Medicare Explained

Understanding Medicare: A Pillar of Retirement

Medicare can feel overwhelming, but understanding the basics will help you make confident decisions as you approach retirement. It’s essential to know your options and responsibilities to avoid costly penalties. As a retirement planner, I like to break down the explanation of Medicare into a pyramid.

Introduction to Medicare

First off, I always recommend using a Medicare specialist, such as a Medicare Broker. Someone in this profession, and with experience, is going to be able to guide you from a sea of options, to a few select choices that will work best for you. This paper is designed to give you a basic understanding of Medicare and how to approach it, but it can’t replace the value of a trustworthy expert.

The ‘Need to Know’

• Eligibility for Medicare starts the month you turn 65
  • You should enroll about 2 months before your birthday
  • There are penalties for missing the enrollment period (for Part A & B)
• If covered by employer health insurance, you may be able to delay enrollment
  • Ask your employer what parts of Medicare you need while staying on their plan

STEP 1 : Parts A & B

Parts A and B are required, and they make the foundation of the Medicare pyramid.

• Part A - Free
  • Hospital insurance, covering inpatient stays and some skilled nursing care.
• Part B - Minimum $185
  • Medical insurance, covering doctor visits and outpatient care
  • Cost is based on income. Research IRMAA tables for details.
• You sign up for these directly through Social Security’s website: ssa.gov, or you can call Social Security to discuss enrollment.
• If you’re already collecting your Social Security income, then enrollment is automatic and there’s no action needed. 
• The payment for Part B will be automatically deducted from your Social Security income payments.

These initial components will cover the bulk of health insurance needs, but they leave gaps which need attention for a complete health insurance package.

STEP 2: YOUR OPTIONS - Fill the Gaps

This may seem out of order, but I’ll explain each part in a way that tells the right story.

Parts A and B have gaps that could lead to high out-of-pocket costs, and there are multiple ways to fill them in order to have complete health insurance coverage.

• OPTION 1 - TRADITIONAL MEDICARE - Parts G and D
  
  
• Part G, is called a “MediGap” plan; use this term to remember that it’s Part “G”
• This is also referred to as your “Supplement”
  • This part fills many of the gaps left behind by Parts A & B.
  • There are standardized options for specific plans within Part G, with varying costs.
• Part D is prescription coverage
  • Options and costs vary depending on your current prescription needs.
• Traditional Medicare coverage applies anywhere in the country that accepts Medicare.

• OPTION 2 - MEDICARE ADVANTAGE PLAN - Part C
  
  
• An Advantage Plan is a “bundled option” to replace the need for parts G and D.
• Whether there is additional premium depends on your specific chosen plan.
• It’s typically thought of as a lower cost option, but you experience trade-offs in higher deductibles, copays, and/or limited networks.
• Most Advantage Plans include prescription coverage, and some even offer dental, vision, and other benefits such as fitness programs.

There are two warnings you must know before opting into an Advantage Plan

1. Like traditional insurance, it’s designed for you to use doctors and providers within your plan’s network and service area.
2. If you want to switch to Original Medicare later, you must apply. You can be rejected for pre-existing conditions.

The point here is that a Medicare Advantage Plan is an alternative to Traditional Medicare. These plans are offered by private insurers and operate more like an employer-sponsored HMO or PPO plan.

Wishing you a retirement filled with joy and purpose.
-Casey

Casey is the owner of Legacy Financial, a retirement planning team that helps individuals and families through the complexities of retirement, investments, and taxes.

Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.