Having a solid understanding of Medicare is essential for planning your retirement. Everyone is going to need health insurance at some point in their lives, either independently or through an employer. But Medicare is complicated, and mistakes can happen, some of which could cost you for the rest of your life.
As retirees get older, their medical needs increase and become more expensive. It's important to consider all your options to ensure you get the appropriate coverage for your specific healthcare needs.
Timing is important
When considering your Medicare coverage options, timing is everything. If you don’t understand the rules, you could receive lifelong penalties. Medicare isn't based on age, but rather on eligibility. If you retire before your 65th birthday, you will need to plan for medical coverage between the date you lose insurance through your employer and the date you become eligible for Medicare. Many people who were covered by health insurance through their workplace often underestimate how expensive health insurance will be until Medicare coverage starts.
There are many different enrollment periods to be aware of. The main one you will hear about is the annual enrollment period, or AEP. This begins Oct. 15 and runs through Dec. 7. During this time, those who are already enrolled in Medicare can evaluate their current plan and make any necessary changes for the next year. During this timeframe, retirees can make unlimited changes which will go into effect Jan. 1 of the next year.
A second enrollment period falls between Jan. 1 and March 31. This is known as the Medicare open enrollment period, or OEP. During this time, anyone who is enrolled in a Medicare Advantage plan can either drop the plan or make changes to their plan. In contrast to the AEP timeframe, those who are enrolled in Medicare Advantage plans can make only one plan change during this time.
Contrary to popular belief, Medicare is not free. There are certain costs associated with each plan. When you first become eligible for Medicare, you have a few options to help determine what is best for your specific situation. The first step is choosing between Original Medicare or Medicare Advantage. Original Medicare plans include Part A, or hospitalization coverage and Part B, which is medical coverage; this could include doctor services and outpatient care. If you choose Original Medicare, this will cover 80% of your bills, leaving you with a 20% cost exposure.
Adding Medigap to your coverage allows you to pay a set price per month with very little cost for your service. Medigap is extra insurance that you can buy to help pay for out-of-pocket costs in Original Medicare. You can go to any doctor or hospital in the country as long as they accept Medigap, no referrals are needed. These plans do not come with prescription coverage, so you also have the option to add Part D, which will cover that. This is a great choice for retirees who have an extensive medical history or have any upcoming surgeries planned.
Medicare Advantage plans have no monthly premiums. Instead, you will pay copays as you need certain services. These plans also cover things that Original Medicare does not cover, like vision, dental and over-the-counter health products. Medicare Advantage plans can have lower out-of-pocket costs than Original Medicare.
However, typically you will be limited to in-network doctors and facilities. These medical plans are called health maintenance organizations (HMO) and preferred provider organizations (PPO). Each plan will determine which network of doctors and hospitals accept your plan.
When you renew your plan every year, make sure to check and see if your doctors are still participating in your plan or accepting your plan. Medicare Advantage is popular with retirees who do not have many medical issues or upcoming doctor appointments and are in good health.
Don’t do it alone
Medicare can be a confusing topic for many entering retirement, and that’s OK! As a Medicare expert, I help clients and retirement planners navigate the program’s complexities. My biggest piece of advice is: Don’t get Medicare tips from a family member or friend, TV commercials or postcards that come in the mail. Getting professional advice from an independent agent will provide you with the best options available in your area.
Jay Dorso has more than 25 years of experience in the financial industry. At Quality Senior Benefits, Jay specializes in helping seniors with every area of retirement planning. From Medicare plans to insurance and long-term care, Jay helps set his clients up for success in retirement. Quality Senior Benefits is an independent firm that offers a wide range of insurance and financial services products.
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