The
premiums and coverages vary, and you must realize the differences.
Medicare takes a little time to
understand. As you approach age 65, familiarize
yourself with its coverage options and their costs and limitations.
Certain features of Medicare can affect
health care costs and coverage. Some
retirees may do okay with original Medicare (Parts A and B), others might find
it lacking and decide to supplement original Medicare with Part C, Part D, or
Medigap coverage. In some cases, that may mean paying more for senior health
care per month than you initially figured.
How much do Medicare Part A and Part B
cost, and what do they cover? Part A
is usually free; Part B is not. Part
A is hospital insurance and covers up to 100 days of hospital care, home health
care, nursing home care, and hospice care. Part B covers doctor visits,
outpatient procedures, and lab work. You
pay for Part B with monthly premiums, and your Part B premium is based on your
income. In 2018, the basic monthly Part B premium is $134; higher-earning
Medicare recipients pay more per month. You also typically shoulder 20% of Part
B costs after paying the yearly deductible, which is $183 in 2018.1
The copays and deductibles linked to original Medicare can take a bite
out of retirement income. In addition, original Medicare does not cover dental,
vision, or hearing care, or prescription medicines, or health care services
outside the U.S. It pays for no more than 100 consecutive days of skilled
nursing home care. These out-of-pocket costs may lead you to look for
supplemental Medicare coverage and to plan other ways of paying for long-term
care.1,2
Medigap policies help Medicare
recipients with some of these copays and deductibles. Sold by private companies, these health care policies will
pay a share of certain out-of-pocket medical costs (i.e., costs greater than
what original Medicare covers for you). You must have original Medicare
coverage in place to purchase one. The Medigap policies being sold today do not
offer prescription drug coverage. A monthly premium on a Medigap policy for a
65-year-old man may run from $150-250, so keep that cost range in mind if you
are considering Medigap coverage.2,3
In 2020, the two most popular kinds of Medigap plans – Medigap C and
Medigap F – will vanish. These plans pay the Medicare Part B deductible, and
Medigap policies of that type are being phased out due to the Medicare Access and CHIP Reauthorization Act. Come 2019,
you will no longer be able to enroll in them.4
Part D plans cover some (certainly not
all) prescription drug expenses. Monthly
premiums are averaging $33.50 this year for these standalone plans, which are offered
by private insurers. Part D plans currently have yearly deductibles of less
than $500.2,5
Some people choose a Part C (Medicare Advantage) plan over original Medicare. These plans, offered by private insurers and approved
by Medicare, combine Part A, Part B, and usually Part D coverage and often some
vision, dental, and hearing benefits. You pay an additional, minor monthly
premium besides your standard Medicare premium for Part C coverage. Some Medicare
Advantage plans are health maintenance organizations (HMOs); others, preferred
provider organizations (PPOs).6
If you want a Part C
plan, should you select an HMO or PPO? About two-thirds of Part C plan
enrollees choose HMOs. There is a cost difference. In 2017, the average HMO
monthly premium was $29. The average regional PPO monthly premium was $35,
while the mean premium for a local PPO was $62.6
HMO plans usually restrict you to doctors within the plan network. If
you are a snowbird who travels frequently, you may be out of the Part C plan’s
network area for weeks or months and risk paying out-of-network medical
expenses from your savings. With PPO plans, you can see out-of-network
providers and see specialists without referrals from primary care physicians.6
Now, what if you retire before age 65? COBRA aside, you are looking at either arranging
private health insurance coverage or going uninsured until you become eligible
for Medicare. You must also factor this possible cost into your retirement
planning. The earliest possible date you can arrange Medicare coverage is the
first day of the month in which your birthday occurs.5
Medicare planning is integral to your
retirement planning. Should you try
original Medicare for a while? Should you enroll in a Part C HMO with the goal
of keeping your overall out-of-pocket health care expenses lower? There is also
the matter of eldercare and the potential need for interim coverage (which will
not be cheap) if you retire prior to 65. Discuss these matters with the
financial professional you know and trust in your next conversation.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
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Citations.
1 - medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html
[5/21/18]
2 - cnbc.com/2018/05/03/medicare-doesnt-cover-everything-heres-how-to-avoid-surprises.html
[5/3/18]
3 -
medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [5/21/18]
4 - fool.com/retirement/2018/02/05/heads-up-the-most-popular-medigap-plans-are-disapp.aspx
[2/5/18]
5 -
money.usnews.com/money/retirement/medicare/articles/your-guide-to-medicare-coverage
[5/2/18]
6 -
cnbc.com/2017/10/18/heres-how-to-snag-the-best-medicare-advantage-plan.html
[10/18/17]
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