Today I want to talk to you about healthcare in retirement. Specifically, I want to go over a few common misconceptions about Medicare. A colleague and friend of mine, Robert Fitzgerald, runs a Georgia-local business – Robert Fitzgerald Insurance Agency. Robert helps his clients navigate the ins and outs of Medicare, and put together a custom health care plan that works for their unique medical needs during retirement, as well as their budget.
I’ve known Robert for a long time, and when I decided I wanted to write a blog post about Medicare, I knew I’d want to reach out to him to ask a few questions. Our conversation provided a laundry list of common Medicare mistakes, or misunderstandings, that he consistently runs into – and how you can avoid them.
You Have Options
The first common misconception that Robert runs into when working with clients to organize a health care plan is that they don’t realize how many options are available to them. It’s almost a foregone conclusion that people will enroll in Medicare once they hit retirement, but there are so many different combinations of various Medicare Parts, or Medicare Advantage plans, to look at.
This flexibility is often a relief for pre-retirees who are concerned about hefty Medicare premiums. Typically, Robert says, people will need to look for both their baseline Medicare coverage (Parts A + B, which cover things like hospital visits and preventative care), as well as some kind of Medicare supplement or prescription drug plan. For some people, this means enrolling in Medicare Part A and B, as well as a supplemental plan that offers them other benefits like dental, vision, and prescription drug coverage.
However, some people choose to skip traditional Medicare coverage and elect a Medicare Advantage Plan. These plans are often attractive because of their $0 premium. With Medicare Advantage Plans, the government is paying the company to offer clients a plan – which means they can pass savings along to those who enroll.
Every state has a different set of Medicare Advantage Plans available, and some plans are better than others. Luckily, here in the Atlanta market, there are several competitive Medicare Advantage Plans. For some plans, the maximum annual out of pocket is between $4500 – $6700 (in network), and they cover a wide range of additional benefits from dental to vision to gym memberships to hearing aids.
Keep in mind that, while Medicare Advantage Plans may sound like a good idea, it’s still wise to speak with a professional who understands your unique medical needs and your financial situation. Medicare Advantage Plans still require a copay or coinsurance when you use medical services, and some of them are structured like traditional PPOs or HMOs that require you get the go-ahead from your primary care doctor before using a specialist medical professional.
Do You Know Whether or Not You’ll Be Automatically Enrolled?
According to Robert, one of the biggest questions people have about Medicare is when and how to enroll. What some people don’t realize is that, if you’re already collecting Social Security, you’ll be automatically enrolled in Medicare at age 65 when you become eligible. However, if you aren’t enrolled in Social Security yet, you’ll need to manually enroll yourself.
There Are Penalties for Late Enrollment
You can enroll in Medicare for a 7-month period surrounding your 65th birthday. You can enroll in the 3 months before your 65th birthday, during the month of your birthday, and for 3 months after your birthday month. If you enroll before your birthday, coverage will start during your birthday month.
However, if you worked for an employer with more than 20 employees after age 65, you may qualify for a Special Enrollment Period for Parts A and B after you officially retire and need Medicare coverage. If you fail to enroll during these periods, you’ll have a penalty that’s the equivalent of 10% of your monthly premium for every year you don’t enroll after you become eligible.
Medicare Doesn’t Cover Everything
Many people believe that Medicare is the end-all-be-all health care solution during retirement. What they don’t always realize is that traditional Medicare (Part A and B) doesn’t cover every medical expense you may face during retirement.
For example, Part A and B don’t typically cover dental, vision, or prescription drug coverage. To receive coverage for these “extras” you might need to look into supplemental Medicare coverage (Part D), or a Medicare Advantage Plan (which stands alone from Part A and B, and acts as comprehensive insurance coverage).
Do You Know How Medicare Premiums Are Calculated?
For high-income earners, Medicare premiums may be more expensive than they’re worth. Medicare premiums are calculated using your Adjusted Gross Income (AGI) from two years ago, based on your tax return. Typically, people enrolled in Medicare will pay a baseline of $135.00/month for premiums (approximately). However, if you and your spouse earn over $170,000 as a couple, it’s likely that you’ll pay significantly more – sometimes up to $500.00/month. In these cases, it’s especially important to weigh all of your health care options during retirement to make sure you’re getting the most out of your premiums.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.