Medicare makes it possible for millions of older Americans to tend to their health and treat medical issues. But since the program is complex and filled with rules, it's easy to end up in the dark. That's not a good thing if you're nearing retirement age and will soon be eligible to enroll. Here are a few key things everyone should know about Medicare and how it works.
1. There's a cost involved
One of the biggest Medicare myths you might come across is that the program is free for seniors. But that's largely untrue.
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Medicare Part A, which covers hospital care, generally does not charge a monthly premium. But there's a premium you'll have to pay for Part B, which covers outpatient services. Your Part D drug plan will also have a cost.
In addition to premiums, there are other expenses you might face as a Medicare enrollee. Each time you're admitted to the hospital, for example, there's a deductible you'll need to meet under Part A. And under Part B, you might face coinsurance costs for the services you end up needing. Your Part D plan, meanwhile, might stick you with expensive copays, depending on the medications you take.
It's important to anticipate these costs and plan for them. In fact, if you have funds in a health savings account (HSA), aim to reserve them for retirement so you have an easier time covering your Medicare expenses.
2. There's a penalty for enrolling late
Medicare eligibility begins at age 65, but your initial enrollment window spans seven months. It begins three months prior to the month of your 65th birthday and ends three months after that month.
You don't have to sign up for Medicare during that initial window if you're covered by a qualified group health plan at the time. And you technically don't have to enroll, even if you're not covered by a qualified plan.
However, you should know that there's a penalty for a late Medicare enrollment. For each 12-month period you're eligible for coverage but don't sign up, your Part B premiums will incur a 10% surcharge. That could make the cost of your coverage even more expensive, so pay attention to when you're supposed to enroll.
3. There are services that aren't covered
Medicare covers a host of procedures, diagnostic tests, and preventive care measures, like screenings and vaccines. But there are a number of important health services it won't pay for.
Medicare will not cover the cost of dental cleanings, eye exams, or hearing aids. These are all essential services that relate to your general health, so it's important to make sure you're able to pay for them out of pocket. Again, an HSA might come to your rescue here, so aim to carry some funds into retirement if that option exists.
4. There's an alternative to explore, but it's far from perfect
Clearly, Medicare isn't a perfect program. It can be costly, and there are commonly needed services it won't even pay for.
If you'd like to explore an alternate means of health coverage, you can look into signing up for Medicare Advantage. Medicare Advantage plans are offered by private insurers and commonly cover services like dental care and eye exams. In fact, many Advantage plans offer a host of supplemental benefits beyond what original Medicare provides, like meal delivery services and fitness center allowances.
In some cases, Medicare Advantage can be more cost-effective than original Medicare -- but definitely not always. And, with an Advantage plan, you may find that it's hard to get care because you're limited to a specific (and sometimes very narrow) network of providers. If you're inclined to choose Medicare Advantage over original Medicare, make sure to compare your plan options carefully and do plenty of research before making a decision.
It's important to do what you can to take care of your health in retirement. The more you know about Medicare, the easier it might be to plan for the expenses you might face. That way, you'll hopefully be less likely to end up in a situation where you're forced to skimp on the services you need due to cost.
