Medicare

By Russell W. Hall, CFP®

When should you sign up?

If you’re not working, sign up at 65.  You can enroll anytime during the 3 months before your birth month, during the month you turn 65, or for 3 months following that.  There is a lifetime penalty that may be assessed if you’re eligible and miss that enrollment window.

If you are still covered by insurance through work, check if your group coverage or Medicare is better for you.  Many people wait until they retire before signing up for Medicare, but sometimes their insurance plan requires that they sign up for Medicare as well.  You have an eight month window to sign up after you stop working.

You can sign up online at www.medicare.gov, by phone at 800-633-4227, or in person at a Social Security office.  You may also be able to sign up with your insurance agent.

What are you signing up for?

Medicare has four parts:

Part A is hospital insurance.

No charge if you (or your spouse) paid into Social Security for at least 10 years.  There’s a $1,556 deductible, plus co-pays for hospital stays longer than 60 days.

Part B is medical insurance.

Monthly premium starts at $170.10.  If your modified income is $182,000 joint ($91,000 single) or more, you’ll pay a higher amount.  Most people have the premium deducted from their Social Security payments.

You also have a $233 per year deductible under Part B.  Once that is met, you usually have a 20% co-pay for most services.

Part C is supplemental coverage, called Medicare Advantage.

These plans are optional, and can be either HMO or PPO.  Each plan is different, but often they will have no monthly premium, only deductibles and co-pays.  Out-of-pocket limits on these plans averages about $5,000 per year.

Some Medicare Advantage plans cover Part D as well (more on Part D below).  You can sign up for both Parts C and D when you turn 65, and each year you can make changes to those plans during open enrollment from October 15 to December 7.

Part D is prescription drug coverage.

Monthly premiums vary but are usually around $40-$50 and can go up to more than $100.  The maximum deductible is $480, and co-pays are different from plan to plan.  Select a plan by specifically looking at costs for any medication you are taking.

There is a coverage gap (commonly referred to as “the donut hole”) that kicks in when you and your plan have spent $4,430 on drugs.  At that point, you pay 25% of the drug costs until you reach the out-of-pocket limit of $7,050.

Have other questions?

Contact Eclectic Associates at 714-738-0220 or info@eclecticassociates.com.  We’ll be happy to provide more information and resources.