Making Smart Financial Decisions When Navigating Medicare Costs

The decisions you make as you prepare for retirement and Medicare coverage can greatly affect your financial security and your lifestyle, now and in the future. If navigating Medicare is new to you, you may be comparing Medicare costs and trying to determine which options will save you money and protect you in case you require medical attention of any kind.

Understanding how Medicare premiums, co-payments, and coinsurance can impact your budget will help you make the Medicare decisions that are right for you.

Medicare Benefits Solutions

May 30, 2022

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Making Medicare Enrollment Decisions

If you are approaching eligibility for Medicare coverage, you will find the experience of navigating Medicare to be quite an education. Considering the rising costs of healthcare, Medicare decisions should be an integral component of your retirement planning. It’s important to balance access to medical services and medications with affordable premiums and minimal out-of-pocket medical expenses.

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How Medicare Works

Medicare covers inpatient and outpatient medically necessary services for people who are 65 years of age or older, or for individuals who qualify under the age of 65 due to certain disabilities.

With few exceptions, Medicare excludes coverage for healthcare outside the U.S. When you become eligible for Medicare, you’ll have decisions to make, including which benefits you want to enroll in, and how you want to receive those benefits.

The Four Parts of Medicare

  • Part A, Original Medicare hospital insurance
  • Part B, Original Medicare medical insurance
  • Part C, Medicare Advantage, private insurance
  • Part D, Private add-on prescription drug coverage

Part A original Medicare hospital insurance

Part A covers healthcare services you get as an inpatient in a hospital, skilled nursing facility (SNF) and hospice. Home health services are covered by both Part A and Part B. Part A falls under the umbrella known as Original Medicare, which is a program provided by the federal government. You can sign up for Original Medicare (Parts A & B) through the Social Security Administration once you are eligible.

Part B original Medicare medical insurance

Part B covers doctor office visits, outpatient care, durable medical equipment and some preventive services. Part B also includes coverage for home health services. Part B is also part of Original Medicare which is provided by the federal government. Once you are eligible you can sign up for Original Medicare (Parts A & B) through the Social Security Administration.

Part C Medicare Advantage

Medicare Advantage, otherwise known as Part C, is an alternative to Original Medicare. You will continue to be a Medicare member, but most of your Medicare coverage will come from your MA plan. These plans are offered by private insurers.

Most MA plans include Part D, so if you like the idea of having Parts A, B and D under one plan, look for an MA plan that covers prescription drugs. Medicare Advantage members also enjoy some benefits and services that extend beyond Original Medicare while being assured of coverage for the same medically necessary services you get with Original Medicare. Some MA plans are available with no premium.

There are several types of MA plans with varying levels of coverage, premiums, deductibles, coinsurance and copayments. Depending on the type of plan you choose, there may be restrictions, such as provider networks and referral requirements. With Original Medicare, you can visit any doctor or medical facility in the country that accepts assignment. Some beneficiaries prefer to keep their Original Medicare and add a Medicare Supplement plan.

Part D add-on prescription drug coverage

Part D is an optional add-on to Original Medicare (Parts A & B) and is offered by private insurance companies. Many Medicare Advantage plans include prescription drug coverage, along with other extra benefits.

To get Medicare coverage for your prescription medications, enroll in Medicare-approved drug coverage. There are two ways to accomplish this:

1. Join a stand-alone Medicare Prescription Drug Plan, which adds Part D to Original Medicare. Before you enroll, you must join either Part A, Part B or both.

2. Join a Medicare Advantage (MA) plan or another type of Medicare health plan inclusive of drug coverage. Before you enroll in an MA plan, you must join both Part A and Part B.

Part D does not cover over-the-counter (OTC) products. However, some Medicare Advantage plans cover an OTC allowance for merchandise like vitamins and personal care items.

