Signing up for Medicare can be an intimidating and complicated process, especially for those who may wish they understood it better. As a financial professional, you're in the unique position of being able to help build client confidence by crafting a strong retirement plan that includes the Medicare coverage they need. Refer to these fast facts below to increase your clients' knowledge on how the right Medicare plan can fit into their life planning.
What is Medicare?
Medicare is health insurance for U.S. citizens and permanent residents who are 65 and older. It includes hospital and medical insurance as well as prescription medication coverage.
What do clients need to do and by when?
Your clients become eligible to sign up for Medicare three months before their 65th birthday, or earlier if they have a disability, Lou Gehrig's disease or end-stage renal disease.
The enrollment period for Medicare for most people ends four months after their 65th birthday. If they delay signing up past this date, they could end up paying more. They could also face a gap in their coverage until they are allowed to enroll again, making them vulnerable to costly out-of-pocket expenses if something goes wrong.
What are the different components of Medicare and what do they cover?
Medicare is made up of four different components:
- Part A includes hospital insurance, which covers most hospital stays, nursing facilities, hospice and some at-home care. It is typically free for most people as they likely paid Medicare taxes while working.
- Part B covers medical insurance, including the cost of visiting a doctor, tests and X-rays, medical equipment, outpatient services and general preventive care. It's optional and available for a monthly premium.
- Part C is referred to as Medicare Advantage. This is a type of federally subsidized health insurance plan that is provided by private insurers and offers the same benefits as Part A and Part B. However, each health insurance company may have its own coverage rules and restrictions.
- Part D covers the costs of prescription drugs. This also involves an extra cost.
How do clients choose the best option for themselves?
Deciding whether Medicare or Medicare Advantage is a better choice will depend on each individual's financial situation as well as both their current and future health needs.
Medicare is paid for by the government, while private insurers provide Medicare Advantage. It's worth noting that Medicare doesn't cover vision, hearing or dental expenses, prescription drugs or 20% of health care costs in general. To acquire more coverage, your client may consider tapping into pre-existing health savings accounts or signing up for a supplemental plan such as Plan D.
In some cases it may make better financial sense for clients to get Medicare Advantage, as it covers almost all possible medical issues.
How much does Medicare cost and can those costs change?
All premiums, co-pays and deductible costs can change from year to year. In 2022, Medicare Part A premiums are free for those who meet the eligibility criteria (working at least 10 years paying Medicare taxes) and $499 monthly for those who do not.
Medicare Part B premiums may range from $170.10 to $578.30.
Medicare Part D has a maximum deductible of $480.
Can clients sign up for Medicare if they are still working?
If a client or their spouse are still working and hold health insurance through that job, they can wait to sign up for Medicare until they lose their job or their insurance, without penalties. However, they may need to sign up for Medicare as soon as they turn 65 if the following caveats apply:
- They are self-employed
- They do not hold group plan coverage as defined by the IRS
- Their employer has less than 20 employees
- They have COBRA coverage which is a temporary extension of employer coverage provided for a length of time after leaving or losing their job.
If your clients decide to take on a part-time job or new career after retirement, they should know that making extra income over a certain annual threshold could trigger higher Medicare premiums.
What happens to a spouse's coverage if a client goes on Medicare?
If a client who has retired goes on Medicare and their spouse is not eligible to apply yet, they have several options:
- They can tap into COBRA benefits for their non-working spouse for at least 18 months, as long as the company is large enough to offer them.
- They can ask their former employer if they can cover their spouse's health insurance even after they retire.
- They can purchase a policy through the health insurance marketplace created by the Affordable Care Act.
- They can apply for Medicaid if their income is low enough to be eligible for it.
Common mistakes to avoid
Some common mistakes your clients should avoid when applying for Medicare include the following:
- They should not assume that their spouse is automatically covered just because they have Medicare. This coverage only applies on an individual basis.
- They should understand their needs and purchase the right coverage for them. That means having to budget for and pay premiums for Parts B, C and D.
- They should know what prescription drugs they will need to take and what plan will cover them.
- They should not sign up for automatic renewal of their plan each January 1, as benefits, plans and premiums can change from year to year. Instead, they should take the time to review their plan's Annual Notice of Change to make sure it still meets their needs.
Have clients considering part-time work after retirement? Learn more about what that means for Medicare, Social Security and more.
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