Retirees’ most commonly identified retirement threat is reduced Medicare benefits. That’s ahead of reductions in Social Security, market volatility, and insufficient retirement savings.
Medicare pays for a big share of retirees’ health care expenses — nearly half, in fact. However, it doesn’t cover everything. Health care costs have a big impact on retirement planning, and Medicare involves making several choices and meeting important deadlines. Understanding some of the various provisions of Medicare is essential to making the most of this benefit.
The A, B, Cs (and Ds) of Medicare
Medicare is a federal health insurance program for individuals age 65 and older, or who are disabled. There are four main parts to the program:
Part A includes health care services under the Original Medicare Plan and covers major medical hospitalization.
Part B also includes health care services under the Original Medicare Plan, and covers everyday doctors’ services.
Over time, both Part A and B have expanded to provide more coverage. Parts A and B are the mainstays of Medicare coverage today.
Part C, also known as the Medicare Advantage Plan, is an option for supplemental coverage. This program is still a part of Medicare, but coverage is provided by private insurance companies. For that reason, pricing and certain aspects of the coverage may vary.
Those who join a Medicare Advantage Plan get all of the medical coverage provided by Parts A and B. Furthermore, some plans may provide additional benefits to help cover costs.
Medicare Part D helps pay for insurance coverage for outpatient prescription drugs. Insurance companies and other organizations are approved by Medicare to sell this coverage.
Enrollment in Part D is voluntary, but you have to be enrolled in Parts A and B to enroll in Part D. In addition, you must enroll in Part D within three months of being eligible for Medicare or you’ll pay a penalty. The one exception is if you have prescription coverage under an employer or union plan that is at least as good as the coverage under Part D.
When you’re eligible
Typically, you’ll qualify for Medicare benefits if you’re 65 or older and qualify for Social Security benefits (even if you haven’t elected them yet). You’re eligible on the first day of the month you reach 65.
If you don’t qualify for Social Security, you may still qualify for Medicare based on the eligibility of a spouse, ex-spouse, or deceased spouse. You could also be eligible based on government employment.
When to enroll
Once you’re eligible for Medicare, there are only certain times you can enroll. A
seven-month enrollment period starts three months before the month you reach 65, and ends three months after the month you turn 65. There’s also a general enrollment period each year from January 1 through March 31. However, other deadlines and requirements may apply. Visit medicare.gov for details.
Medicare is a great benefit, but it doesn’t pay for everything. That’s why many people get some kind of gap coverage, sometimes called Medigap, to help pay for expenses not covered by Medicare as well as deductibles and coinsurance.
Those who don’t have supplemental coverage from an employer or union may buy a Medigap policy from a private insurance company. Premiums and coverage levels can vary by company, type of coverage, and state.
There’s a six-month open enrollment period to buy a Medigap policy. This starts the first month you are age 65 or over and are also enrolled in Medicare Part B. If you don’t enroll during this time, you may not be able to enroll later or get the policy you want — or it might be at a higher price.
Learn all you can
Medicare is an essential benefit, and it pays to know as much as possible. But it’s also complicated, so don’t be hesitant to reach out for help. Contact your financial professional, or you can also visit the Medicare website at medicare.gov or call Medicare directly at 800-MEDICARE.
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