By Mark Cooke

Updated December 22nd, 2021

It’s that time of year again when we chronologically advantaged (age 65 and beyond!) get our mailboxes filled with Medicare supplement advertisements. The Medicare system does a wonderful job of supporting our health care, but it can be equally as overwhelming to determine the right policy for those turning 65, as well as how and when to sign up.

Since this complicated subject has so many options, we’re touching on some key highlights and giving you resources to help.

Signing Up for Medicare

The only people who do not need to sign up for Medicare are those still working past age 65 and those who are covered under a group plan that covers 20 or more employees and their spouses. There are also coverage options for some retirees through a retiree plan. Anyone who finds themselves in these two situations should contact their employer or benefits administrator for details on their coverage and costs. In some cases, it might be best to move to Medicare.

If you are turning 65, it is important to know the timetable for signing up. Signing up late can incur penalties that never go away! Medicare enrollment is not automatic unless you are already receiving a Social Security benefit. If you’re not receiving a benefit, you should be proactive in beginning your signup three months before your 65th birthday.

You have only seven full months to sign up: three months before you turn 65, the month of your birthday and three months after. This may seem like plenty of time, but the sooner you sign up, the more time you will have to select the most appropriate plan for your situation.

You can sign up by contacting Social Security online at www.socialsecurity.gov or by calling 800-772-1213. Be aware that at age 65, Medicare becomes your primary payer, and any private insurer will not pay the bills until Medicare pays its share. However, if you are covered under an employer plan that covers 20 or more employees, your employer plan remains as your primary payer.

Your Medicare Options

Let’s quickly go over the different parts of Medicare.

• Part A covers the cost of hospitalization. It has no upfront premium associated with it because you have been paying for it through payroll deductions throughout your career.

• Part B covers the cost of doctor visits and other health care services, and there is a premium based on your income.

• Part D covers the cost of prescription drugs and is offered through private insurers.

If you are not sure if you are eligible for Part A or Part B, check this flowchart .

Since there are no limits to out-of-pocket expenses, it is important to get supplemental insurance known as “Medigap” or a Medicare Advantage plan. You will also need a prescription plan (Part D), which is sometimes included in the Advantage plans but not the Medigap plans.

The best plan for you depends on your state of residence and the current medications you are prescribed. We highly recommend using an informed health insurance agent who would be willing to walk through the options with you. If you are local to our Gainesville, VA area financial planning firm, feel free to call us for a recommendation!

Medicare Election Periods

If you are on Medicare, the annual coordinated election period occurs from October 15 through December 7, much like a private insurer’s open enrollment.

Since plans and premiums change, and because your health situation might have changed (especially prescription drug usage), it is a good idea to review your options each year. Many drug plans and Medicare Advantage plans offer seminars to help you learn more about the options available to you.

Medicare Premiums and Costs

Some people think Medicare is free, but this is not true. Only Part A’s “premium” is free, but if hospitalized, you will pay a deductible before Medicare pays. If your hospitalization lasts more than 60 days, you will be responsible for paying a portion or even all of the daily rate.

Part B has a premium (except for those who qualify for low-income special assistance) that is deducted from your Social Security check if you are receiving a benefit. If not receiving Social Security, you will be billed directly from Medicare. Since Medicare pays only part of your bill, your supplemental insurance could pick up the extra cost, depending on the plan you choose.

Medicare does subsidize prescription drug coverage through payments to private insurers, but you will likely have to pay a monthly premium. There may also be an annual deductible, as well as a copayment or coinsurance each time you fill a prescription.

For Part B and D plans, you may also be subject to the income-related monthly adjustment amount, known as the IRMAA surcharge. This is applied if your modified adjusted gross income (MAGI) exceeds $91K if you file taxes as a single, or $182K if you are married, filing jointly, for the previous year. Check this chart to see if the IRMMA surcharge will apply to you.

The Myth of Medicare and Long-Term Care

Let’s clear up a misconception about long-term care expenses that may catch you by surprise — Medicare isn’t enough! If you need help with activities of daily living (bathing, dressing, etc.) or if you need help because of cognitive decline, Medicare will not cover the care.

Family members deliver the majority of long-term care in the United States, oftentimes because of the high cost of professional care. It is important to have a plan in place to cover these potential costs either by self-insurance, a stand-alone long-term-care policy, a hybrid policy (typically life and long-term care) or a reverse mortgage line of credit.

When thinking over and planning your future health care expenses, it is helpful to talk to a financial advisor to integrate this into your overall financial plan. There are often many options available you may have never thought of!

Since you’ve come this far on the Medicare enlightenment journey, we’d like to send you The Baby Boomer’s Guide to Medicare Planning, which goes into more detail. Email mcooke@heritagefinllc.com to request your free copy.

In addition, you can schedule a complimentary consultation with a fiduciary financial advisor to discuss your personal situation.