Paying for health care is one of the biggest financial challenges many people face in retirement. Whether you are already enrolled in Medicare or anticipate one day being covered, here are some things you really need know, including some of the costs. Medicare has not yet announced deductible and premium levels for 2022 for Parts A and B, so the costs given below are projections using information from the latest report of the Medicare Trustees. More information can be found at www.Medicare.gov.
Medicare coverage comes in two main flavors: Original Medicare and Medicare Advantage. Original Medicare is divided into two parts: Part A and Part B. In addition, other options have been created to help Medicare meet the needs of the typical consumer. These include Medicare Part D and Medigap. These additional options are provided by private companies under contract with Medicare.
Medicare Part A. Part A covers inpatient hospital care, skilled nursing care (when medically necessary), hospice and home health care. Most people pay no premium for Part A, but there is a deductible of $1,556 for each benefit period. Under Part A, a benefit period corresponds to a period of hospitalization. Once you are out of the hospital for at least 60 days, that benefit period is over and a new benefit period would begin if you were hospitalized again.
Up to 60 days of in-patient hospital care is fully covered each benefit period. If you are in the hospital more than 60 days, but less than 91 days, you will pay coinsurance of $371 per day. After 90 days, your coinsurance doubles and you start drawing on your “lifetime reserve days.” You only get 60 lifetime reserve days.
Medicare Part B. Part B covers doctor visits and outpatient care and other medically necessary services like ambulance services, clinical research and durable medical equipment. Monthly premiums start at $158.50 with an annual deductible of $217. After the deductible is met, you pay coinsurance equal to 20% of the cost for most doctor services, including those provided while you are in the hospital. If your income is above $91,000 for single tax-payers and $182,000 for married-filing-jointly taxpayers, you become subject to what is called the income-related monthly adjustment amount, or IRMAA, which can significantly increase your cost of coverage.
Medicare Part D. These are private plans that contract with Medicare to provide prescription drug coverage. Monthly premiums for plans available in Monterey County range from as low as $7.50 to as much as $160.
Medigap. Note that there is no limit to the amount you can owe under Original Medicare. Consequently, many people purchase a supplemental policy known as Medigap insurance to protect themselves. Medigap insurance is issued by private companies based on Medicare requirements. Monthly premiums can be as low as $30 for a high-deductible plan to as much as $206.
Medicare Advantage. Medicare Advantage plans have become very 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 Medicare Part A.) In addition, they often provide prescription drug coverage and maximum out-of-pocket protection. Depending on the plan, they may also provide vision, dental, hearing and chiropractic care.
The only Medicare Advantage plan offered in Monterey County is the Aspire Health Plan sponsored by Montage Health. Its network includes all four Monterey County Hospitals (including CHOMP and Salinas Valley Memorial) and more than 700 doctors and other service providers.
The 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 $52. The monthly premium for the high-end plan is $269. You can see the details for the Aspire plans at www.AspireHealthPlan.org.
If you are already enrolled in Medicare, you probably know that Medicare is in the middle of its annual open enrollment period. If you have questions about your Medicare coverage or how it might be changed to better meet your needs, act now to talk with a qualified planner. Open enrollment ends on December 7.
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.