If you’re nearing retirement, it’s important to understand the ins and outs of Medicare. This quick primer should help.
Once you retire, you may find that a good number of your expenses start to decrease. But if there’s one expense that’s likely to increase, it’s healthcare.
That’s why it’s so important to read up on Medicare ahead of retirement. Knowing how the program works can help you better plan for medical costs. Here are a few key points to be aware of if you’re feeling like you’re in the dark.
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1. When eligibility begins
Medicare eligibility starts at age 65. However, your initial enrollment window spans seven months. It begins three months before the month of your 65th birthday and ends three months after that month.
If you don’t sign up for Medicare during that initial enrollment window, you may have to wait until the program’s general enrollment period, which runs from Jan. 1 through March 31 every year. But waiting to enroll puts you at risk of surcharges on your Part B premiums for life. Unless you’re covered by a qualifying group health plan (which usually means a plan with 20 employees or more), your best bet generally is to sign up for Medicare on time.
2. What’s covered and what’s not
Medicare covers a host of healthcare needs for seniors, from outpatient care to diagnostic exams to surgeries and hospital admissions. But there are a number of key healthcare services that Medicare won’t cover. These include dental care, eye exams, and hearing aids.
While original Medicare won’t pay for these services, many Medicare Advantage plans will. Medicare Advantage is an alternative to original Medicare and works similarly to the health insurance plans many people get through their employers.
With Medicare Advantage, you’re generally limited to a specific network of healthcare providers. But you may find that your costs are lower as a Medicare Advantage enrollee because you’re getting coverage for a wider range of services.
3. What costs are involved
One big misconception about Medicare is that it provides free healthcare, which is far from true. While most enrollees don’t pay a premium for Medicare Part A, which covers hospital care, there are out-of-pocket costs for a hospital stay.
This year, the inpatient hospital deductible for Medicare Part A is $1,632. And that only covers your first 60 days.
Meanwhile, Medicare Part B currently charges a standard monthly premium of $174.70. Higher earners, however, may be subject to surcharges on top of that sum. There’s also a $240 annual deductible that has to be met in 2024 for Part B. Plus under Part B, you’re often looking at 20% coinsurance for the services you need.
Then there’s Medicare Part D, which covers prescription drugs. There’s no standard monthly premium for Part D because it varies by plan. Even though some plans don’t charge a monthly premium, you generally should expect to pay something for coverage on top of the copays that hinge on the plan in which you enroll and the medications you take.
If you sign up for Medicare Advantage, your costs will depend on your plan. Some Medicare Advantage plans have a $0 premium, but that doesn’t mean other out-of-pocket costs won’t arise as you use your coverage.
The more you know about Medicare ahead of retirement, the more confident you can feel about your ability to cover your healthcare expenses as a senior. Even if you still have a few working years ahead of you, it pays to start reading up on Medicare and ways to maximize it.