Medicare Decoded: Your Guide to Smart Health Coverage

Medicare can seem complicated but understanding how it works is an important part of retirement planning. Medicare is a federal health insurance program primarily designed for Americans aged 65 and older. Understanding the different parts of Medicare is essential to making informed decisions about your healthcare coverage. This is especially important when planning for retirement, as healthcare costs can significantly impact your financial security in later years. By aligning your Medicare choices with your retirement goals—whether you are considering a Medicare Advantage plan, supplemental coverage, or long-term care planning—you can help ensure a smoother transition into retirement and better protect your future well-being.

The Four Parts of Medicare

Part A (Hospital Insurance)

Medicare Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Most people do not pay a premium for Part A, as they have already contributed through Medicare taxes during their working years. Individuals who do not qualify for premium-free Part A may be able to purchase it.

Part B (Medical Insurance)

Part B covers outpatient care, preventive services, doctor visits, and medical supplies. Unlike Part A, Part B requires a monthly premium. After meeting an annual deductible, beneficiaries typically pay 20 percent of the Medicare-approved amount for services. Premiums and deductibles are updated each year and may be higher for those with higher incomes.

Part C (Medicare Advantage)

Medicare Advantage provides an alternative to Original Medicare. Private insurance companies offer Medicare Advantage plans, which must cover all services included in Parts A and B. Many Advantage plans include additional benefits such as vision, dental, or prescription drug coverage.

Part D (Prescription Drug Coverage)

Part D helps cover the cost of prescription drugs. You can get this coverage by joining a Medicare drug plan or through a Medicare Advantage plan that includes drug coverage. Costs vary depending on the plan.

Medicare premiums, deductibles, and other costs are updated annually, so it is crucial to check medicare.gov for the most current information. The Inflation Reduction Act has introduced several cost-saving measures, one of which will be a $2,000 annual out-of-pocket cap on Part D starting in 2025.

Covering the Cost: Medigap

Medigap, also known as Medicare Supplement Insurance, is designed to fill the "gaps" in Original Medicare coverage. Medigap policies help cover out-of-pocket costs associated with Original Medicare (Part A and Part B), including:

• Copayments

• Coinsurance

• Deductibles

You must be enrolled in Parts A and B to be eligible to purchase a Medigap policy. However, having Parts A and B does not obligate you to buy Medigap. It is optional. Premiums for Medigap policies vary based on age, location, and coverage level. Comparing quotes from several insurance companies is often helpful in finding the right balance between cost and coverage.

Considering a Monthly Budget

Because Medicare costs vary by plan, income level, and health needs, it is wise to plan for several categories of expenses:

• Part B premium (required for most people)

• Part D premium (if you add prescription coverage)

• Medigap premium (if you choose supplemental coverage)

• Out-of-pocket costs (deductibles, copayments, and non-covered services)

On average, retirees can expect to spend several hundred dollars each month on Medicare-related coverage. The exact amount depends on personal circumstances.

5 Recommendations When Signing Up for Medicare

1. Understand Your Enrollment Period: Sign up for Medicare during your Initial Enrollment Period to avoid late enrollment penalties. This period starts three months before the month you turn 65 and ends three months after you turn 65.
2. Assess Your Current Health Insurance: If you are still working and have employer-sponsored health insurance, compare it with Medicare to determine the best option. You can delay enrolling in Part B without penalty if you have qualifying coverage.
3. Evaluate Your Healthcare Needs: Review your current and anticipated healthcare needs. A more comprehensive plan might be beneficial if you require frequent medical care or take multiple prescription medications.
4. Compare Original Medicare and Medicare Advantage: Decide whether Original Medicare or a Medicare Advantage plan better suits your needs. Original Medicare offers more provider flexibility, while Medicare Advantage plans may offer additional benefits but often have network restrictions.
5. Review Prescription Drug Coverage: If you choose Original Medicare, consider adding a standalone Part D plan for prescription drug coverage. Most Medicare Advantage plans include Part D coverage; however, verifying the specifics of any plan you are considering is important.

Review Annually

Remember, Medicare options and costs can change annually, so it is important to review your coverage regularly and make adjustments as necessary.

• Annual Enrollment Period (October 15-December 7): During this time, you may switch between Original Medicare and Medicare Advantage or change your prescription drug plan.
• Medicare Advantage Open Enrollment (January 1 – March 31): If you are enrolled in a Medicare Advantage plan, you may make one change during this period.

If you are satisfied with your plan, it usually continues automatically. For free and personalized assistance, contact your local State Health Insurance Assistance Program (SHIP).

In Summary

Medicare includes several parts that work together to provide comprehensive health coverage, but navigating the system can be complex:

• Part A for hospital stays and related services
• Part B for outpatient and preventive care
• Part C (Medicare Advantage) is an alternative offered by private insurers
• Part D for prescription drug coverage

When enrolling, carefully consider your health needs, compare plan types, and review your coverage every year. Doing so will help you select the Medicare option that best supports both your health and financial security.

Pension Fund offers Via Benefits to help you select the right Medicare option for you. You can utilize this service by visiting my.viabenefits.com/cchcbt or calling 833-414-1405 (8 a.m. to 9 p.m. EDT) to create your profile and schedule your enrollment appointment.

Once you have selected an appropriate plan, Your Money Line can help you with general retirement planning questions, including how your Medicare plan choice fits into your overall financial wellness goals in retirement. Schedule an appointment with them from our Your Money Line page.