Planning Around Your Medicare Benefits

Medicare and the healthcare costs associated with life after Age 65 will likely be one of your biggest expenses, lasting for the longest period over your lifetime. Also, Medicare and its nuances can also be one of the most confusing. In fact, nearly 75% of people wish they had a better understanding of Medicare coverage, according to The Harris Poll on behalf of Nationwide Retirement Institute (October 2023).

Rest assured, your wealth management team at Churchill Management Group at Focus Partner’s Wealth is available to help you better understand your Medicare options.

Three Main Categories of Eligibility for Medicare

1. People age 65 and older (some disabled widows/widowers younger than 65 may be eligible).Decide how you are going to spend your time.
2. Generally, those who have been entitled to Social Security Disability for 24 months.
3. Persons diagnosed with permanent kidney failure requiring dialysis or kidney transplants.

Enrollment Periods

1. The “Initial Enrollment Period” for Medicare is a seven-month period beginning three months before the month of your 65th birthday and ending three months after the month you turn 65.

If you apply for Social Security Benefits at age 65, you will be automatically enrolled in Medicare. If you are applying for Medicare before you apply for Social Security benefits, you will need to ask them to bill you for the Medicare premiums, as they are normally deducted from your Social Security benefits.

• If you decide not to enroll during Initial Enrollment you can also sign up during the General Enrollment Period (January 1 through March 31 each year). However, there may be a 10% penalty added to the Part B premium for each year that you delay enrolling. The exception would be if you are still working and covered under your employer’s health plan; then you may enroll during a Special Enrollment Period.

• The Special Enrollment Period starts when the employer’s health plan coverage ceases to be the primary insurance. Retiree medical benefits are not considered primary insurance by Medicare but when available, act as a supplement.
2. The “Open Enrollment Period” is an annual period of time (occurs each year, from October 15 through December 7) when current Medicare users can choose to re-evaluate part of their Medicare coverage (their Medicare Advantage and/or Part D plan) and compare it against all the other plans on the market.

Choices on How to Receive Medicare Benefits

Once you are eligible for Medicare, you will also need to decide if you want Original Medicare or a Medicare Advantage Plan.

1. Original Medicare (Part A & B) – Part A may cover costs related to inpatient hospital visits, skilled nursing facilities, hospice and palliative care, and home healthcare. Part B may cover outpatient care, medical equipment, and medically necessary doctors’ services. Some preventative care may also be covered by Part B. However, in most cases, it is recommended to consider purchasing a Medicare Supplemental (Medigap) Insurance Policy to cover health care costs not covered by Medicare.
2. Medicare Advantage Plan (Part C) – are plans offered by private companies approved by Medicare. There are different types of plans, similar to HMO and PPO plans. Some Medicare Advantage plans offer additional coverage for vision, hearing, and dental services, and many also offer enhanced prescription drug coverage. In most cases, you may not be able to purchase a Medigap policy if you make this choice.
3. Medicare Prescription Drug Plan (Part D) – some Medicare Advantage Plans offer drug coverage, including shots and vaccines. This is an optional plan available for an additional fee

Remember these choices are based on your individual needs. So for a married couple, this could mean that you choose different options for your Medicare and Prescription Drug coverage than your spouse.

Also, it is important to be aware that Medicare does not cover most long-term care (assisted living, memory care or nursing home), except in some cases with strict requirements and for a limited time.

Initial Enrollment

Medicare’s initial enrollment period typically starts three months before , and ends three months following, your 65^th birthday. If you miss Medicare’s initial enrollment period, you may be subject to a late enrollment penalty, which varies based on the type of Medicare you’re applying for.

Part A –For late enrollment, your premium may increase by 10% for twice the number of years you were delayed in enrolling. For example, if you didn’t sign up for Part A for two years past your initial enrollment period, you’d be subject to a higher premium for four years.
Part B –You may be charged a late penalty of 10% of the standard Part B premium for every 12 months of delayed enrollment.
Part D – For every month you delay enrolling in coverage, you’ll be charged 1% of the standard Part D premium, rounded to the nearest $0.10.

Medicare Only Covers You in the United States

If your retirement dreams include moving or traveling abroad, it’s important to know that Medicare, in most cases, does not cover healthcare expenses for citizens outside the United States. That means you may need to enroll in private insurance or your country of residence’s public healthcare system, where available.

What Does Medicare Cover?

Medicare covers many, but certainly not all, health care expenses. Part A covers hospital stays, hospice care, skilled nursing facility care for up to 100 days following a 3-night (or longer) admittance to a hospital, and home care. Part B is for doctor visits, ambulance services, durable medical equipment, outpatient services and preventive benefits such as mammograms and medical screenings. Part D covers prescription drug costs.

What Doesn’t Medicare Cover?

Medicare doesn’t cover most dental and vision care, routine hearing care (including hearing aids), most foot care, long-term care, alternative medicine and nonemergency transportation, among other services. For these and other out-of-pocket costs, most people choose to supplement with private (Medigap) insurance.

Medicare Premium Amounts Are Impacted By Income

If your income is above a certain threshold, you’ll likely pay more for Medicare parts B and D, this is known as Income Related Monthly Adjustment Amount (IRMAA). There’s a two-year look-back when determining whether or not you are subject to IRMAA premium surcharges. Tax planning can help you better understand any impact that could apply.

If you’re subject to IRMAA, it’s possible to appeal the surcharge if you’ve experienced a life changing event, such as retirement, work reduction, divorce, etc. IRS form SSA-44 is used to make this appeal

Medicare Might Offer Certain Free Preventative Services

As a Medicare recipient, you may be eligible for several free preventative services, such as an annual wellness exam, a free cardiovascular screening every five years, annual flu shots, annual mammograms, and screenings for certain prostate, colorectal, and cervical cancers.

Additional Resources

For more information, you can visit: www.medicare.gov.

You can get personalized health insurance counseling at no cost to you from your local State Health Insurance Assistance Program (SHIP). Please visit https://www.shiphelp.org/.

“Parts of Medicare,” U.S. Centers for Medicare and Medicaid Services, www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare

It is important to fully understand what makes the most sense for your particular situation regarding these benefits.

Sources: aarp.org and medicare.gov

Scott Perkins, Director, Financial Planning, MSTax, MBA, CFP®

Reach out to a Churchill advisor at (877) 937-7110 or [email protected] to discuss how we can work alongside you to help grow and maintain wealth now and for future generations to come.

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