While most Americans pay into the Medicare system, many do not understand the benefits they will be eligible to receive at age 65. There are eight important things to understand about the value of health insurance in retirement years.
1. Tax Rates
The majority of workers pay 1.45 percent of their wages toward Medicare, and employers match that contribution. Those who are self-employed pay almost three percent of their income into the fund. Under the Affordable Care Act, people who earned more than $200,000 and couples who earned more than $250,000 were required to pay an additional 0.9 percent starting in 2013.
2. Enrollment Period
People can sign up for Medicare three months before they turn 65, and coverage may start as soon as the first day of the person’s month of birth. Initial enrollment continues for the first three months following the individual’s birthday. However, it is also possible to enroll between the first day of January and the last day of March each year. People who sign up late may have to pay a penalty for late enrollment, so it is best to sign up as early as possible. For each 12-month period a person is eligible but does not enroll, Part B premiums increase by 10 percent. Individuals or spouses of individuals who are covered by group plans at work must sign up within eight months of leaving the job to avoid higher costs.
3. Upfront Expenses
There are copay fees, coinsurance and deductibles with Medicare. The deductible for Part B was almost $150 in 2013, and Medicare covered 80 percent of approved services after the copay was met. There are no annual limits for what a person has to pay out of pocket.
The majority of retirees do not have to pay premiums for Part A hospital insurance, and the standard amount for Part B was slightly more than $100 in 2013. However, retirees who earned more than $85,000 or couples who earned more than $170,000 had to pay more.
5. Free Physicals
During the first 12 months of Part B coverage, a person is eligible for a free preventative care visit with a doctor. This visit usually includes a medical history review and recommendations for a preventative care plan. After being enrolled for a year, members are also eligible for a free annual wellness visit to address further illness prevention measures.
6. Supplemental Coverage
It is hard to guess how much upfront costs will be for regular Medicare. This is why many retirees supplement their coverage with Medigap or Medicare Advantage plans. There are extra premiums, but these plans often fill the gaps for other services that regular Medicare does not cover. For those who have a large amount of medical expenses, the peace of mind provided by these policies is worth the investment of paying for them. Medigap’s open enrollment period begins the month a person turns 65 and lasts for six months. People who enroll during this time are guaranteed the right to purchase any policy sold in their state whether they have poor or good health. However, there are no guarantees after the six-month period passes.
7. Part D Plan Selection
Retirees have the freedom to choose a new Part D prescription plan every year during open enrollment. This period is from the middle of October through the first week of December. Even those who are happy with their current plans should compare available options during this time to see if there are any new plans offering better coverage. Unless a person changes plans, his or her coverage is automatically renewed each year.
8. Free Preventative Care
Many of the preventative services are provided without policyholders having to pay deductibles. Some of these include breast cancer screenings and bone mass measurements. If problems are found, there could be additional costs. For example, a colonoscopy is a covered procedure, but a person may have to pay 20 percent of the bill if polyps are found and must be removed. For more information about these plan options, discuss concerns with an agent.