Introduction to Managing Healthcare Costs

As you approach retirement, you hope to enjoy your time without stress. However, high healthcare costs can quickly deplete your savings. Therefore, it’s crucial to include these expenses in your retirement planning. Annuities offer a reliable solution by providing a steady income to cover healthcare needs.

Understanding Medicare

For most Americans over 65, Medicare serves as the primary health insurance. It provides substantial support but does not cover everything. Notably, Medicare excludes services such as dental, vision, and hearing care. It also involves co-pays and deductibles. Consequently, some retirees opt for additional insurance like Medigap or Medicare Advantage to fill these gaps, although these plans come with additional costs.

Why Annuities Help

Annuities are particularly effective for managing medical expenses in retirement. By converting some of your savings into regular payments, annuities ensure that you always have funds available to meet medical costs.

Consistent Money
One of the key benefits of an annuity is that it delivers a consistent monthly income for life. This reliability is invaluable as it allows you to manage your budget more effectively. With this steady income, you can comfortably handle regular medical expenses and unexpected health issues alike.

Protecting Your Future

As you age, it is common for healthcare costs to increase. Annuities offer a form of protection against the risk of depleting your resources, ensuring you continue to receive income throughout your later years, which is often when you need it most for healthcare.

Growing Your Money
Additionally, some annuities have the potential to grow based on stock market performance. This growth can be crucial in years when the market performs well, providing extra funds that can help cover unexpected healthcare expenses.

Tax Benefits
Moreover, annuities provide significant tax advantages. The investment within an annuity accumulates tax-deferred, meaning you don’t pay taxes on the earnings until you withdraw the funds. This arrangement allows your money to grow more efficiently and increases the amount available for healthcare when required.

How to Use Annuities for Healthcare Costs

To effectively incorporate annuities into your healthcare financial strategy, consider the following steps:

• Assess Your Health Needs: Firstly, evaluate your current health and potential future needs. Take into account your family health history and any existing conditions.
• Review Your Savings: Next, examine your total savings and income sources. This review will help you determine how much you can allocate towards healthcare expenses.
• Consult with Experts: Additionally, speak with financial advisors who specialize in retirement and healthcare planning. They can provide valuable insights into choosing the right annuity for your situation.
• Select the Best Annuity: Choose an annuity that aligns with your financial goals and risk tolerance. There are various types of annuities available, so select one that best meets your needs.
• Monitor and Adjust Your Plan: Finally, it’s important to regularly review your annuity’s performance and your overall financial plan. Make adjustments as necessary to ensure it continues to meet your healthcare needs.

Conclusion
Managing healthcare costs effectively is crucial for a secure and stress-free retirement. Given the rising costs and limitations of Medicare, having a solid financial strategy is essential. Annuities provide a dependable way to ensure a continuous income throughout retirement. By planning carefully and incorporating annuities into your financial planning, you can safeguard your financial future and enjoy your retirement years without the burden of healthcare worries. This proactive approach ensures you are prepared for unexpected costs and offers peace of mind as you age.

Looking for Guidance?

If you’re seeking personalized advice, consider reaching out to a financial professional.. Get started by visiting our “Find a Financial Professional” section, where you can connect with someone directly. If you would like a personal referral for a first appointment, please call us at 877.476.9723 of contact us here to schedule an appointment with an independent trusted and licensed financial professional.

Authored by Brent Meyer, founder and president of SafeMoney.com, with over 20 years of experience in retirement planning and annuities. Learn more about my extensive background and expertise here

The post Managing Healthcare Costs in Retirement first appeared on SafeMoney.com.

Those extra monthly premium amounts are basically “surcharges” on your Medicare premiums, and they can apply to those with Standard Medicare and Medicare Advantage plans. Whether IRMAA applies to you and other Medicare beneficiaries is determined by your modified adjusted gross income (MAGI) from two prior tax years.

While you obviously want to maximize your income in retirement, in some cases this can lead to those additional surcharges on your Medicare coverage. If your income exceeds a certain amount each year, then you may have to pay the monthly adjustment amount on top of any taxes that you owe.

