In this post we will discuss who qualifies for Medicare, what medical expenses are covered and why a Medigap policy is crucial.
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A Brief Overview of Medicare
As more of your clients draw closer to retirement, it helps to know the basics for one of the key pillars supporting their financial security in retirement—Medicare.
Who Qualifies for Medicare?
As soon as your client turns 65 years old, he or she becomes eligible for Medicare benefits. Enrollment must occur during a seven-month period that starts three months before an individual turns age 65; failure to sign-up on a timely basis could result in facing permanent higher premium costs. Individuals with certain disabilities or diagnosed with end-stage renal disease are also eligible, regardless of age.
What Medical Expenses are Covered?
Medicare provides a wide range of benefits, consisting of:
- Part A – Hospital Insurance, which covers inpatient hospital, inpatient skilled nursing facility, hospice and some home health services.
- Part B – Medical Insurance includes physician services, outpatient care, durable medical equipment, home health services and many preventive services.
- Part C – Medicare Advantage (MA) is a program comprised of Medicare-approved private insurance companies that provide all Part A and Part B services, and may provide prescription drug coverage and other supplemental benefits.
- Part D – Prescription Drug Benefit, which provides outpatient prescription drug coverage through Medicare-approved private insurance companies.
Individuals may elect Part A and Part B coverage through the Original Medicare Program (with optional Part D coverage), or Part A and Part B coverage through an MA plan, if available where they reside.
What are the Costs of Coverage?
Each Part has its own costs:
- Part A—Coverage will be premium-free for those already receiving retirement benefits from Social Security, or are eligible to receive them but just haven’t filed for them yet. If an individual is under 65, premium-free coverage is available to individuals receiving Social Security benefits for 24 months, or those who have end-stage renal disease and meet certain requirements. Otherwise, premiums are $422 per month in 2018 for individuals who have paid into Medicare for less than 30 quarters, and $232 if Medicare contributions were made for 30-39 quarters.
There are deductibles and copayments, including a $1,340 deductible for each benefit period, plus $0 copayment for days 1-60, $335 coinsurance per day for days 61-90 and $670 copayment for each “lifetime reserve day” after day 90. There are up to 60 lifetime reserve days over a lifetime, after which the insured bears all costs.
- Part B—The standard monthly premium is $134, but will be higher based upon annual income. Higher premiums kick in on incomes above $85,000 (single) and $170,000 (joint). After a $183 deductible (2018) is met, the insured typically pays 20 percent of the Medicare-approved amount.
- Part C—Monthly premium will vary by plan.
- Part D—Monthly premium will vary by plan, with a maximum annual deductible of $405 (2018).
In addition to out-of-pocket costs, there are a number of health care expenses that Medicare doesn’t cover. That’s why many Americans consider a Medigap plan. Your client should apply for Medigap insurance at the same time as Medicare since any delay may result in higher premiums or even denial of coverage.
See referenced disclosure (2) at http://blog.americanportfolios.com/disclosures/