Medicare Planning

Healthcare is often one of the biggest expenses seniors will face during retirement. While some may have employers that offer continuing health benefits after retirement, few are so fortunate. Because of this, it’s imperative to make healthcare coverage a focus during your retirement planning. Having a good understanding of the costs and coverages of your available healthcare options will help you to decide which makes the most sense financially for your particular situation. The two primary ways you can get health insurance when you retire are through original Medicare (Part A & Part B) or with a Medicare Advantage Plan through a private insurer (Part C). 

What Is Original Medicare (Parts A & B)?

Medicare Parts A & B, or original Medicare, is sometimes called “traditional Medicare” or “fee for service” Medicare. With original Medicare, you can go to any doctor, hospital, skilled nursing facility, or outpatient treatment clinic that accepts Medicare assignment. Original Medicare is made up of two parts:

  • Part A, which covers mostly inpatient care 
  • Part B, which covers mostly outpatient care

Part A

Part A is often called hospital insurance, because it pays for the costs associated with overnight stays in a hospital, skilled nursing facility, or psychiatric hospital. These costs can include meals, nursing services, and the hospital room itself. Part A may also cover home healthcare services and hospice care in specific circumstances.

Part B

Many people who have Medicare don’t go to the hospital, but everyone sees a doctor or needs screenings and lab tests at some point. Whereas Part A is known as hospital insurance, Part B is often referred to as medical insurance because it covers outpatient care. Preventative services, annual checkups, lab tests, and physical therapy all fall under the umbrella of Part B.

What Is Part D? 

Medicare also offers voluntary prescription medication coverage, known as Part D, to everyone with Medicare. To get Part D, you must join a plan run by an insurance company or other private company approved by Medicare. Although these plans vary in price and benefits, they all cover a broad number of brand name and generic drugs available at local pharmacies or through the mail. In addition to a wide range of pharmacies offered, each prescription plan will have a different list of medications it covers, called the plan’s formulary. It is important to ensure that your plan covers the drugs you need when deciding on a plan. Unlike Part A and Part B, premiums for Part D are not regulated by the government and will vary from plan to plan. 

If you choose not to enroll in Part D right away, you may face a late penalty, depending on your circumstances, forcing you to pay higher monthly premiums for the rest of the time you have medication coverage from Medicare. Many states have low-cost Part D plans that can act as a safety net in case your health situation changes. Consider this even if you don’t take prescription medications now.

What Is Medigap?

Medigap is a supplemental insurance sold by private companies that you can get on top of original Medicare (Parts A & B). Medicare covers many healthcare costs, but it does not pay for every expense. You are responsible for these costs, sometimes called the “gaps” in Medicare coverage. Medigap helps pay for the gaps, much like retiree insurance.

There are several different Medigap plans available. For varying premiums, these plans cover varying portions of the out-of-pocket expenses left over after Parts A & B. Depending on the level of coverage you decide to purchase, a Medigap plan may cover your deductibles, the 20% coinsurance portion from outpatient services in Part B, and per-day coinsurance costs for overnight stays not covered in Part A.

What Is Medicare Advantage?

Medicare Advantage (also referred to as Medicare Part C) is an alternative to original Medicare (Parts A & B) that is offered by private insurance companies and operates similarly to what people are accustomed to with employer-sponsored plans. These plans are typically required to offer everything that is covered through original Medicare (excluding hospice). There may also be additional prescription drug, dental, or vision coverage. Medicare advantage plans carry their own premiums on top of the Medicare Part B premiums that you will still be required to pay. For many people, this option offers more help at a lower cost.

With most Medicare Advantage plans, doctor’s office visits, lab work, surgeries, and other procedures are covered after paying a copay. The specifics of each plan will depend on the insurance company and the policy. Because Medicare Advantage is obtained through a private insurance company, there is the risk of premiums, benefits, and copayments changing from year to year. In addition, you may have to get referrals to see specialists or be limited to providers within the HMO or PPO network. Unlike original Medicare, Medicare Advantage has a maximum out-of-pocket spending limit that cannot be exceeded annually. It is not possible to carry Medigap coverage and a Medicare Advantage plan at the same time. For many people, this option may offer more coverage for a lower or similar cost.

When Can You Enroll?

There are several times when you can enroll in Medicare, and each of those times has certain rules around applying and when your coverage will begin. Understanding when you can enroll and the best time to do so is an integral part of getting your Medicare.

Initial Enrollment Period

The initial enrollment period (IEP) is the first time you can sign up for Medicare, and it consists of the following timeframe:

  • The three (3) months before your 65th birthday
  • The month of your 65th birthday
  • The three (3) months after your 65th birthday

 You may join Medicare Parts A, B, C, and D during this time.

Special Enrollment Period

Note that there are special enrollment periods for Medicare Parts A & B with varying criteria you must meet in order to be eligible to enroll during a period other than your initial enrollment period (IEP).

How Can You Find the Best Policies? is a great resource for all your questions about Medicare. They even offer the Medicare Plan Finder, which allows you to find and compare Medicare policies. This personalized search tool will provide you with more accurate cost estimates and coverage information based on your location, your medical needs, and which medications you may be using.

And if all the information above weren’t enough to process, it’s important to note that there are also Medicare supplement plans. That’s why it’s important to speak with a Medicare specialist to discuss all of the options and what makes the most sense for you.

If you’re a client of RFA, call your Senior Wealth Advisor; he or she can connect you with a specialist who can walk you through the process. 

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