Learning the Basics of Medicare

No matter when you ultimately decide to retire, Medicare eligibility begins at age 65. For most of those planning for retirement, it is assumed that Medicare will provide for all medical needs, and therefore you don’t need to worry about this aspect of your budget.

The truth is somewhat less optimistic; while Medicare is indeed a fairly comprehensive program, it is not free and does not cover everything you might need. For the average retiree, Medicare covers about 60 percent of total healthcare expenditures. That’s significant, but of course it means you need to make a plan for the other 40 percent of your costs.

Why does coverage only amount to about 60 percent of your expenditure? Remember, you’re still responsible for co-pays, deductibles, and co-insurance. Also, since Medicare doesn’t cover all necessary medical services, you might have to pay for all of those expenses yourself.

The good news is that within Medicare, you have many options. Each year, during the Annual Election Period from October 15 to December 7, you can make changes to your Medicare plan(s). Here are just a few of the primary points to consider.

Original Medicare. Original Medicare consists of Parts A and B. All you do is enroll in Medicare upon your 65’th birthday, and you are automatically covered by Part A. Part B, on the other hand, is optional and you must elect to enroll in it.

Part A refers to hospitalization coverage, while Part B pays for doctor visits and certain other services. Part A is free for all, but Part B comes with a premium.

Supplemental Insurance. Many people who enroll in Parts A and B will also elect supplemental coverage called Medigap. In exchange for a monthly premium, Medigap pays for your co-payments, deductibles, and some types of coinsurance. Medigap premiums are usually lower if you sign up when you first enroll in Medicare.

Medicare Part D. This option plan helps to cover prescription drug costs.

Medicare Advantage. Medicare Advantage, also called Part C, refers to healthcare plans offered by private insurance companies which are approved and regulated by Medicare. You can opt for an Advantage plan rather than Original Medicare, and combine Parts A and B into one plan. Some Advantage plans also include Part D coverage. Dental and vision care might be offered (these are not normally provided by Medicare).

So as you can see, you have many options with regard to Medicare. Some might be a better fit for your healthcare budget, so it makes sense to investigate all of your options before retirement. Then, during each year’s Annual Election Period, review your choices and compare new plans to make sure your Medicare plan continues to suit your needs.
As you’re planning your retirement budget, come see us so that we can help you calculate all potential costs. Together we can make an income plan that satisfies your lifestyle needs and budget.