Retirement Guys: Medicare Basics Part IIWritten by Nolan Baker Mark Clair | | email@example.com
A short while ago we wrote a column on the basics of Medicare and we would like to take this opportunity to refresh your memory a bit on what we talked about and then take it a baby step further and give you some tips when it comes to smart Medicare planning. If you read the previous column, you remember that Medicare typically becomes part of your life at age 65. It becomes the primary source of health care and most other health insurance plans become secondary.
There are different parts of Medicare such as A, B, C and D. Part A is hospitalization, B is doctor’s services and tests and D is Medicare’s prescription drug benefit. Part C, which is also called Medicare Advantage, involves health plans offered by private insurers in an all-inclusive format kind of like an HMO or PPO.
Tip #1: Medicare is not free. Some folks are thinking “Wheeeeeee!!!” when I get to 65, the government will pay for my health care costs via Medicare. Not necessarily so. It is a valuable government benefit, but it is not free so smart planning says to budget for health care costs in retirement. The costs of Medicare include a monthly premium for Part B that is taken out of your Social Security check each month ($104.90 in 2014), a Part A deductible of $1,216 per spell of illness, a Part B deductible of $147/yr and a Part D deductible of $310. Then there are co-payments. Part A hospitalization covers the first 60 days and then days 61-90 you pay $304/day and days 91-150 you pay $608/day. Part B pays for 80 percent of the assigned Medicare claim and you pay the other 20 percent (this is why you should get a good “Medigap” insurance policy to cover the gaps). Sound overwhelming? As you can see, there is a lot to consider and you should think about and plan what your health care costs could be during retirement time.
Not only is Medicare not free, but there are some things it covers and some things it does not. Here are generally what Medicare covers:
- Hospital: 100 percent of first 60 days
- Medical services (doctor visits, outpatient services): 80 percent of Medicare-approved amount
- Some preventive services (flu shots, certain screenings)
Tip #2: Medicare does not cover everything! Here is generally what it does not cover:
- Long-term care
- Care delivered outside the U.S.
- Dental care
- Vision care
- Hearing aids
- Cosmetic surgery
- Acupuncture and other alternative care
- Amounts over Medicare-approved amount
- Amounts not covered by deductibles and coinsurance (20 percent)
Keep all these things in mind when you are planning out your health care costs.
Enrollment in Medicare Parts A and B is automatic for anyone receiving Social Security at age 65, so be very careful. Since the full retirement age is now 66 and since many people choose to continue to work and defer Social Security, it may be no longer a given that people are receiving Social Security at 65. Therefore it is important to understand when they can, should or must sign up for Medicare. Initial enrollment starts on the first day of the third month before a person’s 65th birthday and extends for seven months. There are special enrollment periods for those who have chosen to defer Social Security or have missed their initial enrollment period.
Tip #3: There is a penalty for failing to sign up for Medicare during the initial enrollment period that lasts for the rest of your life. The penalty is 10 percent of the Part B premium for every 12-month period you failed to enroll in Part B. This can add up to a bunch of money wasted over your lifetime. You don’t want to find this out the hard way, so be acutely aware of when you should enroll in Medicare.
As always, The Retirement Guys are here to help you with valuable information that can improve your life during retirement. You can get a copy of “The Retirement Guys Baby Boomer’s Guide to Medicare Planning” by contacting us via email at www.retirementguysnetwork.com. As always, we wish you a happy retirement.
For more information about The Retirement Guys, tune in every Saturday at 1 PM on 1370 WSPD or visit www.retirementguysradio.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550.
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