Is retirement approaching soon? If so, now may be the time to make your final planning decisions, such as when to file for Social Security benefits or how much income to withdraw from your retirement accounts. You’ll also want to decide when to file for Medicare and which type of coverage to select.
Medicare is a valuable benefit for retirees. You’ve probably paid into the Medicare system for much of your career. Medicare is partially funded through a payroll tax on all American workers. After you retire, Medicare provides funding for a wide range of medical services, including hospitalizations, doctor visits and even prescription drugs.
You may find the Medicare system complex and difficult to navigate. There are many different types of coverage, so it’s important to consider your needs and objectives. These decisions are important because they impact your health care costs and your financial stability in retirement.
Below are a few common questions and answers about Medicare. If you haven’t yet reviewed your Medicare options, now may be the time to do so. A financial professional can help you determine which type of protection best aligns with your budget and your retirement objectives.
What are the different types of Medicare coverage?
In its original form, Medicare only covered hospitalizations. Over time, however, other types of protection have been added to make Medicare more robust and comprehensive. Some types of coverage are optional and come with additional premiums.
Part A, also known as Original Medicare, is automatically provided for anyone who’s eligible for Medicare enrollment. It’s funded by the Medicare payroll tax, so it doesn’t come with additional premiums. Part A covers hospitalizations and some types of skilled nursing assistance.
It’s important to note that the skilled nursing covered by Part A is not the same as long-term care. Part A covers skilled nursing care related to a hospitalization or specific medical treatment. It doesn’t cover long-term care services such as assistance with bathing, eating or mobility.
Part B covers doctor visits, medical equipment, ambulance transport and a limited number of prescription drugs. You are automatically enrolled in Part B when you file for Social Security. However, you can opt out of Part B if you wish. Part B is partially funded by the payroll tax, but it also comes with a monthly premium.
Part C is commonly known as Medicare Advantage. It’s a unique program that allows private insurers to offer policies directly to seniors. These policies usually bundle traditional Medicare coverage with protection for other services, like dental and vision. Medicare Advantage policies are offered with a broad range of coverage, premiums, copays and more. Do your research and carefully consider your specific needs before buying a Medicare Advantage policy.
Part D is a relatively new type of protection. It offers coverage for prescription drugs and is available to anyone who’s enrolled in any of the other types of Medicare. Part D is a voluntary coverage program, and you will have to pay an additional premium for the protection.
When and how do I sign up for Medicare?
You are eligible to sign up for Medicare at age 65 and can enroll either online or by calling your Social Security office. You actually have a seven-month window around your 65th birthday to enroll. You can sign up as early as three months prior to or as late as three months after your birthday month.
Medicare also offers an annual enrollment period in which you can change your coverage. You can add Part B if you’ve previously declined it, or you can switch to a Medicare Advantage plan that may offer additional coverage.
It’s wise to evaluate your coverage every year and determine whether it’s right for your needs. You may find that you want a plan with lower premiums, or you may determine that you’re willing to pay additional premiums for coverage for prescription drugs or other services. The annual enrollment period is your time to make those adjustments.
How is Medicare different from Medicaid?
Many people confuse Medicare and Medicaid because both are government health care programs. The key difference between the two is whom the plans serve. Medicare is a health care program primarily for retirees, although those with long-term disabilities may also be eligible. Medicaid is a state-managed program to benefit those who can’t afford health care through other sources.
Many retirees end up on Medicaid at some point, usually in the later years of retirement. To take advantage of Medicaid, however, you must have little income and few assets. Medicaid is a resource of last resort after you’ve depleted all other resources.
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