Medicare should be part of your retirement planning

Medicare takes a little time to understand. As you approach age 65, familiarize yourself with its coverage options and their costs and limitations.

Certain features of Medicare can affect health care costs and coverage. Some retirees may do okay with original Medicare (Parts A and B), others might find it lacking and decide to supplement original Medicare with Part C, Part D, or Medigap coverage.

How much do Medicare Part A and Part B cost, and what do they cover? Part A is usually free; Part B is not. Part A is hospital insurance and covers up to 100 days of hospital care, home health care, nursing home care, and hospice care. Part B covers doctor visits, outpatient procedures, and lab work. In 2018, the basic monthly Part B premium is $134. You also typically shoulder 20% of Part B costs after paying the yearly deductible, which is $183 in 2018.1

Medicare does not cover dental, vision, or hearing care, or prescription medicines, or health care services outside the U.S. Out-of-pock-et costs may lead you to look for supplemental Medicare coverage and to plan other ways of paying for long-term care.1,2

Medigap policies help Medicare recipients with some of these copays and deductibles. Sold by private companies, these health care policies will pay a share of certain out-of-pocket medical costs. You must have original Medicare coverage in place to purchase one. The Medigap policies being sold today do not offer prescription drug coverage.2,3

Part D plans cover some prescription drug expenses. Part D plans currently have yearly deductibles of less than $500.2,4

Some people choose a Part C (Medicare Advantage) plan over original Medicare. These plans, offered by private insurers and approved by Medicare, combine Part A, Part B, and usually Part D coverage and often some vision, dental, and hearing benefits. You pay an additional, minor monthly premium besides your standard Medicare premium for Part C coverage. Some Medicare Advantage plans are health maintenance organizations (HMOs); others, preferred provider organizations (PPOs).5

In 2017, the average HMO monthly premium was $29. The average regional PPO monthly premium was $35, while the mean premium for a local PPO was $62.5

HMO plans usually restrict you to doctors within the plan network. If you are a snowbird who travels frequently, you may be out of the Part C plan's network area for weeks or months and risk paying out-of-network medical expenses from your savings. With PPO plans, you can see out-of-network providers and see specialists without referrals from primary care physicians.5

Medicare planning is integral to your retirement planning. Discuss it with the financial professional you know and trust in your next conversation.

This article was contributed by David E. Scott, CFP®, B.A. Accounting, a LPL Registered Principal and Certified Financial Planner? with offices at 812 Ashmun Street in Sault Ste. Marie.

Citations. 1 -medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html

[5/21/18]

2 -cnbc.com/2018/05/03/medicare-doesnt-cover-everything-heres-how-to-avoid-surprises.html

[5/3/18]

3 -medicare.gov/supplement-other-insurance/medigap/whats-medigap.html

[5/21/18]

4 -money.usnews.com/money/retirement/medicare/articles/your-guide-to-5-cnbc.com/2017/10/18/heres-how-to-snag-the-best-medicare-advantage-plan.html

[10/18/17]

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