Medicarebasics
0 likes245 views
The document provides an overview of Medicare, which includes four parts (A, B, C, and D) that cover different health expenses. However, Medicare does not cover all health care costs in retirement. It outlines what each part covers, average premium and out-of-pocket costs, and expenses that are not covered. It recommends retirees understand what costs they will be responsible for, evaluate insurance options to cover gaps, and develop a retirement strategy that accounts for health care expenses.
Medicarebasics
- 1. Medicare: Understanding the Basics RES-7512B-A 31 MAY 2015 PAGE 1 OF 2 © 2014 EDWARD JONES. ALL RIGHTS RESERVED. Medicare is the key source of health care coverage for retirees age 65 and older, so it’s important to understand the basics of the program. While Medicare is the largest payer for traditional medical services, it’s not designed to pay for all health care costs in retirement. There are many items Medicare doesn’t cover, so it’s important to understand what costs you’ll still be responsible for as you consider your health care expenses in retirement. Following is an overview of Medicare and a pre-Medicare checklist on page 2, but please refer to www.medicare. gov for more information or to determine if specific items are covered. Standard Medi-care Components Description & Covered Expenses Estimated Out-of-pocket Cost (2014)* Expenses Not Covered Part A Hospital insurance Covers medically necessary inpatient hospital care (including rooms, meals, general nursing and drugs), skilled nursing facility care, some nursing home care (if following an inpatient hospital stay) and hospice care Average monthly premium: $01 Benefit-period deductible (days 1-60): $1,2162 Responsible for co-payments/coinsurance (must pay coinsurance for stays > 60 days) Long-term care costs Medicare premiums, deductibles, coinsur-ance and co-payments Routine dental care and dentures Routine hearing exams, fittings for hearing aids and hearing aids Routine eye exams, glasses and contact lenses (unless after cataract surgery) Cosmetic surgery Part B Medical insurance Covers medically necessary doctor services, outpatient medical care, durable medical equipment, some preventive care and other medically necessary services Part A doesn’t cover, such as ambulance services, cardiovascular, cancer and diabetes screenings, and laboratory services Average monthly premium: $104.902,3,4 Annual deductible: $147 Premiums vary based on participant’s income Responsible for co-payments/coinsurance (For example, coinsurance may include paying 20% of all outpatient hospital services.) Medicare-approved Insurance Company Plans Part D Prescription drug Coverage is offered by Medicare-approved insurance companies; each plan has its own list of covered drugs. Weighted-average monthly premium:$39.904,5,6 Standard Annual Deductible: $3107 Premiums vary based on participant’s income, insur-ance company and plan Responsible for deductibles, co-payments and coinsurance Medigap (Medicare Supplemental Insurance) Ten standard options (Plans A – N) offered by Medicare-approved insurance companies Coverage varies by plan but is designed to cover expenses not covered by Parts A and B, such as deductibles, co-payments and coinsurance. If you have Medicare Advantage, you do not need Medigap. Median monthly premium: $183 (Plan F - Plan F has the highest enrollment and covers such items as Parts A & B deductibles and coinsurance) Premium is in addition to Part B and D premiums Premiums, co-payments and coinsurance vary based on state of residence, insurance company and plan Part C Medicare Advantage Offered by Medicare-approved insurance companies in place of Medicare. Coverage depends on the policy but typically combines Parts A, B and potentially D, as well as other potential out-of-pocket costs. Average monthly premium: $49.005 (Premium is in addition to Part B premium. Plans may or may not include prescription drug coverage) Premiums, co-payments and coinsurance vary based on state of residence, insurance company and plan *Source: Medicare, Kaiser Family Foundation, Edward Jones estimates. 1 You must have paid 40 quarters of Medicare tax while employed. If you paid less than 40 quarters, you may pay a monthly premium of up to $426. 2 A benefit period begins when you’re admitted and ends when you have not received inpatient or skilled nursing facility services for 60 straight days, at which point a new benefit period (and therefore a potential deductible) begins. 3 If you delay filing or refuse Part B when you become eligible, there could be a 10% premium surcharge for each year you are eligible but not enrolled. 4 Average monthly premium based on single taxable income of $85,000 or less or joint taxable income of $170,000 or less. For incomes above these levels, premiums will be higher. 5 Source: Kaiser Family Foundation. 6 National base premium is $32.42, from which insurance companies determine their premiums. There could also be a late-enrollment penalty of 1% of the $32.42 for every month you delay filing for Part D after you become eligible. 7 There are initial coverage limits that average $2,850 (including deduct-ible), after which the individual is responsible for 47.5% of branded drug costs and 72% of generics (although the entire cost of branded drugs counts toward your out-of-pocket maximum), until reaching the maximum out-of-pocket amount averaging $4,550 in 2014.