This surcharge is also in addition to the monthly premiums that you will pay for Medicare Parts B and D, which cover doctor visits and prescription drug coverage. IRMAA can raise the cost of Medicare by hundreds or even thousands of dollars per year for those whose incomes are high enough.

It’s a big but little-known issue, to say the least. In this article, we will go over the basics of IRMAA, how it works with Medicare and retirement in general, and some possible strategies that can help keep them and other healthcare costs at bay.

How Does IRMAA Work in Medicare?

If your income exceeds a certain threshold (which is indexed annually for inflation), then you will have to pay IRMAA along with your other Medicare premiums. IRMAA doesn’t cover any specific types of medical benefits or services. It’s just a surcharge added onto your Parts B and D premiums.

IRMAA is also based on your MAGI reported to the IRS from two years ago. MAGI is basically your total income before federal income tax deductions, apart from “above the line” deductions. If your income was above the threshold at that point, then you will pay IRMAA for this year. If your income has dropped substantially over the past two years, then you can apply to have the IRMAA payments waived.

How Is IRMAA Generally Calculated?

As briefly mentioned, IRMAA is based on your modified adjusted gross income that you reported on your taxes from two years ago. MAGI includes items such as earned income, taxable retirement plan distributions, investment income such as dividends, interest, and capital gains, and the taxable portion of your Social Security benefits.

If this amount exceeds the threshold, then IRMAA will be applied to your Medicare premiums.

What Is Medicare Part B IRMAA?

Part B IRMAA is the surcharge that can apply for Medicare Part B coverage. In 2023, the maximum amount that IRMAA could charge you for your Medicare Part B premiums is almost $400. But only a small percentage of all Medicare recipients have incomes high enough to warrant charging this amount.

According to the Medicare Trustees report, roughly 7% of Medicare Part B beneficiaries paid for IRMAA.

Can Losing Your Spouse Trigger IRMAA?

In some cases, the answer is yes. The income threshold for married couples is twice that of individuals.

So, say that you and your spouse were well below the income limit for married couples and then your spouse passes away. Then your remaining income may still be high enough for you to have to pay IRMAA by yourself.

What Are Some Strategies for Relief from IRMAA?

You can do several things to reduce or eliminate how much in Medicare surcharges you owe on top of your Medicare premiums. Some of these strategies include:

IRMAA Relief Strategy #1: Harvesting Tax Gains

If you hold securities that have gone up in value in taxable accounts, you could sell them to realize the gains while you are still working. Then you will buy them back immediately.

This increases the cost basis so that you can have less capital gains tax when you might sell those holdings for good after you retire.

IRMAA Relief Strategy #2: Roth Conversions

If you have traditional IRAs or qualified plans from your employer laying around, consider converting them to Roth IRAs. By doing so, you won’t have to count your distributions from them in your MAGI.

Of course, you will have to pay the tax on your conversion upfront, but you would be taxed on it anyway when you draw it out if you leave your money in a traditional account or plan. That being said, this tax strategy shouldn’t be used lightly. Your financial advisor and tax advisor can help you with weighing the pros and cons in light of your overall situation.

IRMAA Relief Strategy #3: Increase Your Retirement Plan Contributions

What if you are still working when you become eligible for Medicare? You can increase your contributions to your traditional retirement plan or IRA to lower your MAGI for the year.

Remember that you must have at least as much earned income as the amount of your contributions for the year.

IRMAA Relief Strategy #4: Tax Loss Harvesting

Say that you own securities in a taxable account and they had fallen in value. They could be sold, and then once 30 days had passed, they could be bought back to satisfy the IRS “Wash sale.”

You can realize up to $3,000 worth of capital losses each year from doing this. You can also net your losses against any capital gains reaped during the year. However, this strategy shouldn’t be pursued lightly.

Just as with other tax-planning strategies, it’s prudent to talk to your financial advisor and tax advisor about this. They can help you consider the pros and cons for your personal situation.

IRMAA Relief Strategy #5: Delay Taking Distributions From Retirement Accounts

If you don’t need to draw from your retirement accounts for income, then wait until you must start required minimum distributions. This will also give your retirement accounts more time to grow.

