Today, let's discuss Medicare. Before age 65, many of us rely on private insurance or employer-sponsored health plans to cover our healthcare needs. These plans are usually straightforward: we visit the doctor, show our insurance card, get treated, and the insurance pays (minus the deductible, of course!). Things can get a little murky when we turn 65 and are at the doorstep of retirement.

How to know if you are fully covered—and safe from unpleasant financial surprises!

At 65, the government provides health insurance through Medicare, designed to support healthcare needs in retirement. However, Medicare is divided into Parts A, B, C, and D, each with unique coverage. How do you sign up for these parts, and how can you ensure you’re fully covered for medical expenses, free from the worry of unexpected bills in retirement? Medical costs are a big part of retirement planning, so it’s essential to know your ABC’s (and D) of Medicare.

Medicare Part A - When to enroll and what you receive

Enrollment in Medicare Part A starts during a six-month window (three months before or after your 65th birthday) through the Social Security Administration at www.medicare.gov. Failing to enroll on time could mean penalties. Medicare Part A, which is free if you’ve paid Medicare taxes, covers hospital stays, limited skilled nursing facility care, some home health care, and hospice. However, it doesn’t cover long-term care—a key distinction to remember.

Medicare Part B – It’s automatic, and here’s what it covers.

Part B automatically kicks in at 65 unless you choose to stay on an employer health plan (for employers with at least 20 employees if you’re still working). Medicare Part B covers doctor visits, outpatient care, medical devices, preventive services, and some home healthcare. Monthly premiums for Part B start at $174.70 in 2024, but they increase with income, up to $560.50. Since premiums are based on income from two years prior, a sudden income drop (due to retirement or a spouse’s passing) can feel burdensome. If this happens, you can request a premium reduction with Form SSA-44.

What is a Medigap plan, and do you need one?

Even with Medicare parts A and B, there are still gaps in coverage which can lead to (financially) painful consequences like deductibles, co-pays, and extended hospital costs. To cover these gaps, there are Medigap Plans. If the Medicare alphabet did not confuse things enough, there are Medigap plans with Benefit classifications A-N to choose from, each with varying levels of coverage.  These plans are administered by private companies and are bound by government rules, because they fill in the coverage gaps of Medicare part A and B.

Here’s what Medicare Advantage (formerly Part C) offers.

Medicare Advantage Plans (formerly Part C) are private, government-regulated plans that provide all Medicare Part A and B benefits, plus extras like prescription drugs, dental, vision, and hearing coverage. To explore these plans and find one that suits your needs, visit www.medicare.gov.

Medicare Plan D – Drug coverage (but watch out for the Donut Hole)!

If you’re not opting for Medicare Advantage, Medicare Part D is designed for prescription drug coverage. While it helps cover drug costs, be aware of the “donut hole” – a coverage gap that temporarily limits benefits after you’ve spent $4,660 on prescriptions in 2024, until you reach an out-of-pocket total of $7,400. After that, catastrophic coverage takes over. You can customize your drug coverage on the Medicare website.

Medicare questions? We’re here to help.

These are the basic of your ABC’s (and D) of Medicare. There are many combinations of coverage to consider, and everyone is unique in their coverage needs in retirement. Fortunately, the Medicare website is available to help navigate these coverages, but it can also be useful to have professional help. For additional guidance we are happy to offer a free consultation, please visit us at www.F5FP.com.

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