Nov 21, 2017

What Every Retiree Should Know

By Byron Ellis

Planning a big party for your 65th?

Well, while you’re thinking about what you want to do and where you want to go, make sure you start thinking about Medicare, because it’s finally time to sign-up.

Not sure where or how to get started?—then let’s clear that (and a few other things) up right now, because there is lots to know.

Medicare has many moving pieces

The way politicians and pundits talk about Medicare on TV, you might think it’s just one thing—a single government entity or program. But it’s not. It’s actually a multi-dimensional, four-tiered program, creatively labeled A, B, C, and D. (No, seriously, it’s really called Medicare A, Medicare B, Medicare, C, and Medicare, D.)

Here’s how the independent parts breakdown:

  • Part A – BIG things

Covers medical costs related to things like extended hospital stays or residency in a nursing care facility. It also covers any skilled nursing care or therapy required following discharge from the hospital (however this coverage is limited to 100 days).

  • Part B – Medium things

Need to go to the doctor? Undergo a procedure at an outpatient clinic? Buy a new knee brace? This is where Medicare B comes into play. From labs to x-rays to wheelchairs, Medicare B has you covered so long as the expense is either preventative or determined “medically necessary” by a physician.

  • Part C – A Private Path

Also referred to as “Medicare Advantage,” Medicare C is your avenue to receiving Medicare A and B through a private health insurer—provided that insurer has been approved by the federal government. That last bit is really important to note, so here it is again: not every private insurer is compatible with Medicare C.

  • Part D – Drugs

The fourth and final piece of the Medicare puzzle, Part D is exclusively for covering the cost of prescription medication—from statins to anti-arthritics and everything in between. Having said that, not every prescription is covered under Part D, which means it’s your responsibility to see if the drugs you need are covered before signing up.

Determining Your Medicare Eligibility

Are you a citizen of the United States? Are you 65 years old? Congratulations. You’re covered. You’re also covered if you hold a green card (Permanent Residency) and are 65. Now, if you’re NOT 65 years old, you still may be eligible for Medicare, but there are additional hurdles to clear.

To see what it takes to sign up for Medicare before the age of 65, click here.

Signing Up for Medicare

Just because you’re eligible doesn’t mean you’re enrolled (this is where Medicare can get a little tricky).

Signing up isn’t very cut and dry—it all depends on which part (A, B, C, or D) you’re signing up for, when your birthday is, and whether or not you (or your spouse) is still working for an employer who offers group healthcare. I’ll give you the high-level overview below, but for the full breakdown, check out the official Medicare.gov website.

Applying for Part A, Part B, or Part C

Enrollment starts 3 months before your 65th birthday. So, like I said earlier, while you’re thinking about those big birthday plans, think about completing your enrollment. Enrollment remains open until 3 months after your 65th birthday.

If you miss this 6-month window, you can still opt-in, but you’ll have to wait until the General Enrollment Period which runs from January 1st until March 31st.

The same rules that apply for Part A, apply for Part B and C, with one exception—if you miss your enrollment period for Part B or Part C, you’re on the hook for a 10% late-enrollment penalty when you eventually do sign up.

Applying for Part D

The enrollment window for Part D mirrors the enrollment period for Parts A, B, and C. However, Part D has its own, unique late-enrollment penalty. The penalty is calculated by multiplying 1% of the "national base beneficiary premium" (which is $35.63 in 2017) by the number of full, uncovered months you didn't have Part D or creditable coverage.

This penalty—whatever it ends up being—is then added to your monthly Part D premium. If you are a little confused, it is ok. Like I said, this is not so cut and dry.

How Much Medicare Actually Costs

(Unfortunately, the costs of Medicare C and D are too variable to accurately estimate so, in this section, we’ll focus exclusively on A and B.)

The monthly premium for Medicare Part A varies, ranging from roughly $220 to $400 depending on when you enroll, and how long you’ve been paying Medicare taxes (however most Americans won’t actually need to pay the premium for Medicare A).

Medicare B, however, is a bit more nuanced.

The listed “Standard Premium” is only $134, and it can get even lower. By paying for Medicare B with your Social Security benefits, that monthly premium drops to $110 on average. Having said that, if you’re a high-earner (still working), you can forget about that low-cost premium—your monthly liability could be more than $400.

Let’s start with the deductible which is $183. No matter your monthly premium, this annual deductible must be met before Medicare will cover any expenses. Once met, Medicare generally operates on an 80/20 split, where the federal government picks up 80% of the cost (though this percentage can be higher or lower depending on your individual circumstances).

The Wrap-Up

Well, there you have it, Medicare in a nutshell. If u want to learn more about Medicare (and retirement planning in general) now is a great time to reach out to the team at United Capital Financial Life Management. We are more than happy to talk to you about your life today, tomorrow, and well into the future.

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