IRMAA Relief Strategy #6: Charitable Distributions

The IRS allows you to take out up to $100,000 from your retirement accounts each year and donate that money directly to a qualified charity. These distributions therefore won’t count as MAGI for the purpose of the IRMAA calculation.

IRMAA Relief Strategy #7: Defer Taking Social Security

If you can wait until age 70 to start collecting Social Security benefits, then you could effectively lower your MAGI in the meantime. This can make a big difference, as those who will have 85% of their Social Security benefits taxed are most at risk for owing IRMAA.

You will also increase your overall monthly benefit by as much as 32% if you don’t start drawing benefits until you reach your maximum retirement age.

IRMAA Relief Strategy #8: Dispute the Surcharge

If your income has dropped greatly in the past two years, then you can appeal the amount of IRMAA that you owe. If you have had a major life change in the recent past, such as a death, divorce, retirement, or lost pension, then the IRMAA board may be willing to reduce or eliminate your surcharges.

The Bottom Line on IRMAA and Retirement Planning

IRMAA won’t apply to most Medicare recipients. However, if you do have to pay these surcharges, there are several things you can do to improve your situation.

Consult your financial advisor for more information about IRMAA, how it affects you, and what you can do to fight it. If you are looking for an experienced financial professional to help you, many independent financial professionals are available here at SafeMoney.com. They can listen to your situation, offer a variety of strategies and options from multiple financial services companies, and aren’t beholden to one parent company for their business.

If that sounds like a good fit for your goals, use our “Find a Financial Professional” section to connect with someone. You can request an initial appointment to discuss your goals, concerns, and financial situation. Should you need a personal referral, please call us at 877.476.9723.

The post What Is IRMAA? (How Your Income Affects Your Medicare Premiums in Retirement) first appeared on SafeMoney.com.

Every year, there are copays, deductibles, and premiums to be paid. These numbers typically adjust from year to year, so you don’t have to be caught unprepared when they change this year in 2023.

Once again, Social Security recipients have been given a large COLA (cost of living adjustment) for their benefits, which can play into these updates here. Here are the critical numbers that are important to know regarding Medicare benefits in 2023.

Medicare Part A Premiums

Original Medicare consists of Medicare Parts A and B. If you paid payroll taxes on your lifetime wages for less than 30 quarters, then you must pay the premium for Medicare Part A.

This premium has risen to $506 per month in 2023, up from the $499 that was charged last year. If you paid payroll tax for anywhere from 30 to 39 quarters, then your monthly premium will rise to $278 per month. That is an increase from $274 per month in 2022.

Medicare Part A Deductibles and Coinsurance

The inpatient hospital deductible has risen to $1,600 per benefit period in 2023. That is up from $1,556 per month charged in 2022.

As for coinsurance, there is still a $0 copay for hospital stays of up to 60 days. For days 61 through 90, you will have to pay coinsurance of $400, a hike from 2022’s price of $389 per day.

After 90 days, the daily coinsurance amount rises to $800 per day, up from 2021’s price of $778 per day. Each Medicare participant gets 60 lifetime reserve days over the span of their life.

Copays for skilled nursing care is still $0 for the first 20 days. Then the price rises to $200.00 per day for days 21-100 of each benefit period, an increase from 2022’s cost of $194.50.

Medicare Part B Premiums and Deductibles

Medicare Part B has seen changes for 2023.

In 2023, this premium will cost $164.90 per month, which is down from the $170.10 per month charged in 2022. But these numbers only apply to single or head of household filers who have incomes of less than $91,000, or joint filers with incomes of less than $182,000.

Those with incomes above these thresholds must pay at least $65.90 per month more in 2023. People with super-high incomes can pay as much as $395.60 more per month in 2023.

This is on top of the standard Part B premium of $164.90. So, a high-income earner might have to pay a total of $560.50 per month ($395.60 + $164.90).

The 2023 annual deductible for Medicare Part B is set at $226, compared to $233 in 2022.

Medicare Part D Premiums and Copays

Part D of Medicare has seen a change in price from 2022 to 2023.

In 2022, the average Medicare Part D premium was $32.08 per month. Now, the average premium in 2023 is $31.50 per month.

