For today’s guest post on Medicare, please welcome Danielle Kunkle Roberts from Boomer Benefits.
As you are looking at the future and trying to plan, there may be a few fundamental necessities you know you need to budget for. Health insurance is most likely one of them. Every situation is different, whether you are retired and starting Medicare at age 65 or working and will start Medicare after. Previous income can affect your Medicare premiums, and the supplemental coverage you may choose can determine what you will spend on health coverage in a year.
For most Medicare beneficiaries, Part A has a $0 monthly premium. However, if you have not worked at least 40 quarters in the United States, you will have to buy Part A. If you fall between 30-39 quarters, your premium will be $259 per month, and if you are lower than 30 quarters, it will be $471. Each time you are admitted into the hospital as an inpatient, there will be a $1,484 deductible per benefit period. Additional costs and coinsurance can occur while you are in the hospital.
While Part A provides hospital coverage, Part B provides medical outpatient coverage. There is a standard monthly premium of $148.50. However, if you earn a higher income, you will pay more for Part B. An annual deductible of $203 needs to be met first before Medicare starts paying 80% of Medicare-approved services. You are then responsible for 20% of those approved services with no cap or limit.
Income Related Monthly Adjustment Amount
There is an Income Related Monthly Adjustment Amount (IRMAA) calculated based on previous income for higher-income earners. Social Security will look at your modified adjusted gross income (MAGI) on your tax returns from two years prior. For instance, Social Security will focus on 2019 tax returns to determine what a beneficiary will pay in 2021.
If you made under $88,000 filing individually or $176,000 filing jointly in 2019, you would pay the standard premium in 2021. If you made over those amounts, you could expect to pay more for Part B, with the highest premium amount possible being $504.90 monthly.
When you pay more for Part B due to a higher income, you will also pay an additional amount for Part D. Part D is Medicare coverage for prescriptions that you obtain from the pharmacy. This program allows you to get medications at a reduced rate and protects you from catastrophic spending on high-dollar medications. IRMAA is reevaluated each year, but also can be appealed.
To appeal IRMAA, you must qualify for a Life-Changing Event such as marriage or divorce, retirement or reduction of income, or others. For example, if your income in 2019 was $100,000 individually and you retired in 2020, bringing your income down to $50,000, you would have a good case in appealing. Typically, Social Security will send you a letter stating that they evaluated your MAGI from two years prior, and you must pay more for Part B. The letter comes in the mail after you apply for Medicare and explains how to appeal.
Medicare does cover substantial amounts of the hospital and medical services; however, it does not cover those services at 100%. One option you can choose to go with Medicare is a Medicare Supplement (Medigap) plan. A Medigap plan acts as secondary and will leave you with minimal out of pocket cost. You have a monthly premium, but you will not deal with copays or coinsurance with most plans, so you know almost exactly what you are paying each year for health services.
Increases in your monthly premium can happen each year. Typically, you are notified of the increase by your Medigap carrier before it kicks in. Some carriers can have more than one increase in a year. It is essential to research the carriers available in your area.
Medicare Advantage Coverage
The other option you can choose is a Medicare Advantage plan instead of a Medigap plan. You keep your Medicare Part A and Part B, but you agree to receive your benefits through a private insurance company.
It is typically a network plan like an HMO or PPO, so you are required to use a network of doctors and hospitals to get coverage. Medicare Advantage plan premiums vary by area, but most plans have very low premiums. There are copays/coinsurance for the services your plan provides and a maximum out-of-pocket limit to help cap the total amount you could spend in a year.
The premiums, copays, and deductibles can change each year. Providers can also choose to no longer accept specific plans, so it is important to verify that your provider continues to take your plan from year to year. If a provider is out-of-network, you could be responsible for 100% of the cost, depending on your plan.
These plans may fit your lifestyle and needs. For most plans, you have a low premium and do not pay anything until you need to use it, but if something catastrophic were to happen, that is when you could pay a large amount of money.
Dental, Vision, Hearing
Routine dental, vision, and hearing services are still not covered under Original Medicare. Some Medicare Advantage plans provide this coverage, but not every plan will have all three benefits. Major services that are not medically necessary and approved by Medicare will not be covered. Those procedures can be expensive and add up quickly.
There are standalone dental, vision, and hearing plans you can purchase to help with these costs/services.
To Sum It Up
As you plan for retirement or to come off your current coverage and start Medicare benefits, you want to know the most cost-effective options that best fit your needs. The number of doctor/hospital visits in a year, prescriptions, and how much you may plan to travel can help narrow down which option may be more cost-effective for you. Insurance is purchased for future possibilities. It is a critical decision that takes time to research and plan.