Your Essential Guide to Medicare for Retirees
Navigating health insurance at any age can be confusing and daunting. When you’re also negotiating a type of insurance that’s brand new to you and adjusting to a new life as a retiree, Medicare can feel overwhelming.
The good news is Medicare is not as complex as it may seem. We’ve broken down the essential information you need to know into six FAQs. Let’s begin!
What is Medicare?
Medicare is health insurance for people 65 and older and younger people with a disability, End-Stage Renal Disease, or ALS. This post is focused on information for 65 and older.
Medicare covers a lot of the same care and services that group/employer insurance plans do but has different Parts and Plans.
Part A is hospital insurance. Most people qualify for $0 premiums for this coverage.
Part B is insurance for doctors’ services and outpatient care.
Supplemental plans come in two drastically different flavors – Medigap and Medicare Advantage. Read on to learn about key differences between them. You need Supplemental insurance to help pay the 20% of costs Parts A and B don’t pay.
Part D is prescription drug insurance.
It’s equally important to note what Medicare does NOT cover – vision, dental, and long-term care.
Which Parts and Plans should I enroll in?
You have two options, and the best option depends on the individual. What’s best for you may not be cost-efficient or sufficient for your spouse/partner.
Option #1: Original Medicare Parts A and B + Medigap supplemental + Part D. While premiums are more expensive, this option provides the most comprehensive coverage with Medigap Plan G (or F if you enrolled before 2020).
With Medigap, your network is all providers and facilities that accept Medicare, regardless of where you need care. Additionally, Medigap policies are standardized, meaning Medicare has verified plans that offer the same basic benefits. Policies issued after 1992 are also guaranteed renewable for life as long as premiums are paid.
Note that even if you’re not taking drugs currently, you should enroll in a low-cost Part D plan to avoid a lifelong penalty.
Option #2: Original Medicare Parts A and B + Medicare Advantage. Most Advantage plans include drug coverage, but if yours doesn’t, also enroll in a Part D plan. This option’s premiums are typically less expensive but out-of-pocket costs can be high, which can quickly offset lower premiums and perks like dental and vision coverage.
Although insurance companies are approved by Medicare, Advantage policies are not standardized. Therefore, everything about these policies vary wildly and can change drastically from year to year. Read the fine print and ask questions about anything that’s unclear.
Advantage plans have a geographic network of doctors and providers. If you have a beloved doctor or preferred facility, verify they accept the plan before enrolling.
Finally, Advantage plans are not guaranteed renewable. Insurance companies can change or cancel your coverage at their discretion.
How do I choose between these two options?
First, determine your health care expense budget. A fee-only fiduciary financial advisor can help you determine that amount by stress testing your long-term plan with actuarial-provided Medicare and health care expenses.
Second, research Medicare plans for your zip code at Medicare.gov. Enter your preferred doctors, providers, facilities, and current drugs to verify if plans cover them and for more accurate cost estimates.
If you want professional help, seek an insurance agent who specializes in Medicare plans or contact Maine SHIP (state health insurance assistance program) funded by the Centers for Medicare and Medicaid Services.
When should I enroll?
If you or your spouse/partner are still working at your age 65, ask HR how your health insurance works with Medicare. You may have the choice to switch to Medicare or you may be required to switch. When employment or group health insurance ends, you’ll have 8 months to enroll in Medicare. Note COBRA is not considered group health insurance.
Everyone else should enroll around their 65th birthday during the seven-month Initial Enrollment Period. It starts the third month before your birthday and ends the third month after your birthday. If you enroll before your birthday month, coverage begins on the first of your birthday month. If you enroll during or after your birthday month, coverage begins on the first of the month after you enroll.
Procrastinators, beware! If you enroll late, you may incur expensive lifelong penalties. Seek professional help if you’re unsure of your enrollment period.
I’m enrolled in Medicare Parts and Plans. Now what?
Everyone with an Advantage and Part D drug plans should review and shop annually during Medicare Open Enrollment, October 15 to December 7.
Doing so can save or cost you thousands of dollars. Plan premiums, deductibles, copays, network, covered drugs and pharmacies, and drug prices can change drastically from year to year.
Start by reviewing the Annual Notice of Changes insurance companies are required to provide in September. Even if your plan and medical situation have not changed, shop anyways – there may be an equivalent plan that costs much less.
If you have a Medigap plan, consider it your lifelong supplemental insurance. You shouldn’t need to change plans unless yours isn’t meeting your needs. If you do want to switch, review state rules to verify your eligibility and allowable timeframes.
Who the heck is IRMAA?
IRMAA, the Income-Related Monthly Adjustment Amount, is a surcharge added to Part B and D premiums if your income two years ago exceeds certain levels that are adjusted each year.
If your 2022 modified adjusted gross income exceeded $206,000 for joint taxpayers or $103,000 for single taxpayers, then IRMAA applies to your 2024 Part B and D premiums.
Total surcharges for 2024 range from $83/month to nearly $500/month.
Fortunately, certain life events such as work stoppage (retiring), divorce or death of a spouse can reduce or even eliminate IRMAA. You’ll need to submit an appeal form and proof to the Social Security Administration.
Learn more about IRMAA in this PFA blog post.
Don’t let Medicare or IRMAA intimidate you. Through comprehensive financial planning and asset management, PFA Advisors navigate health care, taxes, and all things retirement for you, leaving you more time to enjoy retirement.