What about folks with incomes above the thresholds, as discussed before? They will have to pay anywhere from an additional $12.20 per month to $76.40 per month on top of their standard Part D premiums.

Medicare Advantage Plan Ratings

Medicare Advantage plans are covered in what is also known as Medicare Part C.

They are bundled plans that encompass everything covered by Original Medicare and usually also Part D. They also often contain other ancillary benefits such as coverage for dental, hearing, and vision care, fitness memberships, stipends for over-the-counter expenses, and meal delivery.

Every year, the Centers for Medicare and Medicaid Services assigns a star rating to these plans. One star is the lowest and five stars are the highest.

These ratings can change from one year to the next. They are based primarily on the customer satisfaction feedback that they receive, along with the overall quality of the services and care that each plan provides.

In 2023, the average rating for these plans came in at 4.15. The average rating was 4.37 in 2022.

Medicare Advantage Premiums

In 2023, the average cost for Medicare Part C is $28.00 per month.

Of course, Medicare Advantage enrollees must also still pay the Part B premium of $164.90 per month in addition to their Part C premiums.

As of November 2022, more than 28 million Medicare beneficiaries were enrolled in a Medicare Advantage plan — over half of the total Medicare population.

There are a total of 3,998 Medicare Part C Plans being offered in 2023, which is an 6% increase from 2022.

Making Changes to Medicare

If you want to change your Medicare plan from Parts A and B to Part C, find another Medicare Advantage Plan or pick up Part D coverage, you can do this during Open Enrollment, which lasts from October 15^th to December 7^th.

If you realize that you enrolled in the wrong plan, then there is a Medicare Advantage enrollment period from January 1 to March 31^st. During this period, you can switch to another Medicare Advantage plan or switch back to Parts A and B with the option to pick up Part D coverage.

Your new coverage will start at the beginning of the month, after the month in which you requested your change.

Some Final Thoughts to These Important Medicare Updates

There are changes to the premiums, deductibles, and copays with Medicare every year. Some changes are larger than others on an annual basis.

If you have any questions about these numbers or other aspects of Medicare that might impact you, contact your agent or financial professional for more information.

They can go over these details with you in greater depth, including whether any specific coverage might make sense for you. If you are looking for an agent or financial professional to assist you with your Medicare options, then no sweat. Many independent agents and financial professionals are available at SafeMoney.com to help guide you.

Get started by using our “Find a Financial Professional” section to connect with someone directly. You can request an initial meeting to discuss your health insurance needs and explore a potential working relationship. Should you need a personal referral or something else relating to your retirement needs, please feel free to call us at 877.476.9723.

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There are many options for health coverage with Medicare. It’s good to understand a little bit about these options, as they may be confusing, or at least at first.

To help you get started, here are some basic questions that you probably have about Medicare – and what different things can entail.

What is Medicare?

Medicare is a federal government program that gives seniors access to healthcare. It’s administered by the Centers for Medicare and Medicaid Services, which is an agency inside the U.S. Department of Health and Human Services.

In short, it’s a federal health insurance program for senior citizens. There are four separate parts to this program: Parts A, B, C, and D.

Parts A and B are referred to as “original Medicare,” because they were the two parts that were created when Medicare was first introduced. Parts C and D were added later.

Who is Medicare for? When are they eligible?

Medicare is offered to eligible individuals who are age 65 or older. If you qualify for Social Security disability or have been diagnosed with end stage renal disease (ESRD), then you may also be eligible for Medicare.

Medicare only offers coverage to individuals. There is no family coverage available under Medicare, as you would find with private health insurers.

If you are married, both you and your spouse will have to enroll in Medicare separately. Should you be eligible to enroll in Medicare when you turn 65, then your eligibility period will begin three months before the month in which you turn 65 and end three months after this month.

This is known as the Initial Enrollment Period. Medicare also offers a Special Enrollment period. This period is for those who are still covered under their employer’s health insurance plan when they turn 65 or have certain types of life changes, such as relocating or losing their current health coverage.

What if you don’t enroll in Medicare during the Initial Enrollment Period and you don’t qualify for the Special Enrollment Period? Then you will have to wait until the next General Enrollment Period begins the following January (and lasts through the end of March).

