While talking to a friend who recently turned 65, he asked “Do you warn your clients about all the decisions they have to make when they turn 65?” I thought he was talking about planning for Social Security and the best strategy for collecting your benefits. In fact, he was talking about Medicare. And no, I don’t normally talk to my clients about that and decided I should.
As you approach 65, you have a few months to decide what kind of Medicare you want. Perhaps you didn’t know there was more than one flavor of Medicare, which is where problems can start. Unfortunately, you could be faced with late enrollment penalties if you aren’t ready to make the decisions. While signing up on time is important, you have the opportunity to change your Medicare choices annually.
If you receive Social Security, you will automatically be signed up for Medicare on the first day of the month that you turn 65. My birthday is June 23, so Medicare can start on June 1st for me. If you are on Social Security because you are disabled, you will also automatically be signed up for Medicare, even if you are not 65.
It’s common, and often a good idea, to delay taking Social Security until you are 70. If you decide to wait to take Social Security, you will have to take action to enroll in Medicare at 65.
Being “automatically signed up for Medicare”, is actually an over simplification because there are four parts to Medicare, Part A, B, C, and D. When you are automatically signed up, you are signed up for “Original Medicare” Part A and B. That may not be what you want to do, though.
Part A covers things like hospitals, hospice care, home health care, and skilled nursing facility care. Part B covers doctors and other health care providers, outpatient care, home health care, some medical equipment, and other health care needs outside a facility.
You have a choice between Original Medicare and Part C, Medicare Advantage Plans. If you choose Original Medicare, you choose the doctors and facilities you want to go to for health care needs.
Most people pay Medicare taxes as part of their payroll taxes when they are working. If you do, Part A is free and Part B typically costs $104.90 per month. High income individuals and couples may pay more. You may also end up paying a late enrollment penalty if you don’t sign up during your initial eligibility period.
With the Part A and B Original Medicare plan, you typically pay a deductible before Medicare starts to pay. You also pay a copayment (for example 20% of fees charged or possibly a flat fee such as $10 or $20 per visit) for service from your doctor or facility. There are no out of pocket limits with Original Medicare.
With Medicare Part C, Advantage Plans, you are limited to a select group of doctors and facilities, similar to an HMO or PPO. As a matter of fact, you might be able to continue your current plan. For example, if you are currently using Kaiser Permanente in Southern California, you can continue to use them with the Medicare Advantage Plans (some services and fees may be different on Medicare). Medicare Advantage Plans have all the same coverage that Medicare Part A and B have and your specific plan may have extra coverage like vision, hearing, and/or dental.
If you choose to enroll in a Medicare Advantage Plan, you are still part of and pay for Part A and B, the same as on the Original Medicare, but you may also have to pay an additional Part C premium payment. Often you don’t have a deductible, such as with HMOs, but you may have co-payments. If your Advantage Plan is a PPO (preferred provider organization), you may have reduced deductibles and co-payment verses Original Medicare.
You may want to choose Medicare Advantage to stay with your current doctors and facilities at a lower rate. If you’d like to have more choices, you may want to choose Original Medicare. Don’t wait until you turn 65 to look into and consider your options or you may end up paying more. Starting a year or two before, will give you plenty of time to consider all the options.
In the future, we’ll look at Medicare Part D, Prescription Drug Coverage and supplemental insurance. It’s not easy growing older and it’s worth planning for a successful transition.
You can find out more about Medicare at Medicare & You 2016.
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