Welcome to Imagine Financial Services, I’m Marianne Nolte a Certified Financial Planner™. Todays financial planning topic is Medicare.
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Medicare impacts a persons financial life both during working years and once you attain age 65 plus.
For most, a person qualifies for Medicare by paying Medicare taxes for at least 10 years. During a persons working years, Medicare tax is taken from your paycheck and this can reduce your monthly cashflow. That can cause financial strain.
Once you obtain age 65, you become eligible for Medicare coverage Part A and Part B. Part A is hospital insurance. Not long term hospital coverage, but limited hospital coverage. For most there is no charge for Part A coverage as long as they have sufficiently paid into medicare during their working years.
Part B is medical insurance which helps pay expenses for doctors visits and other medical services. A monthly premium applies to Part B.
Next is Part C and D coverages. These are other elements to Medicare which have more flexibility. They are run by private insurance companies which must follow the rules set by Medicare. Part C and D come with additional costs. I’ll skip Part C for the moment and address Part D… think D for Drugs.
Back to Part C, this is Medicare Advantage. Part C bundles Parts A, B, and D into one plan. It is purchased with specific services in mind. I frequently hear a couple of questions.
Question one, “What if I’m turning 65 shortly, I’m employed, and have good medical insurance through my employer. Do I still need to sign up for Medicare and will this cause an out of pocket expense for me”?
Well, situations like this seem to cause confusion as the various coverages get a bit entwined. When a person turns 65, they are required to sign up for Part A with the Social Security Administration.
If a person has creditable coverage through their employer, they have the option to waive Part B coverage and save themselves the cost of paying a monthly premium while covered by their employer plan. However, they may face a penalty for postponing Part B coverage.
We just said Part B may be waived if you have creditable coverage. What’s creditable coverage? It’s drug coverage from an employer plan noted as “creditable.” Remember, Part D is for drugs.
If the person chooses to waive part B, once they do leave their employer, a special enrollment period of 63 days opens up for them and works just the same as the initial enrollment period when someone turns 65. Be mindful of this as it applies to potential penalties.
I know that is a lot to take in, so seek professional counsel from a Medicare specialist to determine the best strategy for your specific situation.
The second question, “At age 65 I signed up for Medicare. I was healthy at that time. Now that I am 75, I am beginning to experience medical issues. Last month I was hospitalized with a serious problem that required surgery. Do I have options for changing and improving my Medicare Part C coverage”?
Let’s back up to when someone first signs up for Medicare. During the initial enrollment period, there are ZERO medical questions. Clients can choose whichever plan they want. They may be thinking, why would I pay a premium for insurance when I rarely go to the doctor? So they may not sign up for a Medicare supplement. However, as their health changes, they may not pass the medical underwriting and they’re limited to choosing whatever Part C or Medicare Advantage plan provides the most coverage. Like investing, we don’t have a crystal ball. We can’t determine future events in our lives. What can be done is to take proper steps to protect us based on the information today, so again, speak with a Medicare specialist and thoroughly evaluate your current health and your families health history.
Thanks for joining Marianne Nolte, CFP® professional to cover these sticky Medicare questions.