If you are approaching the age of 65, congratulations! You are closer to retirement and a new season of life. With it, come many changes, including healthcare and insurance.
An important component to navigate at this age: Medicare. It has many benefits, but can be complicated to understand. Let’s look at the essential information you need to know, tips, and common mistakes.
Medicare Basics
Ninety-one percent of the U.S. population under 65 years old has public or private health insurance. For those aged 65 and older, over 99 percent of the population is covered, thanks to Medicare. We’ve all heard the term, but what exactly is Medicare?
It is a health insurance program that is funded and run by the government. Available to U.S. residents over 65 and to people younger than 65 with certain disabilities, Medicare offers assistance with healthcare and medication costs. Medicare is not considered comprehensive healthcare because it does not cover dental, hearing, and vision.
Any kind of health insurance requires both the insured person and the company to share in the expenses. Before we look at what Medicare covers, it is good to review certain terms to make the benefits clearer. These terms apply to most insurance plans.
Premium. This is the amount paid each month for insurance coverage. It is a set monthly amount.
Deductible. The deductible is your portion to pay for the services you received. Once that is paid, insurance pays the remainder for covered services. This amount can change from year-to- year.
Copayment. A fixed amount you pay on site for office visits, urgent care, or emergency services. These do not count toward the deductible.
Coinsurance. Once you’ve met the deductible amount for the year, you and the insurance company share the cost of services. They pay a certain percentage and your percentage is called coinsurance.
Medicare coverage is broken down into four different areas: Parts A, B, D, and the alternative Part C.
● Part A: Hospital. Hospital stays and services, hospice care, and skilled nursing facilities are covered in Part A. There is usually no premium required (unless you have not worked enough years to qualify) but there is a yearly deductible. For 2022, that figure is $1,556.
● Part B: Outpatient. Covered in this part are ambulances, doctor’s office visits, labs, and other outpatient services. There is a monthly premium (cost depends on your income) and an annual deductible (currently $233). The coinsurance percentage is 20 percent of costs, with Medicare paying 80 percent.
● Part D: Prescriptions. This part covers prescription medicine that you take yourself. You choose and pay for a prescription drug plan that matches your needs. Most of them will require a premium and a deductible. Your coinsurance percentage will vary from plan to plan.
● Part C: Private Alternative. Part C is called Medicare Advantage (MA) and it is a private alternative to Medicare. Medicare approves alternative providers and works with them. You choose and pay for this private insurance plan, which normally bundles Parts A, B, and D into an HMO or PPO. Some of these plans also include dental and vision.
Essential Tips to Avoid Common Mistakes
Now that you know the basics of Medicare, we can look at some essential tips that will help you avoid common mistakes. Medicare, like anything, has rules and regulations that must be followed or penalties will be applied.
These tips include:
● Enrolling at the Right Time. To sign up for Medicare Part A, B, and D, you have a seven-month window to enroll. Everyone who wants to sign up for Medicare has an IEP, or initial enrollment period. The month you turn 65 years old, plus three months before and three months after, is considered your IEP. As an example, if your birthday is in July, your enrollment period window lasts from April 1 to October 31 in the year that you turn 65. What if you miss this window? You can still sign up during general enrollment, but will pay a onetime late fee. The bad news is you will also pay higher premiums for the rest of your life.
● Comparing Medicare and Medicare Advantage. Deciding on the type of coverage you need as you progress into your later decades is important. You will want to compare original Medicare with the private alternative, Medicare Advantage, to see which one best fits your lifestyle, health needs, and financial situation.
● Researching Doctors and Drug Plans. It is important to do some legwork and find out which plans include your preferred doctors and which ones cover the medications you require.
● Understanding How Your Current Insurance Works with Medicare. You may still be employed after the age of 65 and receive insurance through your company. If your employer has over 20 employees, that private health insurance will be considered your primary coverage. Less than 20 employees: Medicare will be considered your primary coverage with the private insurance paying the rest.
● Signing up for MediGap. If you have chosen Medicare (not Medicare Advantage), you can sign up for MediGap. This is a supplemental insurance policy that pays for some or all of your out-of-pocket expenses. Examples of what it can cover include copays, coinsurance, and deductibles. The best time to enroll is during the six-month open enrollment window which starts the month you turn 65 years old and have enrolled in Part B. Insurance plans will give you the best rates in this period and cannot deny you coverage for any pre-existing conditions you may have. If you miss this window, your premiums will be higher or they might reject you for coverage because of your health issues.
Final Thoughts
As you get closer to age 65, it is important to educate yourself on what Medicare entails and how you can make the best decision for your health. These choices can sometimes sneak up on you and take you by surprise. But with a little pre-planning and forethought, you can look forward to turning 65 with confidence.