If you are approaching the milestone birthday of 65, it is time to enroll in Medicare. It is important that you understand your seven-month initial enrollment period, which is three months before your birthday month and three months after. If you miss this seven-month enrollment window, you will get another opportunity in Medicare’s annual general enrollment period, which runs from January 1 through the end of March. If you enroll during this period, your coverage won’t begin until July and your monthly premiums for Medicare Part B will likely be higher.
If you are still working when you turn 65 and have a qualified group health plan with a credible drug plan, and your employer has at least 20 employees, you can choose to delay your enrollment in Medicare. Compare the costs and benefits of your work plan and Medicare before deciding. If you delay Medicare, you will get a special eight-month enrollment when you leave your job or your employer stops offering coverage. This will allow you to avoid the Medicare Part B premium while still covered at work.
The ABCs of Medicare
When you reach Medicare eligibility, you will be faced with a myriad of choices. It can be a difficult decision to choose health insurance, especially with all of the details involved with Medicare. There are five distinct parts of Medicare, each covering different aspects of your health care.
Part A Hospital Coverage
This is the portion of Medicare that pays hospital costs, including semi-private rooms, meals, nursing, and inpatient drug treatments. Medicare Part A also covers some benefits related to skilled home care, hospice care, and if you have to go into skilled nursing care, the first 100 days of that expense. You probably won’t have any premiums to pay for Part A because you paid for Part A while working with payroll taxes. If you don’t have enough work history, the premium in 2023 can be as much as $505 a month.
Part B Medical Coverage
Covers outpatient health care visits, including doctor office appointments, diagnostic testing, durable medical equipment, outpatient surgery, and ambulance services. Prescription drugs like infusions or injections that you have to visit a doctor’s office for are also covered. (Part D pays for most prescription drugs you take yourself). You will pay a monthly premium for Medicare Part B, and if your income is over certain thresholds, your premiums will include a surcharge based on your modified adjusted gross income from two years ago. Part B premium for most individuals will be $174.70 per month in 2023.
After you have paid your Part B deductible for the year, Part B kicks in 80% of covered medical services. There is a coinsurance of 20% that you will be responsible for.
Medicare Part B also covers preventive care without any co-pay for things like mammograms, colonoscopies, flu shots, and vaccines.
Part C Medicare Advantage
Part C are private plans covering both Part A and Part B bundled together, mostly in an HMO format, although some are available in a PPO plan. Different plans charge varying amounts when you see a medical provider in or out of your network.
The companies that offer Medicare Part C must follow certain regulations set by federal and state law. However, out-of-pocket costs and the access to services may differ depending on the plan. The company’s offering Part C can change those details every year, be sure to evaluate your Medicare Part C on an annual basis.
Part D Prescription Drugs
You need to sign up separately for a Part D plan that is sold by a private insurance company. Premiums will vary depending on the plan chosen, and there are surcharges for those with higher incomes.
There are five phases to Medicare Part D payments:
Deductible – Your Medicare Part D plan won’t start paying for your covered drugs until you meet the annual deductible. The maximum deductible allowed by law is $545 in 2024.
Initial coverage – Once the deductible is met, you pay copays or coinsurance for covered drugs, depending on where the drug falls in your plan’s formulary. When you have spent a combined total of $5,030 in 2024 for covered drugs, you move on to the next phase.
The doughnut hole – Sometimes called the “coverage gap,” rather than the copays or coinsurance on the plan’s formulary, you pay up to 25% of the cost of covered drugs. When you have spent $8,000 in 2024 for covered drugs, you will leave the coverage gap and reach catastrophic coverage. During this period, you will owe no cost-sharing for the costs of your covered drugs. The 5% coinsurance during catastrophic coverage was eliminated with the passage of the Inflation Reduction Act.
Catastrophic coverage – In 2023, you pay 5% of the cost of your covered prescription drugs or $4.15 for generic drugs, or $10.35 for brand-name drugs, whichever is higher. This phase continues until the end of the year. Starting next year, the Inflation Reduction Act eliminates that 5% coinsurance during the catastrophic coverage phase.
Medigap
The final of the five parts of Medicare is Medigap or Medicare Supplement Insurance. This is an additional private insurance policy that helps cover some of the out-of-pocket costs not covered by Original Medicare (Parts A and B). It’s important to note that Medigap policies don’t work with Part C Medicare Advantage plans.
It is essential to stay informed and proactive about your healthcare coverage in retirement. By understanding the basics of Medicare, enrolling on time, and carefully evaluating your healthcare needs, you can make the most of this valuable benefit and enjoy a secure retirement.
