Choices Surrounding Medicare - Road to Retirement

When it comes to understanding Medicare, you first need to understand your options. This article will only focus on the choices you make within Medicare and will not go into detail about specifics for City and County employees, for more information on that, click here, or contact SDPEBA, 888-315-8027 or RISK Management, 619-236-5924.  

The Different Types of Medicare 

Medicare Part A 

In general, you can think of Medicare Part A as short-term hospital care (such as hospice care, nursing care, and inpatient hospital care). Medicare Part A can also help with several services that fall within that category, such as physical therapy or social services.  

In order to be eligible for Medicare Part A you simply need to have paid into Medicare for at least 10 years. Most employers automatically deduct Medicare taxes from your paycheck, meaning you are probably automatically eligible (there are rare cases in which you might not have paid into Medicare, it is an active decision, meaning you should be aware if you made this choice).  

Medicare Part A is also “additive,” meaning it does not interfere or interact with any other form of coverage. If you have your own health insurance or use any other Medicare plans, you will be able to use Medicare Part A.  

Original Medicare refers to a bundle of Medicare Part A and Medicare Part B. 

Medicare Part B 

Medicare Part B is similar to health care and covers medically necessary/preventative services. Medicare Part B will help pay for durable medical equipment, ambulance services, and medical treatment. Contrary to popular belief, Medicare part B does have limited coverage for drugs, but it does not cover most prescriptions, Medicare Part D does this. 

Medicare Part B works on a coinsurance model. Think of it as an 80% blanket discount applied to all medical services and supplies that fall under Part B’s coverage.  

The average cost for Medicare Part B in 2021 is $148.50 per month, most people pay for it with social security deductions. Your rate will vary based on “IRMAA” (Income Related Monthly Adjustment Amount). IRMAA functions very similarly to tax brackets and is based on a snapshot of your annual wages two years prior to retiring. Your coinsurance percentage is always 80%, no matter your rate. 

Medicare Part B functions alongside Medicare Advantage (part C) as well as Medicare Supplements (independent insurance providers).  

Medicare Part C (Medicare Advantage)  

Medicare Part C, Medicare Advantage, MA Plans, are all different names for the same thing. Signing up for Medicare Part C is an alternative to “Original Medicare” and is managed by private companies that are sponsored by Medicare. By joining Medicare Advantage, you still have the same coverage you’d get with Medicare Parts A and B, there just might be more/additional covered services based on the provider you choose.  

Medicare Part C is essentially a “complete” insurance package. With it you tend to get health care coverage (through part B), hospital coverage (through part A), prescription drug coverage (through part D), vision insurance, dental insurance, and more. These plans vary based on the provider as well as the user. Some providers even will customize individual plans based on your preexisting conditions or lifestyle.  

Monthly premiums for Medicare Part C vary, but many of them actually have $0 premiums, some even will pay a portion of your Medicare Part B premium. Shopping around for these plans is just like shopping for health insurance. Keep a close eye on the monthly premium, copay, coinsurance, and any deductibles, as they tend to be quite high.  

These plans are similar to HMO plans, and usually require you to use specific doctors within your network.  

Medicare Part D (Prescription Drug Plan) 

Medicare Part D is an optional add on for Original Medicare and is usually attached to Medicare Part C plans. It’s important to know that Medicare Part D is not compatible with every insurance plan and it is suggested that you look to add part D last so that way you can find the best coverage prior. 

Most individuals who sign up for Medicare Part D get it alongside Original Medicare. Premiums for Medicare part D vary, but usually range from between $10-$40 a month. Since this plan also varies based on your insurer, you’ll need to carefully read through what is covered and how it will interact with your other plans. 

Medicare Supplemental Insurance 

Medicare Supplemental Insurance comes from 3rd party providers and functions similarly to PPO plans. Medicare Supplemental Insurance usually stacks on top of Original Medicare with the option of adding Medicare part D.  

Medicare Supplemental Insurance is usually provided by your employer or union, but you can also shop for it yourself. The plans can vary based on the provider and your needs, so be sure to look closely at your explanation of coverage (EOC) before making any final choices. 

Often, Medicare Supplements will cover the remaining 20% of your Medicare part B coinsurance and offers additional health care coverage. Since the plans follow a PPO model, you have more options when it comes to choosing where you’ll get your coverage and won’t be limited to the providers in your immediate vicinity. 

Medicare Supplemental Insurance does not include dental/vision/or drug coverage. When you’re making choices you should consider the costs additional insurance/these services will be. Some employers will offer these services to their former employees, be sure to check in with that before retiring. 

The Choices 

The first and biggest choice when it comes to Medicare is when to enroll. You most likely will be automatically enrolled in Medicare Part A three months before turning 65. That’s often the best time to get yourself situated with both Medicare and Social Security and get the complete enrollment process finished.  

If you have special circumstances or outside coverage, then the timing might vary slightly. Just know that you have a 7-month window centered on your birth month to enroll in Medicare (that means three months prior to your birth month the enrollment opens, and three months after your birth month, the enrollment window closes).  

The next choice is then if you want to get Original Medicare or Medicare Advantage. With Original Medicare you have the option to add Medicare Part D or Medicare Supplemental Insurance to your plan. You’ll have more freedom in terms of where you can receive care, but a steeper premium and less coverage for things like vision/dental. If you choose Medicare Advantage, then you’re choosing a plan with additional coverage and lower rates but also less flexible coverage and more expensive copays/coinsurance.  

Ultimately that choice is a big one. Make sure you’re considering your options and looking into what your employer might provide for you.  

Once that’s finished you simply need to go through the enrollment process. You might have to make a couple of other decisions like if you’d like to use pension deduction or social security deduction. There’s no “right” answer to these questions and will really depend on your own financial planning.  

Things to Consider Before you’re About to Retire 

You might have noticed that the plans we have gone over don’t have coverage for things like life insurance or long-term care. These are plans you’re expected to consider prior to retirement or to get through outside sources.  

Most employers offer a form of life insurance, you should consider signing up for one prior to retiring. There are also 3rd party life insurance providers, these are great ways to get life insurance if your employer does not offer any or if their plans terminate after you retire. 

Get a Customized Life Insurance Quote

 Long-Term care insurance is difficult to get. If you’re able to find a plan through your employer or from a 3rd party provider, you should consider it prior to retiring. You most likely will not find a good rate for long-term care insurance after you retire.  

Click here to Schedule a Long-Term Care Call

Since some employers do offer continued benefit coverage to retired employees you should check in to see if there are any conditions on your plans. For example, with SDPEBA you cannot sign up for Aflac once you retire—but, if you sign up before retiring you’re able to keep your plan. Check in with your employer to see if there are any plans that have these sorts of conditions so you can effectively plan for the future.  

Schedule a call with our Aflac Specialist