Medical care costs lots. And as your age grows, so do your medical bills. A 2019 study revealed that even a healthy male-female couple that retires at age 65 should plan on spending $285,000 on their medical expenses during their retirement.
Women should expect to spend $150,000, and men should expect to pay $135,000.
If you’re nearing retirement, you need to understand how Medicare works. Keep reading for a full explanation of Medicare facts.
Medicare has been around since July 30, 1965, when President Lyndon B. Johnson signed it into law as a part of his war on poverty. Older Americans along with people that have disabilities can turn to Medicare for all of their health care coverage.
In short, Medicare is like health insurance provided by the federal government for individuals over the age of 65. Once you celebrate your 65th birthday, you are eligible for the program.
As you near this golden date, you need to begin investigating the options available that meet all of your health needs. You also need an option you can afford since Medicare is not a free program.
You have the responsibility to prepare for this shift in your medical coverage. If you’re already receiving Social Security benefits, then the government will automatically enroll you in Medicare. You will not receive a letter reminding you that you need to make decisions.
You have a window of time where you can sign up for Medicare. Three months before you turn 65, you can begin signing up for your Medicare coverage. You also have three months after your birthday.
If you let three months pass after your birthday, you lose your chance at the best premiums you can get. You may end up paying higher premiums.
Ultimately, it’s important to remember that Medicare is not free. You will have to pay a premium, so set yourself up for your best plan by signing up during the window of opportunity.
Cost of Medicare
What does Medicare cost, you may wonder? The cost depends on the part that you’re paying for. Here’s a breakdown of how much each part costs:
- Part A: Part A has no fee for most people.
- Part B: Individuals pay $144.60 in 2020. You will find this amount deducted monthly from your Social Security benefit payment. If you have an income of more than $87,000 annually, you will have to pay more.
- Part C: Part C will cost you the same $144.60 monthly fee for the Part B premium. You will also have to pay additional premium costs that the insurer sets.
- Part D: This plan is known as the Part D prescription drug plan. Your costs will vary for the Part D premium, but you can expect a cost of around $30 a month.
You also have the cost of Medigap. This is the Medicare supplement program the federal government provides when Medicare does not cover enough.
You also need to account for the fact that you may have not paid enough Medicare taxes when you were working. A small number of people have to pay $458 for their monthly premium
Medicare’s out-of-pocket costs – premiums, deductibles, copays, and coinsurance – can easily result in a large tab each year. If you’re struggling to meet those expenses, you might be eligible for federal and state assistance.
If you qualify for Medicaid, the federal-state health insurance program for people with low incomes and individuals with disabilities, it will pay some or all of your out-of-pocket expenses. Individuals on both Medicare and Medicaid are known as “dual eligibles.”
Other programs are designed for beneficiaries with incomes that are too high to qualify for Medicaid but who still have trouble paying their health care bills. Each program has specific income and asset limits and eligibility requirements that are adjusted annually.
There’s also a program called QMB or the Qualified Medicare Beneficiary program. This program helps pay for Part A and Part B deductibles and premiums along with copays and coinsurance.
Those who qualify for this program also qualify for the Extra Help prescription drug program. This program helps you pay for medicines.
QMB has the lowest income threshold of all four programs.
The year 2020 has brought unique circumstances to retired individuals. Medicare has stepped up by paying for beneficiaries to receive COVID-19 testing. You will have no out-of-pocket expenses.
Additionally, the new program waives the cost of medical services related to the COVID-19 test. So if you have to go to the emergency room to be tested, Medicare has you covered.
Additionally, if you’re homebound and cannot leave home, Medicare covers the cost of the test when your doctor orders the test to be brought to you and administered in your home. your Medicare needs as well.
- Q1: This is the qualifying individual program. It will help you pay for part B premiums but will not cover Part A premiums. If you have an income that’s too high for AMB or SLMB explained below, you could qualify for Q1.
- SLMB: This is a Specified Low-Income Medicare Beneficiary program that helps pay for part B premiums but not Part A.
- QDWI: This is the program that helps pay for Part A premiums. If you have disabilities, are under age 65, and currently work, you may qualify for this program.
You can find help navigating the system and signing p by contacting your state Medicaid Program or the State Health Insurance Program.
Medicare Facts In Detail
With four different plans, medicare information can get a little confusing. Here’s a basic guide to what each part of Medicare covers.
Applying for Medicare automatically enrolls you in Part A. This part of Medicare will cover any hospital stays, skilled nursing care, and hospice. Thus Medicare A covers any care you need such as when you end up in a rehabilitation center after a broken hip.
While you need to pay for Medicare, most people do not have a premium to pay for Part A. When you paid into the system in the past, you were paying for Medicare.
Part A does not come free, though. You still have to plan for a deductible of $1,408 for 2020. Deductible costs change yearly.
You also have the option of buying a Medigap policy or supplemental insurance which will cover some out-of-pocket cost as well as the deductible.
Medicare Part B
Part B is an extension of Part A. It covers the following elements of your health care:
- Lab tests
- Diagnostic screenings
- Medical equipment
- Ambulance transportation
- Doctor visits
- Outpatient services
Because Part B requires more costs than Part A, you can defer signing up for it. If you still work and have insurance benefits through your work or if your spouse’s health plan covers you, defer signing up for Part B. However, if you need it, then sign up for Part B.
You will have to pay a higher monthly premium while you’re in the program as soon as you sign up for Part B. Part B requires you to pay 20 percent
The federal government sets the Part B monthly premium, which is $144.60 for 2020. It may be higher if your income is more than $87,000.
You also have to play on paying the annual deductible of $198 for 2020. You will be responsible for 20 percent of your bills for outpatient services and doctor visits. The government will deduct your premium from your monthly Social Security benefits.
Medicare Part C
Medicare Part C is also known as Medicare Advantage. This is a private health insurance alternative to the original Medicare, which is run federally. Advantage offers a one-stop shopping option that mixes different parts of Medicare into a single plan.
To get the full advantage of Medicare Advantage, you need to enroll in Parts A and B and then pay your premium for part B. You also need to select Medicare Advantage and then seek out a private insurer.
Recently, Medicare Advantage will cover extras like shower grips for your bathroom or wheelchair ramps. They even can help pay for transportation to and from the doctor’s offices and meal delivery.
Medicare Part D
Part D is the prescription drug coverage part of Medicare. You must purchase Part D through private insurance.
All Part D plans have premiums and out-of-pocket costs. You may have to pay a flat copay for your medications. Otherwise, you’ll have to pay a percentage of the cost of your prescription.
You also may have an annual deductible.
The amount of money the cost of your medications will determine how much you’re responsible. So if your drug costs reach $4,020 this year, then you have to pay 25 percent of the rest of your prescription drugs that you buy for the year.
If the cost of your drugs continues to grow, you will have reached the point that Medicare calls catastrophic coverage. For example, if you pay $6,350 for medicines, you must pay 5 percent of the cost of your drugs.
As you look at your Plan D options, make sure the plan has your medications on its list of covered meds. You can find the list at medicare.gov.
You can always change your plans too. The open enrollment for Medicare runs from October 15 to December 7, 2020. Then the changes take effect on January 2021.
Resources like MedicareWire will help you know what your best options are as well.
Assess and Decide
Your medical needs and finances will best determine which plan you should choose. Make sure your doctors and medications are all on the plan you’d like. Then consider your financial situation to make sure you can afford the plan you’d like.
These Medicare facts are a great start to understanding how Medicare works and what your best options are.