- 2. Pre-Medicare Checklist Given all the information on page 1, we recommend considering the following before taking Medicare. Your Edward Jones financial advisor can help you consider how health care costs may affect your overall retirement strategy. 1. Outline Your Retirement Goals – Understanding your retirement goals, such as when you want to retire and what “retirement” looks like to you, can help deter-mine what your retirement expenses may be and if you have enough outside sources of income, including investment income, to cover these expenses. If you plan to retire before age 65, you may have a gap in health care coverage if it isn’t provided by a former employer. If so, you may need to purchase health insurance to ensure you’re covered until you’re eligible for Medicare, and you may be subject to underwriting. 2. Know the Important Dates – If you are age 65 or older but not receiving Social Security (or aren’t eligible), you won’t be automatically enrolled in Medicare. There is a seven-month enrollment period beginning three months before the month you turn 65. To avoid delays in coverage, you should sign up three months before you turn 65. If you don’t enroll during the initial seven-month period, you can enroll between Jan. 1 and March 31 of any subsequent year. However, your coverage will be delayed until July 1 of the year you enroll, premiums could be higher, and you could be assessed penalties for delaying.1 If you’re receiving Social Security, you’ll be automati-cally enrolled in Parts A and B, and your Part B premium will be deducted from your Social Security check. However, signing up for Part D and supplemen-tal insurance isn’t automatic. 3. Evaluate Insurance Options – Part D and supplemen-tal insurance options, such as Medigap or Medicare Part C, are offered through Medicare–approved insurance companies. Plans could help cover certain costs that Medicare doesn’t cover, such as prescription drugs, Part A and B deductibles and co-payments. However, there are 10 different Medigap plans (Plans A–N) and numerous options for Parts C and D, with costs varying based on the coverage and insurance company. While it may be tempting to select the lowest cost plan, it’s critical to select a plan providing the coverage appropriate for your situation or your overall out-of-pocket costs could actually end up being higher. Tools at www.Medicare.gov can help. 4. Estimate Your Out–of-Pocket Health Care Costs – After deciding on the type of coverage you desire, estimate your out-of-pocket expenses, including the costs for Parts A, B and D and any additional coverage you selected in Step 3. Additionally, since there are many items Medicare does not cover, which vary depending on the supplemental coverage you select, be sure to include those potential costs in your estimates. Again, www.medicare.gov has resources to help get you started. 5. Consider Your Options for Covering Potential Long-term Care Costs – Since Medicare does not cover long-term care costs, it’s important to develop a strategy to ensure this potential need is covered. There are several insurance options that can help address where care is administered and how to pay for the costs. 6. Develop Your Retirement Strategy with Your Financial Advisor – To help hedge against rising costs, a portion of your investment allocation should be allocated to growth and rising income investments. But health care is just one of many important factors to review prior to your retirement, such as when to take Social Security and how to generate sufficient income during retirement. Your Edward Jones finan-cial advisor can work with you to better understand your desired retirement lifestyle, estimated expenses (including health care) and sources of income to develop a retirement strategy to help you achieve these goals. Maintaining a healthy portfolio in retirement includes more than your investment decisions. How you’ll budget for health care costs can affect the quality of your retirement. And while these costs may be beyond your control, you can control how you prepare, which includes a strategy for covering both traditional and long-term care expenses. Once you have a strategy in place, be sure to review it periodically with your financial advisor to help ensure you remain on track, especially if your health or medical expense situation changes. 1 You may also be able to enroll during a Special Enrollment Period if: you are covered under a group health plan through an employer and want to sign up for Parts A and/or B, as well as when you leave the group health plan. Late-enrollment penalties may not apply in these cases. While this information is believed to be accurate at the time of publishing, its accuracy and completeness are not guaranteed. You should rely on Medicare for complete program details. For more information on Medicare, visit www.medicare.gov. Edward Jones does not offer health insurance; however, we believe discussing the impact of health care costs within your retirement strategy is important, especially considering that rising health care costs may affect many investors approaching retirement. www.edwardjones.com Member SIPC RES-7512B-A 31 MAY 2015 PAGE 2 OF 2 © 2014 EDWARD JONES. ALL RIGHTS RESERVED. Anita Bowman-McCormick, AAMS® Financial Advisor . 13455 Cutten Road Suite 1g Houston, TX 77069 281-537-2517