Understanding your Medicare options is no simple task. This brief overview will help you understand the main aspects of Medicare and help you determine which options are right for you.
The first step is knowing when you are eligible to receive benefits. The enrollment period begins three months prior to your 65th birthday and extends three months beyond your birthday month. Thus, you have a seven month window to enroll – 3 months before, your actual birthday month, and 3 months afterward. You must enroll in Parts A and B during this seven month window. Failure to do so may result in a penalty and/or higher costs. If you elected to receive Social Security benefits prior to your 65th birthday, you are automatically enrolled in Parts A and B.
Original Medicare has two parts:
• Part A covers costs for inpatient hospital stays, skilled nursing facilities, and hospice care. It may cover some skilled home health care services as well. Most people are not required to pay premiums, so long as the Social Security payroll contribution requirements are met.
• Part B covers doctor’s office visits, outpatient & preventative care, and some home health care services. Most people pay premiums based on income levels, which are billed quarterly or taken out of Social Security if you already receive benefits.
Original Medicare does not limit your out-of-pocket costs for medical care. As a result, there are supplemental plans available through private insurance companies to help cover or cap the additional expenses you may face.
Medigap helps cover additional medical expenses that are not covered by Original Medicare’s Part A and B. There are several standardized plans available and you choose the plan the best fits your specific health needs. The prices may vary for similar coverage so it is important to carefully weigh your options. You have a six month enrollment period where the insurer cannot factor in pre-existing conditions. If you miss this window, you may have to wait for another 6 months before your coverage begins and your medical history may impact the premiums you pay. Medigap does not cover long-term or nursing home care, nor does cover vision, hearing, or dental care.
Prescription Drug Plans (PDP), better known as Part D, help limit the costs for the prescription drugs you need. These plans vary in price depending upon the provider, and usually require a monthly premium payment. One of the most confusing aspects of Part D is the coverage gap or “doughnut hole”. As you spend money on your deductible and co-payments for medication, you reach a point where there may be temporary limits on what the plan will cover. The result is an increase in out-of-pocket costs until you reach another threshold called the “catastrophic coverage” limit. Once you reach this point, you have “closed the gap” and your costs are again reduced significantly.
An additional option is choosing a Medicare Advantage Plan (Part C). These plans cover everything in Parts A and B, and most provide Part D coverage for prescription drugs as well. While the costs may be different than Original Medicare, additional benefits are available, including vision, hearing, dental, and other wellness programs. One of the biggest advantages of a Medicare Advantage Plan is how the plan may cap out-of-pocket expenses (this is not the case with Original Medicare). It is important to know that you cannot have a Medigap and Medicare Advantage Plan at the same time, and premium costs vary widely.
Making the right decisions toward Medicare can play a critical part in your long-term financial planning. The Affordable Care Act has initiated current and future changes to Medicare policies. If you have questions about choosing the options that best fit your needs, we are here to help you. Please feel free to reach us at info@finsyn.com or (713) 623-6600.
Will Goodson
