Retirement Tips You Can't Miss: Understanding Medicare

Transcript

Hello and welcome to Fisher Investments' Retirement Tips You Can't Miss—a series designed to help retirees enjoy the comfortable retirement they've worked so hard for, without worrying about how to make their money last.

Today, we're talking about a topic that's essential for retirees—Medicare. Whether you're approaching 65 or already enrolled, understanding how Medicare works can help you make informed decisions about your healthcare coverage. So, let's get started.

Medicare is the federal health insurance program primarily for people age 65 and older. It also covers some younger individuals with certain disabilities.

Medicare is divided into five parts—Parts A through D plus Medigap or supplement insurance. Here's a quick rundown of those parts:

Part A is hospital insurance, which covers your inpatient hospital stays, skilled nursing care and hospice for a limited time. If you're admitted into the hospital after surgery, for example, Part A insurance will help cover the cost of your hospital room, nursing care and necessary medications.

Part B is medical insurance, which covers your doctor's visits and outpatient care when you're in and out of the hospital or doctor's office on the same day. For example, if you visit your doctor for a routine checkup and get a flu shot, Part B will cover the cost of these services once you've met your deductible.

Part C, is also known as Medicare Advantage, is an alternative to traditional—or original—Medicare. Medicare Advantage is offered by private insurance companies and bundles Medicare Parts A, B and D with extra benefits such as dental and vision. If you're enrolled in a Medicare Advantage plan, your dental cleanings and eye exams may be covered. Traditional Medicare does not cover these services. So, it's important to know that Medicare Advantage plans often require pre-authorization if you wish to see a specialist or receive certain services or prescriptions. You'll often hear this as having service that is "in-network" versus "out-of-network."

Part D is prescription drug coverage. Under Part D, participants must pay a monthly premium to a private insurance carrier. Plan participants may use this insurance provider's network of pharmacies to purchase prescription medications. You want to browse and compare plans to see which one covers your medications at the best price.

Medigap, or supplement insurance, is the last part of Medicare. As the name suggests, Medigap covers the "gaps" in original Medicare Parts A and B, including copayments and coinsurance. Depending on the plan you select, Medicare Supplement Insurance can help you reduce your medical costs by covering some of your deductibles, copays, and even foreign travel emergencies. Your primary care comes through Original Medicare when you choose a Medigap plan, which effectively expands your network of services to any facility that accepts your Medicare "Red, White, and Blue" card.

So how much does Medicare cost?

While Medicare isn't entirely free, most people don't pay a premium for Part A, as long as they've worked and have paid Medicare taxes for at least ten years. Part B has a monthly premium that starts at $185, and will increase each year with the Social Security Administration cost of living adjustment. It also varies depending on your income. Part C, Part D and Medigap premiums vary depending on the plan you choose. Part C or Medicare Advantage plans often come with a very low or even $0 monthly premium.

Keep in mind that with Original Medicare—that's Parts A and B— you'll pay at least 20% of most medical costs. In addition, most prescriptions as well as vision, hearing and dental services, are not covered.

Finally, there are deductibles and coinsurance for most services, so you'll want to budget for those expenses, too.

When it's time to enroll in Medicare, you'll have two main choices.

Your first choice is Original Medicare (Parts A and B), plus Medigap and your Part D. This gives you Original Medicare plus a Medigap supplemental insurance policy to help cover out-of-pocket costs, as well as a separate Part D plan for prescriptions. After you sign up for Part B, you have a six-month "Guaranteed Issue" period for a Medigap policy. This means you avoid medical underwriting for those first six months you're on Medicare and should be a primary consideration for folks with pre-existing conditions. You could also forgo Medigap and instead just add Part D coverage to your Original Medicare plan.

Your second choice is Medicare Advantage, or Part C. This is called "all-in-one" coverage because most Medicare Advantage plans include prescription drug coverage, as well as dental, vision or fitness benefits.

Keep in mind that Original Medicare lets you see any doctor that accepts Medicare, but it doesn't include extras. Medicare Advantage often has lower out-of-pocket costs but comes with network restrictions. Your healthcare needs, preferred doctors, and budget can help determine the plan that's best for you.

So, when do you need to enroll?

You're eligible to enroll in Medicare three months before you turn 65, during your birth month, and three months after you turn 65. This means you have a seven-month Initial Enrollment Period. If you're still working and have employer coverage, or you're covered by your spouse's employer, you may be able to delay enrolling in part B without penalty. Your—or your spouse's—employer must have at least 20 employees enrolled in your group healthcare coverage to be a "creditable" replacement for Medicare.

After that coverage ends, you will qualify for an eight-month Special Enrollment Period. However, if you don't qualify for a Special Enrollment Period and you miss your enrollment window, you could face permanent penalties.

To get started, we recommend you think about: your current and anticipated healthcare needs, your budget for premiums, deductibles, and out-of-pocket costs, and whether your doctors accept Medicare.

Medicare can be complex, but by planning ahead and gathering information to help you navigate the Medicare process, you can make choices that best suit your health and finances. For more resources and insights, visit FisherInvestments.com. Thanks for watching, and don't forget to like and subscribe!