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What You Need to Know About Medicare

  

After paying into Medicare for many years, you might think coverage will be free once you turn 65. Unfortunately, this is not the case. In reality, the national health insurance program comes with a variety of expenses - including premiums, copays, and deductibles. Additionally, if you sign up late, you might face life-time penalties. 


Each day, about 10,000 baby boomers turn 65. Fidelity Investments estimates that the average couple will spend a whopping $285,000 on health care from that age on. Budgeting your Medicare coverage is a key part of managing your expenses. 

Here’s what you need to know. 

 
The Cost 


If you have at least a 10-year work history, you will not pay premiums for Medicare Part A, which covers hospital stays, skilled nursing, hospice, and some home health services. But, there is a deductible and coinsurance rate. 


Part B, which covers outpatient care and medical supplies, has a standard monthly premium and a deductible. After the deductible, you typically pay 20% of covered services. 


Still, Parts A and B do not cover prescriptions. This need is met by a Part D drug plan. You can get a stand-alone plan to use alongside Original Medicare OR an Advantage Plan (Part C), which typically includes prescription drug coverage. If you go this route, your Part A and B benefits will also be delivered via the insurance company offering the Advantage Plan. 


Avoiding Penalties

 

If you tapped your Social Security benefits before age 65, you will automatically be signed up for Original Medicare. In this situation, you will see your Social Security check reduced by the cost of the Part B premium. 


If you have not begun collecting Social Security, the burden is yours to sign up. In this case, you get a seven-month enrollment period that starts three months before your birthday month and ends three months after. If you have insurance through an employer when you reach age 65, you may be able to delay signing up for Medicare with no penalties. 


Otherwise, if you fail to sign up for Part B when you’re supposed to, you will face a 10% penalty for each year that you should have been enrolled. The amount is added to your monthly premium. Part B enrollment isn’t required if you have medical coverage from your job. 


The penalty for not enrolling in Part D when you were first eligible is 1% for every month that you could have been signed up — unless you have qualifying coverage through an employer’s plan. 


Coverage Gaps 


Be sure to consider how you will pay for what Medicare won't. For instance, it generally doesn’t cover dental work and routine vision or hearing care. The same goes for long-term care, cosmetic procedures, and medical care overseas. 


Many people decide to pair Original Medicare with a supplemental policy, called Medigap, to help cover out-of-pocket costs like deductibles and coinsurance. You cannot, however, pair a Medigap policy with an Advantage Plan.



Thanks to CNBC.com for article content