Are you turning 65? Wondering about Medicare benefits? These decisions may seem complex and can impact many different aspects of your financial situation. What are the top 3 things you should consider when signing up for Medicare? In this blog post, we discuss several issues you should consider when enrolling for Medicare benefits.
For this post, we want to welcome Lance Otey, ALMI, AIAA, ARA, ACS. He is the executive director at Abundant Financial Group, a life and health insurance firm in the Dallas-Ft. Worth area. Lance specializes in Medicare, health insurance, and benefits for individuals, business owners, and employer groups.
As you approach your 65th birthday, it will seem like every insurance company has been anxiously awaiting this important milestone in your life, but instead of sending you birthday cards and wishes, they will inundate you with mailers and phone calls trying to advertise why they have the best products for you. On top of that, Medicare is structured with Parts A, B, C, and D and then plan options seemingly from A to Z. Let's try to make some sense of all this.
1. What is the 7-month window and what should you do?
Aside from special circumstances such as coverage through an employer or spouse, most people enroll in Medicare when they turn age 65. This is also known as "aging in" to Medicare. If that's you, your enrollment window will last for seven months, starting three months before the month of your birthday, and ending three months after the month of your birthday. In most cases, your Medicare coverage will begin on the 1st of the month your 65th birthday falls.
For example, if your birthday is April 15th, your enrollment window will run from January through July, and your coverage will usually start on April 1st (Note: there are some exceptions).
For many people, enrolling in Part A (hospital and inpatient care) is automatic. However, you should check with Social Security to be sure. Part B (doctors and outpatient care) may or may not require action on your part. If you are beginning, or have begun, to draw Social Security benefits, Part B should be automatic. However, if you are delaying Social Security, you will need to enroll in Part B either through 800-MEDICARE or Medicare.gov.
Knowing when to draw Social Security is a bit out of my wheelhouse and best left to an advisor like Brett and the folks at Forteris.
2. Income can impact your premium
You won't see the costs of Part A billed to you if you are, or will be, eligible for Social Security. This is because Part A is "premium-free" for those who qualify for Social Security benefits. However, there are five other Part B cost tiers based on your Modified Adjusted Gross Income (MAGI) from two years prior. Therefore, it is not uncommon for your Part B premium to be nearly double the standard premium of $144.60, at least for your first few years on Medicare.
This is also why having a good withdrawal plan in retirement is crucial. Withdrawing from certain accounts, such as your 401(k) or IRA, during retirement can push your Modified Adjusted Gross Income up. This in turn could also push your Part B premium up and add to your expenses in retirement. Having a solid withdrawal plan is crucial to financial success in retirement and, again, something that an advisor like Brett and the folks at Forteris can help with.
3. What are the parts of Medicare and why do you need a supplement or advantage plan?
There are four parts to Medicare: A, B, C, and D. As mentioned earlier, Part A covers Hospital and inpatient care and Part B covers doctors and outpatient care. Parts A and B are designed to work together to cover approximately 80% of your medical expenses. The problem is that there is no limit to how high YOUR 20% piece can go. For example, if you have a $1,000,000 claim, your piece could be around $200,000. Therefore, you need to figure out the best way to address that other 20%. This is where having a trusted Medicare advisor is crucial so they can help you find the best plan for your specific needs and budget.
One way you can go is Part C, also known as Medicare Advantage. Advantage plans work very much like traditional plans you might be accustomed to, utilizing deductibles, coinsurance, and maximum out of pocket expenses. They also come in HMO and PPO varieties, often include Part D Prescription Coverage, and many are offered at little or no cost to the insured.
The other option is a Medicare Supplement, also known as Medigap. These come in a variety of coverage options and premiums. The key benefits of Medigap are that you never have to worry about a network of doctors and hospitals; if they accept Medicare, they will take your supplement, regardless of which company you purchase it though and some plans are designed to cover most costs that you will incur, even in a "worst-case scenario", so you are taking care of the unexpected upfront.
That is where Part D comes into play. Part D is your Prescription Drug Plan (PDP). If you decide a Medicare Supplement is right for you, you will need Part D to cover your prescriptions and avoid potential future financial penalties. Part D is often included in Medicare Advantage Plans (Part C), but not with Medigap policies.
You cannot have both an Advantage and a Supplement. Both plans are excellent options, it just boils down to your specific needs and budget. Each choice has its advantages and disadvantages, so you must discuss what's right for you with your trusted Medicare advisor.
Signing up for Medicare can seem complex. There are many parts of Medicare to consider and several different options you may have when it comes to choosing either a Medicare Supplement or Medicare Advantage plan. These decisions can seem daunting and can also impact many aspects of your financial situation. Having the right advisors can make the decision-making process simpler. If you need help understanding your Medicare benefits and how they impact your overall financial plan, please contact us today.
You can also view our full interview with Lance Otey here, and don't forget to subscribe to our YouTube channel for more valuable insights.
Lance Otey, ALMI, AIAA, ARA, ACS is the executive director at Abundant Financial Group. Lance has more than 15 years' experience in the life and health insurance industry. Lance specializes in creating customized comprehensive benefit packages for individuals, business owners, and employer groups. Lance also specializes in Medicare supplements, prescription drug plans, advantage plans, and ancillary benefits.