Understanding Medicare

Most retirees will, at some point, enroll in Medicare to cover health care expenses during retirement. Unfortunately, Medicare isn’t all that easy to understand if you don’t have experience with it! So, let’s simplify things and go over the basics.

Medicare is made up of four parts: A, B, C (or Medical Advantage), and D. Each piece covers a different kind of medical expense. Medicare Part A and B are what we know as Traditional Medicare. Medicare Part C and D are optional, but may be a helpful supplement to your retirement health care strategy.
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Medicare Part A: Hospital Coverage

Medicare Part A is hospital insurance coverage. It includes coverage for hospital care, skilled nursing facilities, nursing home care, hospice, and home health care services. Individuals may qualify for Medicare Part A with no monthly premium if:

• They already are receiving Social Security benefits as a retiree or Railroad Retirement Board benefits
• You’re eligible for either Social Security or Railroad Retirement benefits, but aren’t enrolled yet
• You or your spouse has Medicare-covered employment​

Medicare Part B: Medically Necessary Services

Medicare Part B covers both medically necessary services, as well as traditional preventative care. This includes:

• Clinical research  
• Ambulance services
• Durable medical equipment (DME)
• Mental health
  • Inpatient
  • Outpatient
  • Partial hospitalization
• Getting a second opinion before surgery
• Limited outpatient prescription drugs
  
  

Medicare Part C: Medicare Advantage
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Medicare Advantage plans, or Medicare Part C, are supplementary. They’re usually offered by a private insurance company that’s been pre-approved by Medicare. Medicare Part C is typically all inclusive, meaning they cover everything from Medicare Part A and B, as well as additional coverage options (like dental or vision).

Medicare Part D: Prescription Drug Coverage

Prescription drug coverage can be spotty at best through Medicare Part A and B. Part D works to provide additional coverage for retirees who are already enrolled in Medicare. Like Medicare Part C, most Part D options are available through private insurance companies. Keep in mind that different prescriptions are covered by different companies at different rates - so always do your research before signing up!
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Enrolling in Medicare

Most Americans can enroll in Medicare at age 65. Typically, the enrollment period for Medicare Part A and B is 7 months long. It begins three months before your 65th birthday and includes your birthday month, as well as 3 months after your 65th birthday. Sometimes you’re automatically enrolled in Medicare if you’re collecting benefits through Social Security already.

If you aren’t automatically enrolled in Medicare, you will need to be aware of the specific enrollment periods for each Part. You can sign up for Part A and/or Part B Medicare during the General Enrollment Period before January 1-March 31 every year if:

• You didn’t sign up in your initial 7-month enrollment eligibility period
• You aren’t eligible for a Special Enrollment Period
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What Do You Do If You Forget?

If you forget to enroll in Medicare Part A or B during your eligible enrollment period, you might be able to enroll during a Special Enrollment Period (SEP). If you currently receive health care coverage from a group plan with an employer, you automatically have an SEP available to you. This would mean that either you or your spouse was still working and covered your health insurance, or you’re covered for an extended period of time after retirement through your employer.

Additionally, you have an 8-month SEP to sign up for Part A and/or Part B during the following times:

• The month after your employment ends
• The month after your group health plan insurance based on current employment ends
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Penalties

It’s important to enroll in Medicare on time, or during your SEP. If you forget to enroll, you could be facing some serious penalties. Although many individuals are eligible for premium-free Medicare Part A coverage, some are not. If you are not eligible for premium-free Medicare Part A, and you don’t sign up during your initial enrollment period, you will be subject to a late-enrollment penalty that is 10% of your monthly premium. The premium is calculated based on the number of years you delayed signing up.

If you are not automatically enrolled in Medicare Part B, and you do not enroll during your initial enrollment period, you could be subject to a 10% penalty for every 12-month period you were eligible to enroll but did not. Nobody wants to pay these hefty fines, so make sure you enroll during your window! Have questions? We’d love to help. Contact Tony at Wisely Advised today!

Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor.  Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients.  You can learn more about Tony and his firm here. ​​​​​​