Your Financial Future
Once you turn 65 and stop working, you no longer have a choice about health insurance. Medicare will be your primary insurer.
Medicare is a government plan with different parts. Part A covers hospital and more and is premium free to people with at least 40 quarters of paying into Social Security. You can also qualify for this coverage if your spouse meets this requirement. There is a deductible of $1,632, and after that is an 80/20 plan like the rest of Medicare.
Part B covers doctors, tests and other things. It charges a monthly fee (currently $174.70 per month) which is deducted from the Social Security checks. If you are not currently receiving checks, you will be billed quarterly. It has a deductible of $240 which must be paid before coverage begins. CMS estimates that this premium only covers about 25% of Medicare’s costs. This is still an 80/20 benefit so other costs could be involved. Higher income recipients could be charged higher monthly premiums under the IRMAA provisions. These can be as high as $675 per month. People often become subject to this additional tax if they pull too much money out of qualified accounts.
Part D is for drug expenses. Originally Medicare did not cover drugs, but this coverage was added during the George W. Bush presidency. It has a deductible of up to $545. The cost of individual drugs can range from nothing for generics to very large amounts for some newer drugs. Cost is outlined in the formulary.
You must enroll in Medicare on a timely basis or you will be subject to a lifetime surcharge. If a person is receiving Social Security when they turn 65, they will be automatically enrolled in Medicare. If they or a spouse are still working for a company with 20 or more employees, they can opt out of Part B. If they are not receiving Social Security, they can sign up three months before their 65th birthday, the month of, or three months after. Failure to do so in a timely manner will create a 10% penalty for each year you are late. Signing up late could make you ineligible to begin until the next general enrollment period which runs from Jan. 1 to March 31. This means you could have no health insurance for many months and you would be responsible for any medical bills.
Many people cover these gaps and copays through commercial insurance. Medigap plans bill you a fee each month that usually increases as you age. There are different levels of plans depending on how much coverage you want. These plans allow you to see any doctor who accepts Medicare and is accepting new patients. They also do not provide some of the additional benefits that the other type of coverage might include. For the first six months after you qualify for Medicare, these plans must accept everyone no matter their health, but after that time you may have to go through underwriting.
The other type of secondary insurance is advantage plans. These are sometimes offered at no out-of-pocket cost to seniors. They can do this since the insurance company receives funds every month from the government to provide your care. These plans sometimes include things Medicare does not cover such as hearing, eye care or gym memberships. Most plans cover some prescription cost, so you don’t need an additional plan as with Medigap.
The government Medicare is involved with both types of supplement coverage. It is important that your retirement planning includes health care costs. None of the above provides long term care coverage.