the precise cost you'll pay depends on your income. Most people don't pay a premium for Part A. As long as you've worked and paid Medicare taxes for 40 quarters (10 years) of your life, you qualify for premium-free Part A. If you don't qualify, your premium is $232 if you worked between 30 and 39 quarters, and $422 if you paid Medicare taxes for less than 30 quarters.
Everyone pays a premium for Part B, but the cost depends on your income. For individuals earning less than $85,000 and couples earning less than $170,000, the 2019 Medicare premium is $135.50 per month. If your income exceeds these limits, your Medicare premiums could rise as high as $460.50.
Medicare Part D isn't as predictable. The premiums vary depending on the plan you choose, where you live, and your income. The average Medicare Part D premium in 2018 was just $34, though.
You'll have a $1,364 deductible in 2019 for Part A, and a $185 deductible for Part B. After you meet your Part B deductible, you must pay 20% co-insurance on any covered medical services. There's also co-insurance for Part A if a single benefit period exceeds 60 days. So if you have to be in the hospital for a couple of months, expect to pay some of the costs yourself above and beyond your deductible. For a complete overview of Medicare costs, visit Medicare.gov.
3. Medicare premiums are tax-deductible.
You can deduct some or all of your Medicare premiums when you file your taxes, which reduces your taxable income for the year and saves you money in tax. Premiums for parts B, C, and D are always tax-deductible, but you cannot deduct the cost of Part A premiums unless you're paying out of pocket. Taking advantage of these tax deductions can help you keep more of your own money.
4. You'll get some free preventive services.
Medicare Part B covers several preventive health services at no cost to you, including a yearly wellness visit, flu shots, cardiovascular disease screenings, and diabetes screenings. These free services can help you better monitor your health and make smarter choices for your future, so you don't end up paying for the long-term consequences of these health conditions.
5. Open enrollment is Oct. 15 to Dec. 7.
The annual open enrollment period is the time when you can make adjustments to your Medicare coverage and switch between Original Medicare and Medicare Advantage (Part C) plans. If you miss this deadline, you'll have to wait until next year to make those changes, so mark your calendar.
If you want to get the most out of Medicare, you have to understand what it does and doesn't cover. You'll also need to be prepared for the costs associated with it. Keeping these five things in mind will ensure you don't run into any unpleasant surprises with Medicare.
