​Medicare: Fast Facts

Here’s what you need to know about Medicare.

​Health insurance is one of the best support systems for retirees. The ability to access medical care when you need it, and the confidence of knowing a significant portion of your medical expenses will be covered, makes growing older more comfortable. However, there may be a few aspects of this resource you need more clarity regarding paying for Medicare.

What is Medicare?

Everyone’s heard of it. But what is it, really?

​Medicare is a health insurance plan administered by the government and available to U.S. citizens who are age 65 or older, disabled, suffer from Lou Gehrig’s disease (i.e., Amyotrophic Lateral Sclerosis), have kidney failure or meet the qualifications to receive a kidney transplant.1
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The concept of offering every American a medical service coverage plan was initially proposed by President Theodore Roosevelt during his electoral campaign. President Harry S. Truman also made attempts to get legislation passed to approve federal funding for the plan. However, the plan was not approved until 1965, and stipulations were attached to the bill, which prevented every American from receiving national medical insurance. Despite these initial failed attempts, the persistent efforts of Presidents Roosevelt, Truman, Kennedy and Johnson eventually resulted in the approval of this health insurance program.2

The Four Plans that Keep You Covered

​There are four options Medicare recipients can utilize simultaneously to help pay for medical expenses for frequently used services—they are Parts A, B, C and D. Here’s a brief overview of the benefits each plan provides.3
Part a
​Part A covers inpatient services such as tests, routine medical exams and surgical procedures. If home health care or admission into a hospital or skilled nursing facility is needed, this insurance plan will also contribute toward the costs. However, the amount depends on the length of your stay or care. *For example, hospital stays longer than two months require you to pay $322 per day and $644 per day after 90 days. If your stay exceeds your lifetime reserve days, you will be responsible for the balance of your incurred medical expenses.
* https://www.missouriclaim.org/wp-content/uploads/2016/06/ship-smp-june-2016-medicare-minute-teaching-materials.pdf
part b
​Medicare Part B pays for procedures your physician performs on you. This includes coverage for ambulatory services, biopsies, mammograms, blood screenings, rehabilitation services, emergency visits and other related services.
part c
​Medicare Part C is the Advantage plan available through independent health insurance companies. The monthly premiums vary based on the insurance company’s plan rates. However, the premiums will be paid by the government. This type of plan pays for inpatient and outpatient care such as those covered in Parts A and B. Prescriptions may also be covered through this plan.
part d
Part D is the portion of Medicare that pays for medication and is also offered through independent health insurance companies. You can purchase this plan for a low monthly price. *The fee varies, but will not cost more than $75 per month. After evaluating your income, you will be informed about the specific amount you will have to pay.
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Part D, however, does not pay the full amount of prescriptions. *In addition to your monthly premiums, you will have to meet an out-of-pocket threshold amount of $4,580, which will include your plan premiums and prescription copays. Your copay amount will also vary based on the price and drug type. If the drug is brand name, you will pay 45 percent of the medication price. If the drug is generic, you will pay 42 percent of the price. By the beginning of the next decade, it is expected that Medicare recipients who purchase a Part D Medicare plan will only be responsible for 25 percent of their medication expenses.
* https://www.missouriclaim.org/wp-content/uploads/2016/06/ship-smp-june-2016-medicare-minute-teaching-materials.pdf

What’s the Difference between Medicare and Medicaid?

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While each insurance plan is administered by the government and paid by taxpayers, there are a few distinctions between each program. The federal health care coverage available to seniors and the disabled is limited to these two groups of the population. Medicaid, on the other hand, is available to the general population who meet the program’s qualification criteria. It is supported on the federal level but administered by state governments.4
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Although state-administered health insurance plans are open to the general population (i.e., children, adults, disabled individuals and seniors), the qualification guidelines are higher than the federally sponsored health insurance plan available to seniors and the disabled. The distribution of state health insurance is determined by an individual’s income and value of assets. The services covered by state-administered health insurance plans are similar to Medicare, but some services are restricted if individuals are age 21 and older or age 21 and younger.

What about the Gaps Parts A and B Don’t Cover?

