Important Medicare Considerations
For many Americans, one of the most daunting aspects of retirement is figuring out how to navigate Medicare. Between determining what coverage is provided by parts A, B, C and D, deciding whether to enroll in a Medigap or a Medicare Advantage plan, and navigating the Medicare enrollment period, the process can quickly become overwhelming.
Following are several often-misunderstood aspects of Medicare you should be aware of.
#1 – Different plans cover different expenses.
Medicare is divided into four separate plans, each of which is designed to cover different expenses.
- Part A – Covers costs related to inpatient hospital visits, skilled nursing facilities, hospice and palliative care, and home healthcare.
- Part B – Covers outpatient care, medical equipment and medically necessary doctors’ services. Some preventative care is also covered by Part B, such as x-rays, mental health services and laboratory tests. You must pay a monthly premium for this coverage, and that premium is based on your income (refer to #6 below).
- Part C –Refers to Medicare Advantage plans, which are plans provided by private health insurance companies that have contracts with the U.S. government. Some Medicare Advantage plans offer additional coverage for vision, hearing and dental services, and many also offer enhanced prescription drug coverage.
- Part D – Refers to Medicare’s prescription drug coverage, including shots and vaccines. This is an optional plan available for an additional fee.
#2 – If you miss enrollment, you may be subject to penalties.
Medicare’s initial enrollment period typically starts three months before — and ends three months following — your 65th birthday. If you miss Medicare’s initial enrollment period, you may be subject to a late enrollment penalty, which varies based on the type of Medicare you’re applying for.
- Part A –For late enrollment, your premium may increase by 10% for twice the number of years you were delayed in enrolling. For example, if you didn’t sign up for Part A for two years past your initial enrollment period, you’d be subject to a higher premium for four years.
- Part B –You may be charged a late penalty of 10% of the standard Part B premium for every 12 months of delayed enrollment. For example, if your standard premium is $174.70 and you are delayed in signing up by 24 months, your monthly premium would increase by $34.94.
- Part D – For every month you delay enrolling in coverage, you’ll be charged 1% of the standard Part D premium, rounded to the nearest $0.10. For example, if your initial premium is $55.50 and you go without coverage for 24 months, your monthly premium would increase by $13.30 ($55.50 x 24 = $1,332; 1% of $1,332 = $13.32; rounded to $13.30).
#3 – You can’t contribute to a health savings account (HSA) once you enroll in Medicare.
Many people are surprised to learn they can no longer set aside tax-advantaged funds in an HSA once they sign up for Medicare. You can either enroll in Medicare or contribute to an HSA, not both. This decision can be a tough one for those concerned about how to pay for medical expenses in retirement.
#4 – You can delay enrolling in Medicare if you’re still covered by group health insurance.
If you are still employed past the age of 65 and covered by your employer’s health insurance policy, you can delay enrolling in Medicare without being subject to a late enrollment penalty. Once you retire and are no longer eligible for employer-sponsored coverage, you have eight months to enroll in Medicare without a penalty.
#5 – Medicare coverage is only valid in the United States.
If your retirement dreams include moving or traveling abroad, it’s important to know that Medicare typically doesn’t cover healthcare expenses for Americans outside the United States. That means you may need to enroll in private insurance or your country of residence’s public healthcare system (if eligible).
#6 – The amount you pay for Medicare depends, in part, on your income.
If your income is above a certain threshold, you’ll likely pay more for Medicare parts B and D. For example, in 2023, the standard Part B monthly premium is $164.90. However, individuals with a gross adjusted income (AGI) greater than $97,000 ($194,000 for joint filers) pay between $230.80 and $560.50 per month for Part B coverage. Similarly, those with income above the threshold pay an extra $12.20 to $76.40 per month in Part D premiums.1 There’s a two-year look-back when determining if you’re subject to premium surcharges. Careful planning can help you understand any impact that could apply.
Additional information regarding the income-related monthly adjusted amount (also known as IRMAA) can be found here. If you’re subject to IRMAA, it’s possible to appeal the surcharge if you’ve experienced a life changing event, such as retirement, work reduction, divorce, etc. IRS form SSA-44 is used to make this appeal.
#7 – Medicare offers free preventative services.
As a Medicare recipient, you’re eligible for several free preventative services, such as an annual wellness exam, a free cardiovascular screening every five years, annual flu shots, annual mammograms, and screenings for prostate, colorectal and cervical cancers.
#8 – You can appeal a Medicare decision.
Many people are surprised to learn they have the right to file an appeal if they disagree with a Medicare coverage or payment decision. There are five levels of appeal. If your appeal is denied at a lower level, you can elevate it to the next level.
The key to a successful appeal is to maintain documentation that supports your position, such as records from your doctor or hospital. If you believe your health would be in jeopardy by waiting through a lengthy appeals process, you can request a quick decision that would require Medicare to review your case within 72 hours.
Could you use some help navigating the ins and outs of Medicare? Creative Planning is here for you. Schedule a meeting with a member of our team. We look forward to getting to know you.