One of the important components of retirement planning is health insurance. In fact, we see many individuals waiting until age 65 to retire to avoid paying large private health insurance premiums prior to Medicare. But once you are turning age 65, how do you navigate the many options surrounding Medicare? We hope this brief summary of the different parts of Medicare, along with suggestions for available resources, are helpful to you as you begin the process of signing up.
Summary of the Different Parts of Medicare:
Part A
Medicare Part A is the first part of Original Medicare and it provides hospital insurance coverage. This coverage includes inpatient hospital stays, care in skilled nursing facilities, hospice care and some home health care. Please note that the coverage for nursing facilities, home health care, etc. is under certain conditions for a limited time. You generally don’t pay a monthly premium for Medicare Part A as long as you or your spouse paid Medicare taxes while working. Please visit Medicare.gov for Part A premium pricing.
Part B
Part B is the second part of Original Medicare and it provides medical insurance. Part B covers doctor’s visits and things such as outpatient care and preventive services. You have a 7-month window to enroll in Part B beginning the three months before the month that you turn age 65. Part B carries a monthly premium that can either be paid out-of-pocket or automatically deducted from Social Security benefits. If you do not enroll within the 7-month window, you may have to pay higher premiums.
Part C
As an alternative to Original Medicare, individuals in many states may have the option of purchasing a Medicare Advantage Plan which is Part C. Part C is provided through private insurers. These plans are not currently offered in Alaska.
Part D
Part D is optional and can be purchased either as a standalone plan or in conjunction with Medicare Advantage plans. Part D is offered through private insurers and covers prescription drugs. There are multiple plans to choose from that cover different drugs. You should look at the prescriptions you are taking to determine which plan is best for you. Plans can change from year to year (with covered medicines changing) so it is important to review your plan annually.
Supplemental Medicare (Medigap)
Supplemental insurance can be purchased through private companies to cover the gaps of Parts A and B, such as coinsurance, copayments, and deductibles. Some Medigap policies will offer medical care for when you travel outside the U.S. which is another gap in Original Medicare. There is a 6-month window to enroll in a supplemental plan after reaching age 65.
Resources:
The local Medicare office has consultants to help you review and understand your options, benefits, and alternatives.
Alaska’s Medicare Information Office
907-269-3680
400 Gambell St., Suite 303
Anchorage, AK 99501
http://dhss.alaska.gov/dsds/Pages/medicare/default.aspx
The summary above was adapted from Medicare.gov and is another resource for learning all about Medicare, what it covers and the associated costs.
Medicare and Your Personal Financial Plan
Once you have determined what Medicare benefits are appropriate and what the related costs are, we like to incorporate those expenses into your retirement planning. We find that Medicare expenses are rising at a rate higher than inflation on standard consumer purchases (CPI). We budget for Medicare/health care expenses separately in your plan as a result. We review the Medicare plans and evaluate the rate of health care inflation each year to stay current in the trends and plan design issues. It is our job to ensure you have a well thought out roadmap for a comfortable and confident future.
Kim Butler, CFP®
Financial Advisor
8/29/18
