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Medicare Options for Retirees Thumbnail

Medicare Options for Retirees

Financial Planning

Whether you’ve officially retired or are still working full time, it’s possible your health insurance options are changing. Depending on your age or health status, you may soon be qualified for Medicare. It is recommended that you sign up for Medicare coverage approximately 3 months before your 65th birthday.1 While you’ve likely heard of it before, we’re breaking down what exactly it is, who Medicare benefits and what each Medicare part covers.

What Is Medicare?

Medicare is a government-funded national health insurance program that was established in 1966. It is designed to offer coverage to individuals including:2  

  • Those who are 65 or older
  • Individuals under 65 with qualifying disabilities
  • Individuals with End-Stage Renal Disease (ESRD)

Medicare is broken down into several parts that cover specific services. While Part A and Part B are sections of the “original” Medicare plan, Part C and Part D offer optional additional coverage. Dental and vision coverage are not included in Medicare.

Part A: Hospital Insurance

Part A is considered hospital insurance.

As such, it covers hospital-related expenses such as:3

  • Inpatient hospital care
  • Skilled nursing facility costs
  • Hospice
  • Lab tests
  • Surgery
  • Some home health care services

Most beneficiaries don’t pay Part A premiums out of pocket if they or their spouse paid Medicare taxes while working.2 It’s important to note, however, that annually adjusted standard deductibles still apply.

Many pre-retirees are frequently warned that Medicare Part A will only cover a maximum of 100 days of nursing home care (provided certain conditions are met). Under the current Part A rules, you would pay $0 for days 1-20 of care in a skilled nursing facility (SNF). During days 21-100, a $176 daily coinsurance payment may be required of you.4 

Knowing the limitations of Part A, some people look for other choices when it comes to managing the costs of extended care.

Part B: Medical Insurance

Part B is considered the medical insurance portion of Medicare.

It covers expenses like:3

  • Physicians’ fees
  • Outpatient hospital care
  • Certain home health services
  • Durable medical equipment
  • Some offerings not covered by Medicare Part A

Part B does come with some costs, however, premiums can be annually adjusted upwards  based on the Medicare recipient’s income level two years prior. The standard monthly premium amount was $144.60 for 2020, with a yearly deductible of $198.4 Since your income determines the premium you can save premium costs with good multi-year tax planning.5

Part C: Medicare Advantage

Sometimes called “Medicare Part C,” Medicare Advantage (MA) plans are often viewed as an all-in-one alternative to Original Medicare.

MA plans are offered by private companies approved by the federal government. Although these plans come with standardized minimum coverage, the amount of additional protection offered can differ drastically from one person to the next. This is due to unique provider networks, premiums, copays, coinsurance and out-of-pocket spending limits.

If you’re interested in obtaining a MA plan, you may find it beneficial to compare prices and services offered from different vendors.

Part D: Prescription Drug Coverage

While MA plans often offer prescription drug coverage, insurers also sell federally standardized Medicare Part D plans as a standalone product to those with Medicare Part A and/or Part B. 

Every Part D plan has its own list of covered medications. If you're interested in obtaining a Part D plan, Medicare’s website offers the formulary of approved drugs and prices, organized by tier.

If you’re approaching 65 or think you may be otherwise eligible for Medicare, review each part carefully to determine what may work best for you. Remember, Medicare enrollment is not automatic and if you miss the enrollment period a lifetime penalty of higher premiums will apply.1 If you have any questions, your trusted financial professional may be able to help you review your coverage options in detail.

  1. https://www.ssa.gov/benefits/medicare/
  2. https://www.medicare.gov/Pubs/pdf/11306-Medicare-Medicaid.pdf
  3. https://www.medicare.gov/what-medicare-covers
  4. https://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-and-deductibles#:~:text=Medicare%20Part%20A%20covers%20inpatient,quarters%20of%20Medicare%2Dcovered%20employment
  5. Opinion: You could unwittingly triple your Medicare premiums — here’s what to watch for - MarketWatch