If you must wait for the General Enrollment Period to begin before you enroll, then your coverage won’t begin until July. You will also have to pay a late fee that is added to your Part A and Part B premiums.

What are your Medicare options?

As mentioned previously, there are four separate parts to the Medicare program. Each part covers a different aspect of healthcare.

Part A

Medicare Part A is one of the two original programs in Medicare. This part of Medicare provides hospital insurance. It will pay 80% of the costs that are incurred if you need hospital care. The expenses that Part A covers include:

Inpatient hospital care – expenses such as a semi-private room, meals, skilled nursing care, rehabilitation-related services, drugs that are necessary for your treatment, and other miscellaneous services and supplies.

The types of facilities in which you can get qualifying inpatient care include: acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term care hospitals, and any inpatient care you receive as part of a qualifying clinical research study.

Home healthcare – nursing care that is only needed on a part-time basis when it’s medically necessary. This includes physical therapy, speech/language pathology, and ongoing occupational therapy.

Hospice care – for those with terminal illnesses or conditions. The recipient must have a life expectancy of six months or less to be eligible for this type of coverage.

Medicare Part A won’t pay for private-duty nursing, the cost of a TV or telephone in your room (if these are billed separately), or personal items of any kind (i.e., clothing, smartphones, etc.)

Part B

This is the other original part of Medicare, and it covers outpatient medical treatments. Part B covers the following types of expenses:

• Medically necessary doctors’ services
• Many forms of preventative care
• Durable medical equipment, such as walkers or wheelchairs
• Outpatient care from a hospital
• Laboratory tests
• X-rays
• Outpatient mental health treatment
• Some types of home healthcare
• Ambulance services
• Diabetic supplies
• Emergency room services
• Flu shots
• Screening mammograms
• Physical therapy
• Certain types of transplants
• Outpatient occupational therapy

Parts A and B both have premiums, deductibles, and coinsurance just like a health insurance plan in the private sector. Once the deductible has been met, Medicare will generally pay 80% of the cost of the services listed above. The insured is required to pay the remainder of these expenses out of pocket.

Most people don’t have to pay premiums for Part A because they paid Medicare taxes while working. However, everyone must pay the premiums for Part B. The amount of the Part B premium changes each year and varies based upon the insured’s income.

Original Medicare doesn’t cover dental, vision, hearing costs, cosmetic surgery, acupuncture, long-term care, or routine foot care.

Those who want or need this coverage will have to purchase separate policies for them, unless they decide to buy a Medicare Advantage Plan that offers this coverage (see below).

Part C – Medicare Advantage Plans

This alternative to Medicare Parts A and B works in the same way as an HMO or a PPO. Each Medicare Advantage plan must at least cover all services that Medicare Parts A and B cover.

Some Medicare Advantage plans also include prescription drug coverage. Advantage plans can have other types of coverage such as for dental, vision, hearing, and/or health & wellness programs.

Insured persons must be eligible for Medicare Parts A and B and live within the area that is covered by the plan. Those who have been diagnosed with ESRD aren’t eligible for this type of plan.

Medicare Advantage Plans only allow participants to use in-network services. Each plan is linked to a specific selection of doctors, hospitals, and healthcare facilities.

If you go to a provider who isn’t in their network, then you will have to pay for the entire cost yourself.

So, if you are considering enrolling in one of these plans, find out whether your current doctor and other healthcare providers are in that program’s network. Also, keep in mind that there might be co-pays and additional costs that you shoulder. Your financial professional can explain this in more detail.

Part D – Prescription Drug Plans

This plan covers some or all costs of both generic and prescription drugs. Medicare beneficiaries must choose a specific plan and join it on their own.

These plans are run by commercial health insurance companies or other companies in the private sector. All companies that offer this kind of coverage must meet the federally mandated criteria for this type of plan.

Medicare Advantage recipients can also purchase this type of coverage. Their plans are known as Medicare Advantage Prescription Drug Plans (MAPDs).

Part D plans have their own premiums, copays, and deductibles, and they come at an additional cost to Original Medicare.

Medicare Supplement Plans

Medicare supplement plans aren’t plan of Medicare per se. Even so, they are designed to cover most or all of the costs that the three basic parts of Medicare don’t cover (Parts A, B, and C).

