Medical insurance can be a major expense for retirees.
The government segments Medicare plans into four categories: A-D, which I will explain at a high level below. There are also standardized supplemental plans available, known as Medigap policies.
Understanding the Medicare program in its entirety can save you money and ensure you are well taken care of.
A – Hospital Insurance
This portion of Medicare is free if you or your spouse have paid into Social Security through employment for at least 10 years.
What’s included in Part A?
– Inpatient hospital services, along with some skilled nursing and hospice care.
Important info about Part A
– Most people do not have to pay a premium. However, deductibles and co-pays will apply.
B – Medical Insurance
This supplemental plan is an optional program, with a monthly premium that can be deducted from your social security check.
What’s included in Part B?
– Doctor’s services, diagnostic tests and outpatient care.
Important info about Part B
– You may have coverage for Part B through your employer if you are still working.
– If you don’t sign up at age 65, your premium increases and will remain elevated for the rest of your life.
– A premium, deductibles and co-insurance will apply.
C – Medicare Advantage Plans
In its simplest sense Part C aggregates Part A with Part B. They are private plans that may provide more coverage than the first two parts would independently.
What’s included in Part C?
There are two coverage options:
1) Medical only
2) Medical with prescription drug coverage
Important info about Part C
– Most states allow for pre-approval if you sign up within six months after you turn 65.
– Monthly premium and fixed co-pays will apply. Certain plans also have a deductible.
Medigap, Medicare Supplement Plans – Alternative to Part C, Medicare Advantage
Medigap is a group of 10 standardized plans available through the private market that assist with out-of pocket expenses.
What’s included in Medigap?
– Medigap covers the gaps in Medicare Parts A and B.
– Drug coverage requires the addition of a stand-alone prescription drug plan, just like Medicare Part C medical only coverage.
Important info about Medigap
– Unlike Part C, it does not aggregate with Parts A and B. Rather, it serves to fill in the gaps of A and B.
– Monthly premium will apply. Copayments and co-insurance are plan dependent.
D – Prescription Drug Coverage
There are two ways to obtain Part D coverage: 1) through a Medicare approved stand-alone plan or 2) Through a Part C Medicare Advantage Plan with prescription drug coverage.
What’s included in Part D?
-Each plan maintains its own list of covered drugs.
-There is a “donut hole” in the program. The hole begins when your total retail cost of drugs (your cost plus Medicare Part D’s contribution) reaches $2,970. It ends when your actual out-of-pocket costs reach $4,750. Note: these are 2013 figures, which are subject to change.
Important info about Part D
-Monthly premiums and co-pays are plan dependent.
Doing your homework can save you money or enhance your coverage for the same price. A good place to start is with the Medicare Plan Finder, found on Medicare’s website.
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Lowell developed a passion for finance in high school, after some hard lessons learned. Now as a Wealth Advisor, he appreciates the opportunity to help his clients articulate, achieve, and expand on their financial and associated life goals. He particularly enjoys working with mid-career technology professionals.
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