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Understanding Your Medicare Choices

Without question, some of the most important decisions retirees need to make involve Medicare and the many related questions about healthcare (and paying for it).

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What issues should i consider before i retire?

Without question, some of the most important decisions retirees need to make involve Medicare and the many related questions about healthcare (and paying for it). Not surprisingly, concern over healthcare costs is almost always near the top of the list when seniors and those approaching retirement are asked what they worry about most. Medicare, the government-sponsored healthcare program for persons 65 and older, has a number of moving parts that require some careful thought, so in order to gain the peace of mind you want around your healthcare costs in retirement, there are a few key principles to keep in mind.

Medicare—what is it?

First of all, it’s not the same as Medicaid, which is the government healthcare program for low-income children, families, seniors, and persons with disabilities. Instead, Medicare is a program for retired persons and those over 65 who have paid into the system during their working lives. The program consists of four parts:

  1. Medicare Part A (“Basic Medicare”) takes care of most hospital costs and is free for most enrollees;
  2. Medicare Part B covers outpatient costs like doctor visits and most diagnostic tests, for which you will pay a monthly premium based on your income, as determined by the government;
  3. Medicare Part C (“Medicare Advantage”) is offered by private insurers under government regulation and can replace many of the benefits offered by Medicare Parts A, B, and (usually) D, as well as other coverages not offered by Medicare;
  4. Medicare Part D covers your prescription drugs, and you will pay a monthly premium that varies by plan to one of the private companies contracted through the government to offer the coverage.

You may also hear people talk about “Medigap” or Medicare supplement plans. These plans are offered by private insurers, and we will discuss them in more detail below.

How do I get it?

Most people sign up for Medicare during their initial enrollment period, beginning three months before their 65th birthday and extending three months afterward. There is a penalty for not signing up during your enrollment period that can be imposed later, when you do sign up. One exception to this rule, however, exists for persons 65 or older who already have “creditable coverage” (usually from a company plan offered by an employer with 20 or more employees, or possibly from one of several government-sponsored plans). If you can demonstrate creditable coverage, you will generally not be assessed a penalty when you do eventually sign up for Medicare. This often applies to persons 65 or older who are still working for their employers.

Should I get Medicare Advantage or Medigap coverage?

Because both of these plans are offered by private insurers, not the government, provisions and provided coverage can vary. If you’re considering Medicare Advantage, you’ll probably want to first make sure that your preferred primary care physician is in-network with the plan you’re considering—not all of them are. You must first be enrolled in Medicare Parts A and B to qualify. Medicare Advantage plans offer prescription drug benefits and other types of coverages. Medicare Advantage plans may be delivered in several ways, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), special needs plans (SNPs), Medicare Medical Savings Accounts (MSAs), or private, fee-for-service plans (PFFS).

Medigap coverage differs from Medicare Advantage in that it works in conjunction with original Medicare, rather than replacing some Medicare benefits in the manner of Medicare Advantage. Like Medicare Advantage, however, Medigap requires membership in Medicare Parts A and B. Typically, Medigap coverage provides benefits that help cover deductibles, certain co-pays, and certain types of emergency medical travel expenses. Medigap does not offer prescription drug benefits.

For either Medicare Advantage or Medigap, it’s important to compare plans and premiums to make sure you’re getting the best benefit for your premium dollars. The same is true if you decide to purchase a Part D plan to cover your prescription drug costs. Because these plans are offered by private insurers, doing some comparison shopping is generally a good idea.

At Milestone Money, we want you to have all the information you need to make informed decisions about Medicare, Social Security, and other important financial aspects of retirement. To learn more, visit us on Facebook.

What issues should i consider before i retire?

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Life is full of financial milestones. We pay for college, we get married, we start businesses. But the most important financial decision we will ever make is when and how to retire. Milestone Money helps you map success to and through retirement.

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