Hence their name noting them as a supplemental. Medicare supplement plans are also known as Medigap plans.

You can’t hold a Medicare supplement plan if you already own a Medicare Advantage plan. These supplement plans are offered by commercial health insurance companies. Separate plans are available, and each plan is standardized.

These plans come at additional cost, so that is good to know. That being said, someone can buy a Medicare supplement plan and have great financial peace of mind in knowing that much of their healthcare expenses are covered. Ask your agent or financial professional for more information on what these options might involve.

How do you sign up for Medicare?

Have you decided on which Medicare program you want to enroll in? Consider speaking with your agent or financial professional about your options, and what else you should know, before making a choice.

No matter what, you will probably need to fill out an application form and submit it to Medicare. If you are going to use Parts A and B, you can apply online at SSA.gov.

Should you be unable to finish the entire application in one sitting, get a re-entry number so that you can come back to your application and finish it later. You can also call Social Security and apply over the phone.

For a Medicare Advantage plan, it’s advantageous to speak with your agent about your options here (and for other plan options in general).

You can sign up for Medicare Advantage plans during:

• the normal enrollment period (three months before and after the month in which you turn 65),
• the annual Open Enrollment Period for Part C (which lasts from October 15 to December 7), or
• a Special Enrollment Period if you qualify.

What will Medicare cost me?

Most enrollees in Medicare won’t have to pay anything for Medicare Part A premiums. That is because they have paid Medicare taxes from their wages for at least 40 qualifying quarters.

Those who don’t meet this standard will pay $278 per month in 2023. In 2022, it was $274 per month if they had 30-39 qualifying quarters of income. They will pay $506 per month in 2023 and paid $499 per month in 2022 if they have/had less than 30 qualifying quarters of income.

The deductible that participants must pay for Part A is $1,600 in 2023 and was $1,556 in 2022. This will cover the bill for a hospital stay of up to 60 days.

Those who are in the hospital for 60 to 90 days must pay a coinsurance cost of $400 per day in 2023 and paid $389 per day in 2022.

After 90 days are up, the number jumps to $800 in 2023 and was at $778 in 2022. The coinsurance cost for a stay at a skilled nursing facility is $200.00 in 2023 and was $194.50 in 2022.

Part B premiums have been based on your income level since 2007. There are six separate brackets of income from zero to over a half-million dollars.

The lowest premium is $164.90 for single filers with incomes of $91,000 or less or twice that amount for joint filers.

The highest bracket is for single filers with incomes of at least $500,000 or $750,000 for joint filers. For them, the monthly premium is $560.50.

What Medicare plan is right for you?

To find the best Medicare option for you, start by looking at your present health status and current health insurance coverage. From there, your post-retirement budget will help you see how much you can afford for premiums, copayments, and other costs.

The next step is to assess which types of coverage you may need.

What if you have a family history of dementia, cancer, or heart disease? Then it may be prudent to get a larger amount of coverage, as the costs for treating those conditions can be involved.

If you don’t take many medications now, then consider that in your choice for Part D coverage. Should you have chronic health problems that don’t appear to be going away soon, then a Medigap policy may be a good idea.

You might also consider a Medicare supplement plan if you are concerned about how much you might be paying in health expenses overall.

Sure, your monthly costs will be higher. But you can have peace of mind knowing that you probably won’t have to pay a huge medical bill out of pocket.

Not all Medicare Advantage plans are equal. Some cost more than others, and some have wider networks of providers than others.

If you plan on doing a good deal of traveling after you retire, then you should make sure that your plan can cover the costs of out-of-state treatment.

Where can I go for more help?

We have covered the basic tenets of Medicare here. But you probably have some further questions that you would like to have answered before you get started.

An independent agent or financial professional at SafeMoney.com can be of great assistance here.

They can help you understand different options in depth, determine which Medicare plan is best for you, and show you how to get that coverage. These financial professionals are independent, meaning they work for you and aren’t beholden to any one insurance company.

Don’t be afraid to ask any questions about things you don’t understand. You can also find more information on the Medicare website at Medicare.gov. This site has lots of additional information that can help you.

