One important area of planning for a successful retirement is to have adequate healthcare coverage, including Medicare. Healthcare costs have been escalating at over twice the rate of inflation for a number of years. For those wanting to retire prior to age 65, healthcare is typically one of the largest bridge expenses to cover until Medicare eligibility.
For most people, their health insurance is provided through their employer. Or, if self-employed, they likely own a private health insurance policy. But once you reach age 65, you have the opportunity to transition to the federal government’s Medicare healthcare system. This article will provide a quick overview of some of the options available, answer some frequently asked questions and provide some resources to help you navigate the system. (For related reading, see: Top 3 Health Insurance Option if You Retire Early.)
Medicare: the Four Parts
- Part A – Hospital insurance that provides coverage for inpatient hospital services, care received in skilled nursing facilities, hospice care and some home healthcare. There is no premium cost for this coverage. However, there are co-pays, deductibles and co-insurance when seeking medical care.
- Part B – Medical insurance that provides coverage for outpatient care such as doctors’ visits, laboratory and imaging tests, medical supplies and preventative services. There is a monthly premium which is automatically deducted from your monthly Social Security check. If you are not receiving Social Security benefits, your premium will be billed to you once a quarter. In 2017 the base premium is $134 per month. You may pay a larger premium if your annual income is higher. You can learn more about your potential premium costs in this article. Your Part B coverage generally covers 80% of your covered care expenses after a deductible has been met.
- Part C – Medicare Advantage Plans, which are Medicare-approved private insurer plans that typically provide medical coverage for Part A, Part B and often include prescription drug coverage. Many of these plans provide extra coverage and may lower out-of-pocket costs.
- Part D – Prescription drug coverage. This particular coverage is optional and has a monthly premium that varies depending on the plan you choose. Similar to Part B coverage, those with higher levels of income may pay higher premiums. The link to my article above provides a chart of premium surcharges for Parts B and D based on income level. (For related reading, see: Understanding Medicare Part D Risks.)
What is Medigap Insurance?
In addition to the options mentioned above, there are approximately 12 different private insurance plans which vary by state. These extra coverage plans are often referred to as Medicare supplemental insurance or Medigap. These policies are designed to fill in the coverage gaps found in original Medicare Parts A and B. A large percentage of those receiving Medicare are also enrolled in one of these policies. (For related reading, see: When to Get a Medigap Insurance Plan.)
When to Apply for Medicare
If you are already receiving Social Security benefits prior to turning age 65, you will automatically be enrolled in Medicare Parts A and B. If you are not receiving Social Security benefits, then you have a seven-month window to apply. You can apply three months prior to turning age 65, the month you turn 65, and up to three months after you turn 65. Your Medicare benefits will generally begin approximately one month after you enroll.
How to Apply for Medicare
You can enroll in Medicare Part A and Part B in the following ways:
- Online at www.SocialSecurity.gov
- By calling Social Security at 1-800-772-1212, Monday to Friday from 7a.m. to 7p.m.
- In person at your local Social Security office; it is recommended that you call first for an appointment.
Should Choose a Coverage Plan for Part C, Part D or a Medigap Policy?
Because each person has a unique health history with specific health coverage needs, you may want to consult with a local resource to help you compare and contrast your options. Every state offers a free health benefits counseling service for Medicare beneficiaries. You can search by your state for the local SHIP office (state health insurance assistance program). This is a valuable service available to answer all of your Medicare questions. You can also seek a private, independent health insurance broker that specializes in Medicare plans.
What if I Don’t Enroll on Time? Is There a Penalty?
If you don’t sign up for Medicare Part B (medical insurance) when you are first eligible at age 65, there is a 10% penalty for every 12 months you are not enrolled on time. The current base premium for part B is $134. Thus you would pay an extra 10% every month for this premium going forward. If you didn’t sign up for two years you would pay 20% extra every month for as long as you are enrolled in Part B.
What if I Had Health Coverage Provided by an Employer?
Medicare does provide an exception if you are covered under group healthcare via an employer, and therefore do not enroll on time. You need to provide a letter of credible coverage from your employer when you sign up and they will usually waive the penalty. (For related reading, see: When You Can and Can't Delay Enrolling in Medicare.)
Additional Resources for Your Medicare Questions
Besides the SHIP link above, or an independent health insurance broker, another option is to call Medicare directly at 1-800-Medicare or 1-800-633-4227. If you prefer searching for your answers online, you can go directly to www.Medicare.gov. (For more from this author, see: Get Ready for Your Required Minimum Distributions.)