Medicare Supplement Plan

Medicare Supplement insurance, often referred to as Medigap, is another add-on to Original Medicare. Like MA, Medigap is sold by private insurance companies. Medicare Supplement plans are standardized throughout the U.S., and they offer a solution to concerns about out-of-pocket expenses. People new to Medicare after January 1, 2020 have eight plans to choose from. Some plans offer benefits Original Medicare does not cover, but premiums can vary based on the coverage.

Original Medicare Costs

If you are wondering how much Medicare costs, it helps to break it down by each Medicare part. The following information reflects 2022 Medicare costs. Final Medicare costs for 2023 are not yet published, but the Centers for Medicare & Medicaid Services (CMS) is looking at risk adjustment models to make that determination.

Your overall annual costs for medical expenses under Medicare will depend greatly on the plan you choose and how frequently you need to use covered services and supplies.

Part A Medicare costs

Eligibility for premium-free Part A is tied to credits earned by working and paying Medicare taxes. If you paid Medicare taxes for less than 40 quarters, you are billed a monthly premium: $274 if you paid for less than 39 quarters or $499 if you paid for less than 30 quarters. Most beneficiaries have premium-free Part A.

The Part A deductible is $1,556 for each benefit period. A benefit period starts when you are admitted as an inpatient and ends when you have not received inpatient care for 60 consecutive days. There is no Part A coinsurance during the first 60 days of your hospital stay. From day 61, you are responsible for coinsurance for each day you are an inpatient.

Part B Medicare costs

While the Part A deductible applies to a benefit period, the Part B deductible ($233 in 2022) is for the calendar year.

For 2022, the standard Part B monthly premium is $170.10. If your annual income falls within a certain range, Medicare will add an income-related monthly adjustment amount (IRMAA) to your premium. Income is based on what you reported two years ago.

So in 2023, your Part B premium will be based on modified adjusted gross income reported on your 2021 tax return. Your rate is influenced by your marital status and how you file. For example, if you earned more than $91,000 up to $114,000 on your 2020 individual tax return, your Part B premium for 2022 is $238.10.

Medicare imposes a Part D-IRMAA as well.

How to Enroll in Medicare

Enrollment in Part A and Part B is automatic if you are receiving Social Security or Railroad Retirement Board benefits when turning 65. Automatic enrollment can also apply to people under 65 who have a disability. If you are getting Social Security Disability Insurance (SSDI) benefits and have amyotrophic lateral sclerosis (ALS), Part A and Part B enrollment will kick in the month your SSDI benefits begin.

If you are not eligible for automatic enrollment, sign up for Part A and Part B through Social Security by phone or online. The best time to enroll is during your Initial Enrollment Period which begins three months before your 65th birthday, and ends three months after your birthday month. If you miss this window, you may be subject to a late enrollment penalty, raising your cost of Medicare premiums.

Making Medicare Coverage Decisions

If you are still employed, you may be wondering if you should apply for Medicare. Though you may be eligible for a Special Enrollment Period based on your group plan coverage, contact your employer to ask how your group coverage would work with Medicare. You may be able to have coverage under a group or retiree health plan and Medicare.

If you have a Health Savings Account (HSA) and contribute to your HSA while you have Medicare, a tax penalty can be imposed. Therefore, be sure your final contribution is the month prior to the Part A effective date.

Many people who are still working at 65 and qualify for premium-free Part A will enroll in Part A but delay Part B and Part D enrollment if they have other creditable coverage. In this case, you may be eligible for a Special Enrollment Period when your employment ends.

Navigating Medicare

If you are feeling concerned about making such an important decision, it may help to know that you can change your Medicare coverage at certain times during the year. During the Annual Enrollment Period each year, between October 15 and December 7, you can join, switch or drop an MA plan or Medicare Prescription Drug Plan. You can also revert to Original Medicare at that time and enroll in a Part D plan.

Navigating Medicare is easier with online resources and plan comparison tools, but if you have additional questions or need more information, a licensed sales agent may be able to help you as you consider your options and enroll.

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