Citi Personal Wealth Management
Your healthcare expenses are likely to climb sharply as you age. But fortunately, so does the help available to you.
Approaching age 65? It's time to learn about Medicare, the government-run health insurance program for older Americans. Medicare also covers certain people with disabilities who are under age 65.
As you try to wrap your head around the topic, it's helpful to focus on Medicare's five key building blocks.
Medicare Part A helps cover hospital bills, hospice, and some home health care. You automatically qualify for Part A if you've worked the 10 years required to receive Social Security or if you are on the account of someone who qualifies, such as a spouse. If you aren't yet receiving Social Security benefits, you should sign up for Part A during the three months before you turn 65, so you are fully enrolled by your birthday.
You can apply for Medicare Part A even if you have health insurance at work and are considering staying on the job past age 65. It doesn't cost anything and Part A may cover some of the costs not covered by your group health plan. You should ask your employer how signing up for Medicare will affect your company health insurance.
When you sign up for Part A, you will be asked if you also want Part B. In most cases, you'll want to say yes unless you are still working after age 65 and your company has a comprehensive medical plan, or your spouse is still working and you can stay on his or her plan.
Among other things, Medicare Part B covers most doctors' bills, X-rays, some lab tests, medical equipment and medications, and physical and speech therapy. Unlike Part A, Part B comes with a premium, which is based on your income and eligibility date.
In most cases, if you don't sign up for Part B within seven months after you become eligible, you may pay a late enrollment penalty. Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn't sign up for it. There are special exceptions to this such as when you and/or your spouse are still working and have health plan coverage through your employer or union.
If you want more coverage than you would receive from Medicare Parts A and B, you can instead choose Part C, also known as Medicare Advantage. Medicare pays a fixed fee for your care every month to companies offering Medicare Advantage plans.
These companies must follow rules set by Medicare. Each plan, however, can charge different out-of-pocket costs and has different rules for how you receive services, including whether you can see a doctor out of network. There's a wide variety of plans, so carefully compare several companies' costs and terms of coverage. Also, check with your doctor's office to make sure it accepts the plan you are considering.
Medicare Part D covers prescription drugs. It is offered to anyone with Medicare coverage and it is funded by the government, but you must join a plan run by an insurer or other private company approved by Medicare. Compare several plans in your area to see which ones pay for the drugs you need at a cost you can afford.
Even if you don't need extra prescription coverage when you turn 65, you may want to sign up for Part D anyway, in case your prescription drug needs change in the future. Additionally, there is a late enrollment penalty of around 32 cents for each month you were eligible but didn't join.
A controversial aspect of Part D is the “donut hole,” a gap in coverage that comes into play after Medicare has paid a certain amount for your drugs each year and lasts until you have paid enough out-of-pocket to reach “Catastrophic Coverage.” Congress has taken steps to gradually shrink the donut hole and it is scheduled to close by 2020.
Once you have enrolled in Medicare Parts A and B, you might consider Medicare supplement insurance, known as Medigap. Medigap is the system of private insurance that covers some of the holes–or gaps–in Medicare coverage. This insurance usually pays for premiums, co-payments, doctor's bills and deductibles that exceed charges approved by Medicare. It does not cover long-term care. Medicare also generally doesn't cover nursing home care, except for stays that are needed post-hospitalization.
For more information on Medicare and Medigap policies, including online tools to help you research costs and plan features, go to www.medicare.gov.
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