Delaware retirees all face one particularly complicated decision – Medicare. Daunting enough to turn most stomachs, it’s often a confusing and time-consuming topic.
A clear explanation of the basics can help make the decision more straightforward, although not without challenges. Using professional help in this case may be one of those rare but clear no-brainers of life, as it helps navigate the confusion without costing a penny. Before readers switch to Google to search for the nearest professional, here are a few basics to help lay the foundation.
Groundwork: Medicare is a health insurance coverage available to folks when they reach age 65, and those younger who qualify for Social Security Disability Income. Now for a simplified approach to the options.
Medicare Part A provides hospitalization benefits to patients ages 65 and older, free of charge. The coverage is quite comprehensive and is highly subsidized by the government, so it is a great deal. Those covered by Medicare can go to virtually any doctor in the country – without a referral – since the vast majority of physicians participate with Medicare.
Medicare Part B adds coverage for physician and outpatient services. The cost is $174.70 per month starting in 2024, an amount lowered from the 2023 rate. The premium payment is deducted from one’s Social Security benefit. It should be noted that folks with Modified Adjusted Gross Income above $103,000 for a single filer and $206,000 for married filing jointly will have higher Medicare Part B premiums due to Income-Related Monthly Adjustment Account income thresholds.
Medicare Parts A and B are very comprehensive, but there are holes in coverage, creating potential out-of-pocket expenses. Specifically, these holes include Part A deductible and copays for hospital stays, skilled nursing care for rehab residential facilities, and hospice, as well as a Part B deductible and copays. Most of these holes can be filled with Medicare Supplement plans, known as Medigap. The Center for Medicare Services designed these plans to fill various combinations of the holes. Plan designs are identical and offer identical coverage regardless which carrier offers them, so consumers are able to shop for carriers, considering the premiums and quality of service each one offers. The most popular Medicare Supplement plans are G and N. Depending on the age of the individual and the plan selected, the cost of Medigap could be $150-$200 per person, per month.
None of these supplement plans covers prescription drugs. Enter Medicare Part D for prescription coverage. Unlike the Medicare Supplement plans which have standard plan designs, every carrier offers its own plan designs. Part D prescription coverage is complicated and difficult to compare as designs vary by premiums, different copayment amounts for different tiers of medication (generic, brand or specialty), and different protocols for step treatment, when the insured might have to be prescribed a generic to see if it works before a brand-name medication is authorized for coverage. Part D is also infamous for the donut hole, when coverage is provided after a deductible is met, paid to a certain benefit level, and then no longer covered until an additional out-of-pocket is met, at which time at least partial coverage is provided.
With Medicare Part C, consumers also have the option to forgo traditional Medicare, and the Medicare Supplement that has a premium, and rather select Medicare Part C, also referred to as Medicare Advantage. When doing so, consumers voluntarily choose to be covered by an HMO. One advantage of this plan option is that there is usually little to no upfront cost for the plan, other than the Medicare Part B premium which still needs to be paid. A major potential negative is that between copays, deductibles and coinsurance payments, annual out-of-pocket costs could be as high as $8,300. Another plus is the possible ancillary benefits the HMO may provide, such reduced costs or partial reimbursement for eye exams and glasses as well as hearing aids, and maybe even dental benefits that are not covered by Medicare. They also offer prescription drug coverage, usually for an additional premium. In addition to the potentially high out-of-pocket costs, another downside is that Medicare Part C is an HMO plan that requires a referral. Fewer doctors will participate in the network than in Medicare, and the availability of physicians outside the coverage area could be very limited.
Deciding whether to select Part A, plus B, and possibly supplements and D, or choose Part C, requires consideration of many options regarding which plan benefits a person most. Consumers can select plans designs independently, but there is no cost savings for doing that. It is wise to use the expertise and acumen of a professional who is licensed to sell the full spectrum of Medicare Supplement and Medicare Advantage plans. While Medicare planning is the no-fun part of retirement, there is help for the journey.
WRITTEN BY: Len Hayduchok, the director and owner of Dedicated Financial Services. As a fiduciary and Certified Financial Planner, he offers his wealth of experience to guide others through the mire of financial and retirement planning. As a Certified Life Coach, he pairs his financial expertise with a heart to help others who want to make the most of their retirement plan. Investment Advisory services are offered through SGL Financial LLC.