Photo of Eric R. Ebbert, CFP®, MBA, CEO Eric R. Ebbert, CFP®, MBA, CEO Oct 01, 2018

Each year at this time, those that have Medicare for their health insurance must decide if they want to make any changes to their coverage.  For those used to having their health insurance while working in a group plan offered by their employer, having to think about managing it yourself in retirement can be difficult and daunting.  Let’s consider some of the basics, but you need to work with an expert in this field. 

Part A of Medicare includes inpatient hospital costs, skilled nursing facilities when medically necessary (for a limited time), some home health care, and hospice care.  Part A is free for most, and you automatically qualify for it at age 65.  It becomes your primary coverage even if you have a group plan which will then act as a supplement for this Part A coverage.  You need to sign up for Part A between 3 months before your 65th birthday and 4 months after even if you are keeping your group coverage. 

Part B generally covers outpatient experiences, including doctors, testing costs, flu shots, rehab, physical therapy, etc.  There is a premium associated with Part B which is based on income.  It can be as low as $134 per month or as high as $428.60 in 2019. This is usually deducted from your Social Security benefits, but can be paid directly if not yet receiving Social Security.  To be eligible you must be age 65, paid Medicare premiums for the past 10 years and be a US citizen or permanent resident.  If you do not join at 65, you can apply between January 1st and March 31st of any subsequent year, but coverage does not begin until the following July 1st.   Be careful to make sure that there is no gap in coverage.  Also, there could be higher premiums if you delay starting Part B after age 65.

Because Part A and B have deductibles and co- insurance costs, most people on Medicare will purchase a supplemental plan which comes in various shapes and sizes with the most expensive plans costing up to $2,500 per year or more depending upon where you live.  In short, it is possible that premiums for Part A, B and a supplement could exceed $7,500 per year per person.  

Part C is a Medicare Advantage plan offered by private insurers which combines Part A and B and usually covers drugs as well.  While offering everything that Medicare covers, these plans may provide extra coverage for things like dental, vision, hearing aids, gyms, etc.  The negative to these plans is they usually have a limited network of providers in exchange for their lower cost. 

Part D covers prescription drugs at a discount, but please be aware that you are still going to pay something out of pocket and for some drugs it can be very high.  Buying supplemental coverage for Part D is important and these plans are very complex and depend on the drugs you have to take.  

Many people who come to ProVise for retirement planning do not budget properly for all of the costs associated with healthcare in retirement.  Over 25 years in retirement all of this can add up to well over $250,000 per individual.  On top of that you have to factor inflation into the equation.  The good news is that Medicare premiums for those that are enrolled in the program are capped in that the premium cannot go up any faster than the increase in Social Security each year.  The bad news is that there may not be an increase in the net monthly Social Security benefit as a result.   For those that wait to enter into Medicare past age 65, they will likely pay the higher rate when they enter.  Thus, you should consider this in making a decision to stay with your group plan versus joining Medicare at age 65.

If you would like to discuss Medicare, Social Security or any other part of your retirement plan please schedule a meeting with us in either the Clearwater or Tampa office.  This meeting is complimentary.  For full disclosure, we do not sell health insurance, but can refer you to an expert in this field. 

The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and are subject to change.