By Scott Ford, CEO, Founder & Wealth Advisor of Cornerstone Wealth Management Group
There are many rites of passage in our lives, from getting your first driver’s license to your first kiss to buying your first home. For wiser and more experienced Americans, a major rite of passage is joining Medicare. Medicare is the federal government’s health insurance program, and most Americans become eligible on their 65th birthday.
While joining a health insurance program may not seem as exciting as a first kiss, it can be just as confusing. There are different enrollment periods, different alphabetically labeled parts, and different costs for each part. Let’s take a look at each aspect of Medicare so you have a better idea of what you’re getting into than you did with that first kiss.
Initial Enrollment & Late Penalties
Since joining Medicare is an age-based rite of passage, your initial enrollment period is based on your birthday. You can enroll any time during the three months prior to the month that you turn 65, during that month, or during the three months following that month. So, if you turn 65 on December 3, 2018, your initial enrollment period is September 2018 through March 2019. You have a 7-month window in which to enroll.
You must sign up for Medicare Part B during your initial enrollment period or you will have to pay a late enrollment penalty. The penalty is a 10% premium increase for each 12-month period that you could have had coverage but didn’t sign up for it. That means that if you were eligible in March 2015 but wait until September 2018 to enroll, your premium is increased by 30% (since there were three full 12-month periods between eligibility and enrollment). It is important to sign up on time because it is not a one-time penalty that you must pay, but an increased premium for as long as you have Medicare coverage.
Parts Of Medicare
As mentioned above, there are different alphabetically named parts to Medicare. Each provides different coverage and has a different cost associated with it.
Medicare Part A
Medicare Part A is hospital insurance. It covers hospital care, skilled nursing facility care, nursing home care, hospice, and home health services.
Most people do not have to pay for Medicare Part A because they or a spouse paid enough Medicare taxes while working (usually 10 years’ worth). Those that did not pay into the system long enough, or who were not a part of the system (like some ministers), pay up to $422 a month for Part A in 2018. Those who are just shy of having paid into the system long enough have a monthly premium of $232 for 2018.
Medicare Part B
Medicare Part B covers preventive and medically necessary services. This is healthcare to prevent illness or detect it at an early stage, and services or supplies needed to diagnose and treat a medical condition. Coverage includes doctors visits, clinical research, ambulance service, durable medical equipment, mental health services, and limited outpatient prescription drugs.
The standard Part B monthly premium is $134 in 2018. This could be higher if you have incurred penalties for late enrollment or if your modified adjusted gross income on your tax return from two years ago is above $85,000 for a single filer or $170,000 for a married couple. If you receive Social Security retirement benefits, your Part B premiums will be automatically taken out of your check.
Medicare Part C
Medicare Part C is also called Medicare Advantage. Medicare Part C is Medicare-approved private health insurance plans that provide all of your Parts A and B coverage in addition to supplemental benefits, such as vision, dental, and prescription drugs. Medicare Part C plans often have networks, and the costs, coverage, and deductibles vary by plan. If you are interested in a Part C plan, it is important to compare them across all variables to find which is best for your unique situation.
Medicare Part D
Medicare Part D is prescription drug coverage. Some people do not need to enroll in Medicare Part D because their prescription drugs are covered under their Part C plan. Part D plans vary, as do the drugs they cover and the costs for each. With a Part D plan, you will have to pay the premium, yearly deductible, copayments or coinsurance, costs in the coverage gap, and possibly late enrollment penalties.
If you missed your initial enrollment period or would like to make changes to your current Medicare coverage, you will need to wait until open enrollment. Luckily, open enrollment starts this month, on October 15. Now is the time to assess your insurance coverage and decide if you need to enroll or make any changes during the upcoming open enrollment period.
The alphabet soup of Medicare can be confusing, especially with the different enrollment periods. If you have questions or need help figuring out your Medicare, give us a call at (301) 739-8505 or email firstname.lastname@example.org. You can also book an appointment online by clicking on the link.
Scott Ford is CEO, Founder, and Wealth Advisor of Cornerstone Wealth Management Group, serving entrepreneurs, business owners, executives, and their families. The firm specializes in business liquidity strategies and SBA financing strategies. It is Scott’s mission to help his clients pursue financial freedom and live a balanced and fulfilled life.
Scott is a Wealth Advisor and Registered Financial Consultant (RFC). He was recognized as one of the 20 Rising Stars of Wealth Management by Private Asset Management magazine in 2008 based upon assets managed of $1 million or more per client. Since 2005, Scott has been an active financial technical analyst.
Clients often choose to work with Scott because of his experience with the challenges business owners and executives face, as well as his firm’s disciplined process. His personal and proactive approach is designed to bring clarity and simplicity to the complex issues of financial management. For over 20 years, he has been helping his clients define and pursue their own unique version of “True Wealth.”
Scott is the author of three books: Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances, The Widow’s Wealth Map: Six Steps to Beginning Again, and New York Times Best Seller The Sustainable Edge: Fifteen Minutes a Week to a Richer Entrepreneurial Life.
He and his wife, Angie, reside in Hedgesville, WV, and have two wonderful children as well as a dog and a cat. In addition to spending time with his family, Scott is a voracious reader and enjoys woodworking, Brazilian Jiu-Jitsu, golf, hunting, permaculture, and beekeeping-basically anything outdoors.