If you are ready for an agent or financial advisor to help you, get started by using our “Find a Financial Professional” section. You can connect with someone directly and talk about your health coverage needs. Should you need a personal referral, please call us at 877.476.9723.

The post Medicare Questions to Ask first appeared on SafeMoney.com.

Funding for this program comes from three separate sources. One is the taxes you pay for Social Security and Medicare. Another is the premiums that you pay for your Medicare coverage. The third part of the funding comes directly from the federal government.

Here’s a quick rundown of the basics of Medicare. Call it “Medicare 101” — the essentials of what you need to know about this federal program for your retirement or other financial circumstances.

History of Medicare

Medicare was created in 1965 through the enactment of the federal law known as Health Insurance for the Aged (Title XVIII) of the Social Security Act. The program has undergone a few big changes since then.

In 1972, the program was expanded to include those with end-stage renal disease (ESRD) and those who qualified for Social Security Disability payments. The following year, the HMO Act was passed creating health maintenance organizations (HMOs). Then the CMS was created in 1977 to oversee the program as an agency within the U.S. Department of Health and Human Services.

In 2003, the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) was passed. This legislation created major changes to the Medicare program, including Part D prescription drug benefits and Medicare Advantage plans. Both of these new provisions were implemented in 2006.

Medicare has remained in its present form since that time. Today, there are tens of millions of people enrolled in Medicare, and this program is the financial backbone of healthcare insurance for senior citizens and disabled persons.

Eligibility for Medicare

There are three separate categories of people who qualify for Medicare. The first and largest group is those who are 65 years old (the “traditional” retirement age) or older.

You automatically qualify for coverage once you reach this age. This is why Medicare comes up so often in retirement planning discussions.

The second group is disabled persons who receive Social Security Disability payments. In this case, the recipient must have been disabled for at least two-and-a-half years before they will qualify for Medicare.

First, they must satisfy the six-month waiting period to begin receiving Social Security disability payments. Then they must wait for another two years before becoming eligible for Medicare.

So, if you became disabled in February of 2021, then you would have begun receiving Social Security disability payments in August. Then you would become eligible for Medicare in August of 2023.

The final group of persons who can qualify for Medicare is those who have been diagnosed with end-stage renal disease (ESRD). If you have been ordered to have a kidney transplant or are put on a regular program of dialysis, then you may be eligible for Medicare.

However, eligibility isn’t automatic. The insured must have paid Medicare taxes for at least 10 years or else already have been receiving Social Security or Railroad Retirement benefits. Spouses and dependents of those in this category also qualify.

The Basic Structure of Medicare

Medicare coverage is divided into four parts (A, B, C, and D). The provisions of each of these parts are broken down as follows.

Medicare Part A

This is one of the two original parts of Medicare, and it covers hospital insurance. All Medicare members are automatically enrolled in this portion of Medicare once they become eligible.

Medicare Part A covers the following types of expenses:

• Inpatient hospital care – Expenses such as a semi-private room, meals, skilled nursing care, rehabilitation-related services, drugs that are necessary for your treatment, and other miscellaneous services and supplies. The types of facilities that you can get qualifying inpatient care in include acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, long-term care hospitals, and any inpatient care you receive as part of a qualifying clinical research study.
• Home health services – Nursing care that is only needed on a part-time basis when it’s medically necessary. This includes physical therapy, speech/language pathology, and ongoing occupational therapy.
• Hospice care – For those with terminal illnesses or conditions. The recipient must have a life expectancy of six months or less to be eligible for this type of coverage.

Medicare Part A doesn’t cover such items as private-duty nursing, a private room (unless it’s deemed medically necessary), a phone and/or television in your room (if those as handled as separate charges in billing), and personal items such as clothing.

Medicare Part B

This is the other original part of Medicare. It covers outpatient medical treatments. Part B covers the following types of expenses:

• Medically necessary doctors’ services
• Many forms of preventative care
• Durable medical equipment, such as walkers or wheelchairs
• Outpatient care from a hospital
• Laboratory tests
• X-rays
• Outpatient mental health treatment
• Some types of home healthcare
• Ambulance services
• Diabetic supplies
• Emergency room services
• Flu shots
• Screening mammograms
• Physical therapy
• Certain types of transplants
• Outpatient occupational therapy

Medicare Parts A and B generally only pay for 80% of the costs of these services. The people who are insured must foot the remainder of the bills themselves.

