11/7/17

If you’re turning 65 soon, it’s time to learn the ins and outs of Medicare, the federal health insurance program for seniors that is run by the Centers for Medicare & Medicaid Services (CMS). Currently, 57 million beneficiaries—or about 17 percent of the U.S. population—are enrolled in Medicare. And that number is expected to soar to 79 million by 2030, according to the AARP.

To fully understand Medicare, here’s what you need to know:

The Parts of Medicare

There are four components, or parts, to Medicare:

• Part A covers hospitalizations, hospice, skilled nursing care and home health.

• Part B covers outpatient care, preventive care and medically necessary services and supplies, like wheelchairs or walkers.

• Part C, or Medicare Advantage, is private insurance that offers Medicare Part A and Part B services, and usually additional coverage, like vision, dental, hearing and prescription drug coverage.

• Part D is prescription drug coverage, which is separate from Part A and Part B, but is sometimes covered in Part C.

You may also have heard of a Medicare Supplement, which covers what Part A and Part B won’t, including copayments, coinsurance and deductibles.

How much does Medicare cost?

Becoming eligible for Medicare is one of the biggest selling points of turning 65. But Medicare isn’t free. While most people won’t pay a premium for Part A coverage (that came out of your paycheck all those years), the other parts carry premiums that are typically much lower than private insurance premiums.

Part B premiums are based on income from two years ago. So, if you recently retired, you might pay more because of your income. Monthly premiums range from $134 to $428.60, depending on your income level.

Part D is also based on income—sort of. In addition to a monthly premium, which MyMedicareMatters.org says is $34 on average, CMS may also tack on an income-related monthly adjustment amount (IRMAA), based on your tax return from two years prior. The IRMAA kicks in for individuals making more than $85,000 and joint filers making more than $170,000. The more you make, the higher the IRMAA, which ranges from $13.30 to $76.20.

If you’re nearing 65 and have a Health Savings Account, make sure the contributions stop once you enroll. The good news is you can still use the funds to pay for qualified medical expenses, even if you’re on Medicare.

How do I sign up?

When you're first eligible for Medicare, you have a seven-month initial enrollment period to sign up for Part A and/or Part B. This enrollment period begins three months before your birthday month and ends three months after the birthday month. If you don’t enroll during the period, you may have to pay a penalty for the rest of the time you’re on Medicare. CMS gives you a little more time to secure Part D coverage—63 days after the initial enrollment period ends—before paying a permanent monthly penalty.

Every year, Medicare Part D and/or Medicare Advantage enrollees can review their coverage and choose another option during the Medicare open enrollment period, which runs this year through Dec. 7.

 

The FMB Advisors Blog

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