Let’s talk Medicare
If you are one of the 44 million Americans currently covered by Medicare, you probably know that Medicare’s annual open enrollment period just started. Between now and December 7 you have the opportunity to make adjustments to your Medicare coverage.
Paying for health care is one of the biggest financial challenges many people face in retirement. If you are 65 or older, Medicare is probably an important part of your financial picture. However, if you are new to Medicare you may be surprised by Medicare’s complexity and the gaps in your coverage.
You can choose between two general directions for your Medicare coverage: Original Medicare and Medicare Advantage plans. Original Medicare, in turn, is divided into two parts. Part A covers inpatient hospital care, skilled nursing facilities (when medically necessary), hospice care and home health care. Part B covers doctor visits and outpatient care and other medically necessary services like ambulance services, clinical research and durable medical equipment. Optional Part D covers prescription drugs and is purchased from private insurance companies.
Original Medicare does not cover everything. For example, while Part A covers hospitalization and skilled nursing facilities, it only covers acute care. If you need long-term care, also known as custodial care, Medicare will not cover it. Medicare also excludes most dental care, eye exams for prescription glasses, dentures, hearing aids and exams for fitting them, acupuncture and routine foot care. If you want to find out if your particular need is covered by Original Medicare, you can search for your item or service on the Medicare coverage website: www.medicare.gov/coverage.
Most people do not pay a premium for Part A, but they do pay a deductible of $1,340 for each benefit period and coinsurance for hospitalization. Part B premiums start at $134 per month, but can be higher depending on your income. In addition, for Part B you will pay a deductible of $183 per year and coinsurance above that amount equal to 20% of the Medicare-approved charge for most doctor services, including the services provided by your doctors while you are in the hospital.
In a catastrophic scenario, there is no limit to the amount you can owe under Original Medicare. Consequently, many people purchase a supplemental policy, also known as Medigap insurance. Medigap insurance is issued by private companies, but the policies are standardized by law to comply with Medicare requirements. There are 10 standard Medigap policies available each with different coverage limits.
If you find this confusing, you are not alone. In fact, this confusion is why Medicare Advantage plans have become so popular in recent years. By law, Medicare Advantage plans are required to provide everything that is covered by Original Medicare. The only exception is hospice care which continues to be provided by Original Medicare Part A.
The only Medicare Advantage plan offered in Monterey County is the Aspire Health Plan. Its network includes all four Monterey County Hospitals (including CHOMP and Salinas Valley Memorial) and more than 700 doctors and other service providers. In addition to all the services provided by original Medicare, and depending on the plan, Aspire also provides vision, dental, hearing and chiropractic care.
Aspire Health Plan has a menu of offerings to appeal to a wide range of customers and budgets. The basic plan is available for a monthly premium of $35.50 (on top of the standard Part B premium), roughly what you would spend for a monthly Part D premium. However, for that amount you get prescription drug coverage and maximum out-of-pocket protection.
Deciding which Medicare option is right for you is a very personal decision. However, from a financial planning point of view, the Aspire Medicare Advantage plan is hard to beat in terms of simplicity, breadth of coverage and cost.
Steven C. Merrell MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey. He welcomes questions you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940 or email them to firstname.lastname@example.org.