“Just like that you're six years old and you take a nap and you wake up and you're twenty-five …”
However, it feels like you wake up and you’re 65. You’ve raised a family and hopefully had a rewarding career, and now it’s time to plan for things like Medicare.
There are so many things to know about Medicare, such as selecting the coverage types you need and keeping track of deductibles. It can all seem daunting when you are just starting to enjoy your golden years.
By doing a little homework, you can take much of the guesswork out of planning for Medicare. Check out these useful tips:
What is medicare? How does it work?
Medicare is a hospital and medical insurance program run by the federal government for people 65 or older. In some cases, younger people with certain disabilities like end-stage renal disease and other illnesses may be covered, but the program is generally meant to cover people of retirement age.
The program started in 1966 under the Social Security Administration and is funded by a combination of payroll taxes, premiums, and other federal revenue sources. There are four parts to the Medicare program, with the first two being covered by the federal government and the last two covered by private insurance companies.
What are the different plans?
There are four parts to the Medicare program:
- Part A: Hospital insurance
- Part B: Medical insurance
- Part C: Medicare Advantage Plans
- Part D: Prescription drug coverage
Part A and Part B are run by the U.S. government, while Parts C and D are administered by private insurance companies. In most cases, you are automatically enrolled in the hospital and medical portion of the program when you sign up for Social Security benefits.
The Medicare Advantage plans are sometimes referred to as Medicare Part C. These plans provide all of the coverage you receive under Part A and Part B, but also include benefits such as vision, dental, and hearing.
Medicare prescription drug plans are also known as Medicare Part D.
How much does it cost?
Most people who have worked and paid Medicare taxes for at least 10 years don’t have to pay for the Part A premium. However, everyone must pay for the Part B, C, and D premiums.
You can also get the Part A premium free of charge at age 65 if:
- You are receiving retirement benefits from Social Security or the Railroad Retirement Board.
- You are eligible to receive Social Security or Railroad benefits but you have not yet filed for them.
- You or your spouse had Medicare-covered government employment.
The Medicare Part B premium is deducted from your Social Security, Railroad Retirement, or Civil Service Retirement check. If you do not get any of these payments, Medicare sends you a bill for your Part B premium every three months. In 2023, the Medicare Part B premium was $164 for most people. Individuals and married couples with incomes above a certain level ― $85,000 for an individual,and $170,000 for a married couple ― may pay more.
Medicare Part A and B also have deductibles and coinsurance that must be paid out of pocket. For 2018, the Medicare Part A deductible is $1,340 per benefit period. Coinsurance is based on the length of hospital days, however, days one through 60 do not require you to pay coinsurance. The Part B deductible is $183 for 2018. Coinsurance is 20 percent of Medicare-approved charges.
Medicare Part C and D require that you pay a premium that is based on the individual plan provider you select. Medicare Part D premiums are based on the income you report on your IRS tax return. The following chart indicates the premium structure for 2018.
If your filing status and yearly income in 2018 was ... | |||
File individual tax return | File joint tax return | File married & separate tax return | You pay each month (in 2018) |
$85,000 or less | $170,000 or less | $85,000 or less | Your plan premium |
Above $85,000 up to $107,000 | Above $170,000 up to $214,000 | Not applicable | $13.00 + your plan premium |
Above $107,000 up to $133,500 | Above $214,000 up to $267,000 | Not applicable | $33.60 + your plan premium |
Above $133,500 up to $160,000 | Above $267,000 up to $320,000 | Not applicable | $54.20 + your plan premium |
Above $160,000 | Above $320,000 | Above $85,000 | $74.80 + your plan premium |
Source: Medicare.gov
Which plan is right for you?
Determining which plan is right for you is largely based on your current and anticipated health, your financial situation, and whether or not you suffer from chronic conditions that require monthly prescriptions..
Medicare Advantage Plans (Part C) that provide comprehensive medical benefits, including prescription drug coverage, may be the way to go for you because in some cases you may pay less out of pocket when compared with Medicare Part A and B.
Pricing depends on your plan provider so it is wise to compare the benefits and costs of all plans offered in your area.
Tips for planning and eligibility
Planning for Medicare may seem like aiming for a moving target, because there are many factors that will come into play as you make informed decisions about what types of coverage you need and how you will pay for it.
In general, Medicare enrollment during your initial seven-month enrollment period is as follows:
- Begins three months before the month you turn 65
- Includes the month you turn 65
- Ends three months after the month you turn 65
If you still have questions regarding Medicare planning, seek the advice of professionals who can help guide you towards which plans to choose for a healthy and happy in retirement.