The ABCD’s of Medicare

by Drew Snider, CFP®

Director, Financial Planning, Coastal Credit Union, Financial Advisor, CUSO Financial Services, L.P.

Member Tips

How well do you understand your retirement healthcare options? From Medigap, Part A, Part B, C, D and all the other letters of the alphabet, it can seem overwhelming. But it doesn’t have to be that way. Here are some basics to help you better understand the Medicare program and the choices you will face.

The Big Decision… “Original Medicare” or Medicare Advantage?

Original Medicare consists of Part A and Part B and become available when you reach age 65. All other Medicare programs are provided by private insurance companies. Medicare Advantage (also known as Medicare Part C), Medicare Part D for retiree drug coverage, and Medicare Supplement policies are all offered through insurance companies. These private insurance policies are strictly regulated by government oversight.

Medicare Part A, broadly speaking, covers hospital stays and, for most of us, will be premium free. On the other hand, Medicare Part B covers doctor and outpatient visits and there is a premium if you choose to enroll.

An individual in 2021 will pay at least $148.50 per month for the Part B benefit. If you file a single tax return and your adjusted gross income is above $88,000 you will pay an increased premium. Those who file a joint tax return with income greater than $176,000 will also pay a higher premium. There is a window around your 65th birthday to enroll in Part B and Part D. If you miss the window you will pay a penalty which results in a higher premium for the rest of your life.

Medicare Part A

Medicare Part A covers hospital services. Here is a more detailed list of the services covered.  It covers the cost of a semi-private room, regular meals, medications, and lab services while hospitalized.  In addition to in hospital services, some services can be received outside of the hospital. Those include a limited amount of skilled nursing, home health care and hospice care.

Medicare Part B

Included in Medicare Part B are doctor visits, outpatient services, physical therapy, durable medical equipment, laboratory services and a limited amount home health care.

What’s Not Covered

It is also important to know what is not covered by Medicare Part A and Part B. The three primary services utilized by seniors that is not covered by Medicare is dental, vision and hearing. Also, prescription drugs are not included in Part A or B so you’ll need to buy a Medicare Part D plan (for drug coverage). In planning for your retirement, it is important to factor these costs into your retirement budget based on your specific health circumstances.

As far as your retirement expenses, it’s important to know that Medicare has annual deductibles and co-insurance that come out of your pocket. Many retirees choose to buy a Medicare Supplement policy to cover these costs and provide more benefits.

Medicare Supplement Policies

When you get close to age 65, your mailbox and email inbox will be flooded with information and solicitations to buy the private insurance options that accompany Medicare Part and B. The first step is to determine if you want to go the Original Medicare route or choose Medicare Advantage. If you go the Original Medicare route, you will sign up for both Part A and Part B and then choose a Medicare Supplement policy and a Part D drug coverage policy. The policy options will be determined by your location and a variety of insurance companies offer a range of options for you to choose from. Be aware that some more rural areas may have less choices than urban and suburban zip codes. You will want to learn about the policy benefits and relative premiums to decide which is right for you. In choosing a Part D plan for drug coverage, be sure to check the formulary for the policies you are considering and be sure they cover your current medications and at a competitive price. Each year you will have the option to switch policies if there is a more desirable plan being offered in your location.

Medicare Advantage

If you choose the Medicare Advantage Plan (also known as Medicare Part C), you are effectively choosing to use private insurance to cover the services offered in Medicare Part A and B. It is also designed to be your Medicare Supplement and Medicare Part D plans. An important consideration when choosing Medicare Advantage is making sure your doctors are covered by the insurance plan you choose. Because it is a private insurance policy, the insurance company can decide to limit the in-network providers. However, a Medicare Advantage plan can offer services not found in Original Medicare like dental, vision, and hearing.

Open Enrollment

Medicare open enrollment is from October 15, 2021 to December 7, 2021. During this time (if you’re over 65) you can choose to change prescription drug plans, change Medicare Advantage plans, return to original Medicare, or enroll in a Medicare Advantage plan for the first time. As you evaluate your policy options, keep in mind that if you want to switch from Medicare Advantage to Original Medicare, enrolling in a Medigap policy may not be guarantee issue – meaning the insurance company offering the Medigap policy may require underwriting. Any changes made during the open enrollment period take effect January 1, 2022.

Considering Your Retirement Decisions? Let’s Talk.

Whew, that was a lot to absorb! But we’re here to help you navigate all your retirement decisions. As a Coastal member, you can connect with one of our CFS* Financial Advisors to schedule your free retirement plan review. We can assess your current retirement income strategies and your insurance needs to see if you are on track to meeting your financial goals…without all the stress.

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