Once you turn 65, you may be inclined to enroll in Medicare right away. In fact, you can actually sign up for Medicare up to three months before the month of your 65th birthday to ensure that you have coverage in place when you need it.
But you should know that Medicare may not be the wonderful program you expect it to be. Here are three big problems with Medicare you should know about before retirement so you can plan accordingly.
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1. It costs money just to get coverage
A lot of people assume that Medicare doesn't charge enrollees a premium. But that's only true, generally speaking, for Part A, which covers hospital care.
Medicare Part B, which covers outpatient care, charges a monthly premium that can rise from year to year. There can also be premiums associated with Part D drug plans and Medicare Advantage plans. It's important to factor these Medicare premiums into your retirement budget ahead of time.
2. There are no yearly out-of-pocket maximums
If you decide to enroll in original Medicare, as opposed to Medicare Advantage, you won't be subject to an out-of-pocket maximum each year. This means that a serious illness or extended hospital stay could lead to burdensome medical bills.
It's important to protect yourself from that scenario, and there are a couple of ways to do that. First, you could pad your retirement savings so you have more money to cover unexpected healthcare costs.
Secondly, you can buy a Medigap plan as soon you're eligible to help defray some of the out-of-pocket costs you might face as a Medicare enrollee. Also known as supplemental insurance, Medigap can pick up the tab for expenses such as:
- Inpatient deductibles for hospital stays under Medicare Part A.
- Daily coinsurance for extended hospital stays and skilled nursing care.
- Coinsurance for Part B services.
- Part B deductibles (for some Medigap plans).
3. There are services it won't cover
You might assume that once you're covered by Medicare, you'll have all of your health needs paid for, minus your cost-sharing responsibilities. But there are a number of key services Medicare won't cover at all. Some notable ones include dental care, eye exams, and hearing aids.
You should also know that Medicare will not pay for long-term care. If you end up needing a home health aide or assisted living, those are costs you'll have to bear yourself.
A good way to pay for services Medicare won't cover is to build up a health savings account (HSA) balance while you're working and reserve those funds for later. You can also use an HSA to pay for long-term care insurance premiums. And it's a good idea to put a policy in place to help cover the often catastrophic costs involved.
Medicare is a lifeline for many older Americans, but it's important to anticipate the costs you might face. Read up on Medicare ahead of time so you're aware of these and other drawbacks that could become a problem for you in retirement.
