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Learn How to Plan for Medicare Costs in Retirement

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Medicare costs in retirementEvery year, 4 million Americans turn 65, and many of them are looking forward to retirement. But not many of these retirees planned for their Medicare costs. Planning for Medicare costs in retirement starts early, so you feel confident about health care expenses after retiring.

The cost of health care becomes increasingly costly as we age. We become more prone to diseases, and our bodies get weaker, failing to fight off what used to be common illnesses that our bodies once warded off. Often, we are ill-prepared when the time for retirement comes. To plan for it carefully, you need to understand the costs of Medicare.

Medicare Part A

Medicare Part A is usually called hospital insurance. It covers items such as inpatient hospital care, skilled nursing facility stays, and some home care. You qualify for Part A if you have paid ten years’ worth of premiums through payroll deductions. In other words, you have likely already paid for this component through years of work. It’s not free, but there is no cost.

If you do not meet the ten year threshold, you can also qualify if you are the dependent of your spouse who has paid the premiums through his or her contributions. If you do not qualify through a spouse, your insurance premium will be $422 per month beginning 2018. This might apply to someone who is of Medicare age, but lived abroad most of their lives.

Part A hospitalization has a deductible of $1,340 for 2018. On top of this, you also pay for coinsurance costs. The price of this will vary, and this variation depends on the type of illness and the length of stay in the hospital. Part A has some gaps in it that can be filled with a Medigap policy, but you need to be enrolled in Part B in order to purchase said supplement.

Medicare Part B

Part B refers to care received at by a doctor. This might include services like a doctor’s office visit, outpatient care and preventive care, durable medical equipment, ambulance transportation and supplies necessary to treat your overall health.

Unlike Part A, Medicare Part B does have a monthly premium. You can pay the government directly or have your amount deducted from your Social Security benefits. In 2018, you will pay $134 per month if it’s your first time enrolling in Part B, or if you are not eligible to receive retirement benefits from Social Security or Railroad Retirement. In some cases, Medicaid will pay your premiums if you meet their financial criteria.

Medicare Part B is means tested using what they call a Income Related Monthly Adjustment Amount (IRMAA). This means high-income earners will pay more for this coverage. Medicare will use a sliding scale to determine your monthly premiums and it’s based on your modified adjusted gross income from 2 years ago. There are five levels altogether and you will receive a letter should this upcharge apply to you. Premiums will range from $134 to $428 per month.

Part B also has a deductible associated with it – that amount is $183 in 2018. Some Medicare supplements sold today can fill in this gap as well. It’s wise to speak with an agent to see if it’s a good value to buy a supplement that covers this deductible.

Medicare Part C

This plan is commonly known as the Medicare Advantage Plan. With this option, you are buying your insurance from a private institution, like Aetna, Anthem BCBS, Humana, United Healthcare or others. These institutions are accredited by the government, specifically Medicare.

You will receive your benefits and claims from a private company and not from the government. These institutions offer similar benefits as original Medicare, but they can also include prescription drug coverage as well – otherwise known as Part D. Advantage plans can also offer varying amounts of dental, vision and hearing insurance.

The catch here is that each Advantage plan varies in coverage, benefits and network availability. So you need to look at your options very carefully. It’s important to make certain your preferred doctors, hospitals and healthcare providers participate in the network.

Each company also has its list of prescription drugs that they can cover, both branded and generic. The cost of the plans varies from one company to another. As these plan receive reimbursement from the government, some can be as low as $0 a month.

Medicare Part D

Medicare Part D is focused solely on prescription drugs. If you buy this policy, you and the private insurance company will share the cost of the drugs. As mentioned earlier, each company has its list of the prescription drugs that they offer and at what cost. This is referred to as their formulary.

Part D drug plans will vary in cost and benefits depending on where you live, what you take, and where you fill your rx’s. One size does not fit all with these, so it’s important to be diligent when shopping for one. Make sure your agent knows all of your information.

If you choose to enroll in a Medicare Advantage plan, you may not need a Part D drug plan as this component is usually included. If you stay with Medicare Parts A & B (referred to as Original Medicare) then you likely want to purchase a Medicare supplement and stand alone Part D drug plan. We can walk you through it.

Talk to a knowledgeable insurance professional to learn more about your Medicare options in retirement. Gathering information ahead of time makes it easier to slip into the comfortable retirement you always dreamed of.

Thank you for reading our blog! How can we help you? Contact us today.

Category: Medicare Advantage, Medicare Part D, Medicare Supplements