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​Health care expenses can quickly accrue, and when unexpected medical emergencies occur, you may not be prepared to handle the financial consequences. Although Parts A and B provide a significant amount of coverage, the total costs will not be paid. *These Parts pay approximately 80 percent of health care expenses, and you are responsible for paying the remaining 20 percent. This remaining balance typically consists of copays and deductibles. These fees are affordable when the amounts are between $10 and $50. However, if you have an extended hospital stay or visit the doctor frequently, and don’t have enough money saved, these fees can be expensive. This is where a supplemental health insurance plan to cover the gap can provide a safety net for you.5
* https://www.moneyunder30.com/understanding-your-health-insurance
A supplemental health insurance plan can offer some financial relief, but you will still need additional coverage if you are admitted into a nursing home permanently or need in-home nursing services. If you need to purchase eyeglasses, visit a dentist or require a hearing aid, Medigap will not cover these expenses. Medigap insurance offers 10 coverage options you can choose for Medicare in retirement. When you speak with an insurance representative about this type of plan or request information, make sure you evaluate the coverage terms closely because some options don’t cover services such as skilled nursing facility stays, hospice care or blood transfusions.6

Paying for Medicare can be challenging, but with diligent research and talking to your financial professional, you can find what you will need when you reach age 65 or what you need to change to your retirement health care plan now .7

​What are Some Steps You Can Take to Pay for Health Care in Retirement?

Plan Ahead by Saving

​If you are still working, you should consider setting money aside for medical care in retirement. For example, a health care spending account can help you control your expenses and reduces the temptation to use medical service savings for non-medical expenses.8 Although Medicare pays a significant portion of your expenses, you don’t want to be burdened with medical bills that exceed your monthly budget. Late fees and interest can also cause medical expenses to increase if bills are not paid on time.

Greg has continued to assist his clients in their retirement planning by providing Medicare Planning. The maze of Medicare can be confusing, ASIS has created an entire division called Club 65 to help clients figure out how does Medicare work?  What is a Supplement Plan, what is a Medicare Advantage Plan? Which is plan is the best for me and how do I implement these plans?

Consider Additional Supplemental Income

​In addition to your defined benefit pension and Social Security income, supplemental retirement income, such as a fixed indexed annuity, can provide the financial stability you need to cover unexpected expenses. Depending on the amount you save prior to retirement, you will receive a monthly amount over a fixed period of time. Discuss what your options are and what retirement income vehicles may be right for your unique situation with your financial professional.

Purchase Non-Medicare Insurance Products

According to a 2014 Centers for Disease Control and Prevention report, 1.4 million seniors reside in nursing homes.9 Long-term care insurance can also help you fill in the gaps of what Medicare supplemental plans don't cover. Adults between the ages 40 and 84 can purchase a long-term care insurance plan.10 The more proactive you are with saving for retirement by acquiring supplemental insurance plans and supplemental income sources, the less likely you are to encounter financial challenges. Even with the rising costs of health care, planning for health care in retirement doesn’t have to be complicated. Consider the options we’ve outlined here and talk to your financial professional to find out the best strategy for you and your situation. 
1 http://www.investopedia.com/terms/m/medicare.asp
2 https://www.medicareresources.org/basic-medicare-information/brief-history-of-medicare/
3 http://www.investopedia.com/articles/personal-finance/070914/medicare-101-do-you-need-all-4-parts.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
4 http://www.investopedia.com/articles/pf/07/medicare-vs-medicaid.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
5 https://www.medicare.gov/supplement-other-insurance/medigap/whats-medigap.html
6 https://www.ehealthinsurance.com/medicare/compare-supplement-plans
7 http://www.investopedia.com/articles/insurance/10/the-shortcomings-of-medicare.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
8 https://www.ameriprise.com/research-market-insights/financial-articles/retirement/strategies-to-help-save-enough-for-health-care-in-retirement/
9 https://www.ameriprise.com/research-market-insights/financial-articles/insurance-estate-planning/what-is-long-term-care-insurance/
10 http://www.cdc.gov/nchs/fastats/nursing-home-care.htm