Medicare can be difficult to understand, not only for those initially eligible for the benefit but for Medicare beneficiaries who have been enrolled for years already. It can almost seem we are inundated with Medicare-related advertisements at the end of each year during the open enrollment period for certain products but do we really have a good understanding of the program overall? Let’s take a look at some of the aspects of Medicare that often need clarification.
What is Medicare and What does it cover?
Medicare is a federal program that provides health insurance to those over 65 and with certain disabilities. Although Medicare does not cover all medical expenses for those enrolled, there are optional products that can be used in conjunction with Medicare that may be a fit for some. There are four different parts of Medicare:
Part A is Hospital Insurance. Services include inpatient care, skilled nursing, and hospice. (Medicare does not cover long-term care.)
Part B helps pay for doctor visits, outpatient care, some preventive services and durable medical equipment.
Parts A and B together are “Original Medicare.” They are listed on your Medicare Card and offered directly from the federal government. Some using Original Medicare often purchase Supplement or “Medi-Gap” plans from private insurers.
Part C is Medicare Advantage, often “MA” or “MAPD” for “Medicare Advantage with Prescription Drugs.” They are approved by Medicare but offered by private insurance companies. Although Advantage plans must cover all the benefits of Original Medicare, specific costs and coverage vary substantially based on your service area. You can view all plans in your area at www.medicare.gov. Those enrolled in Medicare Advantage may not simultaneously own a Medicare Supplement or “Medi-Gap” plan.
Part D covers prescription drugs. Like Part C plans, they are offered by private insurance companies. A part D plan is a stand-alone prescription drug plan, although most Medicare Advantage plans (Part C) also include prescription drugs. This can be a bit confusing, but you’ll only ever get your drug coverage from one or the other since you can’t own an Advantage plan with prescription drug coverage and a stand-alone drug plan at the same time.
There are benefits that Parts A and B do not cover:
- Long-Term Care (Certain individuals may receive coverage through Medicaid depending on their state and specific financial circumstances.)
- Most Dental Care (Only certain medically necessary care is covered by Original Medicare but some advantage plans will provide routine care.)
- Eye Exams or Prescription Lenses
- Cosmetic Surgery
- Hearing Aids and Fitting Exams
- Routine Podiatry (Foot Care)
You can either opt to pay for these services directly if using Original Medicare or select a Medicare Advantage plan that offers some of the services. (Medicare Advantage plans must offer all Medicare Covered benefits included in parts A and B, although many offer additional services as well.)
How much will my premiums be?
Most enrolled in Medicare don’t pay a premium for Part A. Part B will require a premium, which can be increased depending on what your income was two years ago and adjusted each year for those making above a certain threshold. Part C (Medicare Advantage) and Part D (Prescription Drug) plans have premiums that vary based on the plan selected, although some Medicare Advantage plans have a zero premium. (Check available plans and premiums for your service area at www.medicare.gov.) Those receiving assistance from either Medicare or “extra help for prescription drugs” may have lower premiums or copays.
Do I have to enroll if still working?
Those who are still working or otherwise have “credible” coverage can enroll in parts B and D later without paying a penalty for doing so. Those without a valid exemption who choose to delay enrollment in parts B or D will pay an increased amount for having delayed their enrollment.
Is Medicare Enrollment Automatic?
Not always. If you are over 65 and enrolled in Social Security you will automatically be enrolled, although if you are opting to delay enrollment in Social Security beyond 65, you will want to enroll in Medicare during the three-month window prior to eligibility at age 65. Delaying enrollment beyond this point without an exemption (for those still on an employer plan, for example) may result in increased costs.
Can I continue to contribute to my HSA?
Once enrolled in Medicare, you will no longer be able to contribute to your Health Savings Account (“HSA”) although you will be able to use your existing balance to cover some premiums and copays.
We Can Help
Understanding Medicare can be challenging and we’d like to offer ourselves as a resource. We’ve helped many clients develop a strategy for their health care needs in retirement and can assist in planning to meet your goals. Pure Financial Advisors can help you with all of your financial planning and retirement needs.