It should be noted that original Medicare has no maximum out-of-pocket amount; there is no limit to how much insureds may have to pay. Parts A and B both have premiums, deductibles, and coinsurance just like a health insurance plan in the private sector.

Most people don’t have to pay premiums for Part A. That being said, there are deductibles and limits to what Part A covers. But everyone must pay the premiums for Part B.

The amount of the Part B premium changes each year, and it varies based upon the insured’s income. Those who enroll in Part B after the deadline will also have a late enrollment penalty applied to their premiums.

It should also be noted that original Medicare doesn’t cover the costs of vision, dental, or hearing services. Some Medicare Advantage plans do cover this for an additional cost (more on this below).

Medicare Part C

Medicare Part C is made up of Medicare Advantage Plans. This alternative to Medicare Parts A and B works in the same manner as an HMO or a PPO.

However, each Medicare Advantage Plan must at least cover all services that Medicare parts A and B cover. Some Medicare Advantage Plans also include prescription drug coverage and other types of coverage such as for dental, vision, hearing, and/or health & wellness programs.

Insureds must be eligible for Medicare Parts A and B and live within the jurisdictional area that is covered by the plan. Those who have been diagnosed with ESRD aren’t eligible for this type of plan.

If you decide to enroll in a Medicare Advantage Plan, then you will still have to pay the monthly premiums for Original Medicare. However, your specific plan may have different rules, restrictions, and costs than the original Medicare plan.

If you currently have health insurance coverage from a union, former employer, or current employer, then you may become enrolled in their Medicare Advantage plan automatically.

You can elect to either stay with this new plan, revert to your old health insurance coverage, or enroll in Medicare Parts A and B. But you should probably talk to your union or employer before you make a final decision here.

Medicare Part D

Part D deals with prescription drug coverage. In this case, it covers prescription drug plans (PDPs). This type of plan covers some or all the costs of both generic and prescription drugs. Medicare beneficiaries must choose a specific plan and join it on their own.

These plans are run by commercial health insurance companies or other companies in the private sector. All companies that offer this kind of coverage must meet the federally mandated criteria for this type of plan.

Medicare Advantage recipients can also purchase this type of coverage. Their plans are known as Medicare Advantage Prescription Drug Plans (MAPDs). Part D plans have their own premiums, copays, and deductibles. They come at an additional cost to Original Medicare.

Everybody who enrolls in any type of Medicare plan will receive a red, white, and blue Medicare card. You will show this card to your doctor and other healthcare providers whenever you go to see them.

If you enroll in a Medicare Advantage Plan, you will still receive this card. But you will also receive a separate additional card that you will show instead to your healthcare providers.

Regardless of the type of Medicare benefit that you decide to use, you should only ever give your Medicare number to your doctor or other healthcare provider – and no one else.

Supplemental Medicare Plans

Those who enroll in Original Medicare often also choose to purchase a Medigap or supplemental Medicare plan that covers the costs that Original Medicare doesn’t pay. These policies are offered by private health insurance companies but are regulated by the federal government.

Medigap policies pay for the premiums, deductibles, and copays that come with Original Medicare coverage. However, they themselves also require their own premiums.

You can ask your financial professional more about the advantages and disadvantages of Medicare Advantage or Medicare Supplement plans. They can discuss your situation with you and see what coverage might the right fit for your personal needs.

Exploring Your Medicare Options

The bottom-line? If you are 65 years old and need to enroll in Medicare, you may want to talk to a financial advisor about what kind of coverage you should get.

An experienced financial professional can help you to determine the types and amounts of coverage that you will realistically need from this point on and how you can pay for it.

Looking for someone to guide you through this maze of Medicare options? For your convenience, many independent and knowledgeable financial professionals are available at SafeMoney.com to assist you.

Get started by using our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your situation and explore different options. Should you need a personal referral, please call us at 877.476.9723.

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