If you or someone you know is eligible for Medicare, it is important to note that the election period is different this year. Usually held between November 15 and December 31, this year’s open enrollment is entering its final weeks as I write this post; it began on October 15 and will end in less than a month, on December 7.
Surprised? You may be pleased to know you are not alone. Baby boomers are categorically moving toward Medicare eligibility—many are already there—and yet most still remain in the dark about the program and its components (not to mention the deadlines). According to a survey[1] conducted this year by the National Council on Aging and UnitedHealthcare,
“46% of boomers and seniors say that they understand Medicare and how it works. The other half either finds it confusing and does not understand the program very well (35%) or admits not understanding it at all (16%).”
The survey’s report goes on to describe the percentages of those who could correctly identify Medicare Parts A (33%) and B (23%), and mentions that “68% do not even venture a guess about what Part C entails.” Those of us not yet eligible for Medicare may rationalize not knowing by citing a growing uncertainty over the future of the program (shared by 57% of those surveyed), but if you have loved ones who are turning 65 and may need help applying, you will need to possess at least a basic understanding.
Understanding the Parts
Here is a very simple breakdown of Medicare’s key components:
Part A - Hospital Insurance: includes hospital inpatient care such as overnight hospital stay and related services such as hospice and home health care.
Part B - Medical Insurance: includes other medical care such as physician care, ambulance service, lab tests and physical therapy, as well as preventative care and wellness visits.
Part C - Managed Care Plans: covers the spectrum of medical care. Offered by private insurers, these can take the form of a PPO, HMO or similar plan. Referred to as Medicare Advantage plans, these incorporate and supplement Parts A and B, and sometimes include Part D.
Part D - Prescription Coverage: covers the cost of prescription drugs.
The Coverage Gap
In most cases, Medicare Parts A and B do not cover all of an individual’s medical expenses. To bridge the gap, insurers have developed comprehensive Part C Medicare Advantage plans, which replace A and B and often add coverage for Part D prescription coverage. If you choose not to go with a Medicare Advantage plan, you can purchase a Medigap policy to fill in the services not covered by traditional Parts A and B. Private insurers also offer Part D plans that can supplement these policies if you decide to go this route.
Medicare and Social Security
Medicare and Social Security usually go hand in hand, and the former of these two benefits is actually partially funded by the latter. According to the Centers for Medicare & Medicaid Services (CMS), “In the past, people generally got both Social Security retirement benefits and Medicare coverage starting at age 65. The eligibility age to get Medicare has not changed. However, the age to get full Social Security retirement benefits (called your “Full Retirement Age”) has changed for some people.”
This change means that, depending on the year you were born, you may have to wait until your 67th birthday to receive full retirement benefits. Information to help determine when you (or someone you care for) will become eligible for full benefits is available on the Social Security website: www.socialsecurity.gov.
Much More to Learn
The truism “we don’t know what we don’t know” certainly applies here. Medicare is, of course, beyond the scope of a single blog post, however this limited introduction will hopefully inspire you to research the subject further. Additional information about the program, including details about the differences between Medigap and Medicare Advantage plans, can be found by visiting www.medicare.gov.
The official Medicare website also provides resource locators that allow you to search for Medicare Plans and Medicare supplement insurance policy offerings in your area.
Medicare is often mentioned in the same breath as Medicaid, yet the two are quite different. For a review of their differences, be sure to read Medicare and Medicaid: Do You Know the Difference?, an article we released earlier this year.
Finally, the costs associated with Medicare insurance and other medical expenses can also factor into your plan for retirement. (This can include incurring a 10% premium penalty on Medicare Part B by waiting too long to apply.) To learn more about health care costs and retirement planning, I encourage you to read an article we posted last month on this very subject entitled Factoring Health-Care Costs into Retirement Planning.
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