Source: Medicare.gov
Medicare is a key component of financial security for older Americans, with the program covering the vast majority of costs for much of the healthcare you'll need after you turn 65. Yet even though most people automatically qualify for Medicare as a result of their work history, there are still some things you need to know before you enroll for Medicare in order to take maximum advantage of the benefits you've earned.
Unfortunately, Medicare is a fairly complicated program. To help simplify it somewhat, though, it helps to boil down Medicare's many benefits and costs to their bare essentials. Below you'll find five things you should read before you make a Medicare decision that could have huge implications for your healthcare for the rest of your life.
1. What you pay for and what you get with Medicare.
Medicare is complicated in part because it has multiple parts. Part A hospital coverage is free for most Medicare participants, with only those who didn't pay Medicare taxes during their careers paying premiums of as much as $407 per month. But for Part B medical coverage, Medicare charges a base premium of $104.90 per month, with higher amounts for upper-income earners ranging all the way up to $335.70 per month. Prescription drug plans under Part D have differing costs depending on what the plan covers.
Source: Medicare.gov
Alternatively, signing up for a Medicare Advantage plan, also known as Part C, involves consolidating all the hospital, medical, and drug coverage options into a single policy. Medicare Advantage plan costs also vary by provider and level of benefits included.
Regardless of which option you pick, you'll also pay copayments and deductibles in varying amounts with your Medicare coverage. In some cases, you have no control over those amounts, but some plan options let you tailor your coverage to meet your financial needs.
2. The right time to sign up for Medicare.
You can sign up for Medicare starting three months before you turn 65, and initial enrollment lasts until three months after you turn 65. That time period is important because if you enroll late, you can owe penalties. For instance, late enrollees for Part B have to pay 10% higher monthly premiums for every year by which they missed the initial deadline.
Those who work beyond 65 can qualify for a later deadline as long as they have coverage at work. Even then, though, you have to enroll within eight months of the end of that coverage to avoid potential penalties.
3. Filling the gaps in Medicare is important.
Medicare only covers a portion of your healthcare costs. In order to help with the rest, many people buy Medicare Supplemental insurance, also known as Medigap coverage.
Medigap policies typically involve making set monthly premium payments in exchange for the insurer paying much of the cost that Medicare doesn't cover. By paying all or part of coinsurance amounts, deductibles, and even copayments in some circumstances, Medigap coverage can make your healthcare expenses even more predictable in retirement.
Source: Medicare.gov
4. Beware of what Medicare doesn't cover.
Even with Medigap coverage, there are certain types of expenses that Medicare just doesn't cover. One of the biggest is long-term nursing home or assisted living care, with Medicare only covering a limited period of skilled nursing care in which the patient makes substantial progress toward rehabilitation and restoration of their health. Those who need nursing-home or other care for daily activities like eating and hygiene can't expect Medicare coverage to pay for those costs. Those who anticipate these types of expenses should consider a long-term care policy that's designed to cover these costs.
Similarly, Medicare generally doesn't cover costs of routine dental care, eye exams, dentures, or hearing aids. Those will typically remain your responsibility.
5. Know your options if you can't pay for Medicare.
Those with limited income and financial resources can qualify for a variety of different aid programs. Medicaid is the largest, as the joint program between federal and state governments can cover not only costs for certain coverage but also uncovered medical costs like nursing home care. Other programs are more tailored to particular needs, including the Medicare Savings Programs for help with premiums, deductibles, and copayments. Combined with other programs like the Supplemental Security Income area of Social Security, Medicare helps those with less money find ways to cover the costs of getting the healthcare they need.
Making the most of Medicare is crucial to give yourself as much financial flexibility in retirement as you can get. By thinking about these key issues before you file for Medicare, you'll be in a much better position to make the best use of the Medicare program to support your healthcare needs in retirement.
