How Medicare Impacts Financial Planning - Genivity

Planning for retirement requires planning for many scenarios and options. One element to consider is Medicare. In a survey by Forbes, 30 percent of Americans believed that home health care expenses were less than $417 monthly when in reality, the cost is closer to $4,000 a month, or $45,000 annually. To put this into perspective, a 65-year-old in 2016 expected to need approximately $270,000 in savings to cover at least 90 percent of their health care costs in retirement. While this may seem like a cost that will be impossible to cover, Medicare can be very useful in this case.

Apply for Medicare

Medicare is a federal program for U.S. citizens and legal residents of five years. Individuals who are over 65 years of age can apply to this program. Individuals who are under 65 years of age can also apply if they receive disability benefits from Social Security, are members of the Railroad Retirement Board, or who have medical conditions such as Amyotrophic Lateral Sclerosis (ALS) or End-Stage Renal Disease (ESRD).

To apply for Medicare, you have a seven month period. You have three months prior to turning 65 and three months after turning 65. You may also apply during the general enrollment period from January 1 through March 31. If you are accepted, coverage will begin July 1.

To re-apply for Medicare, make sure to do so before your policy expires. If you are uninsured for a 12-month period and re-apply for Medicare part B, you will be charged a 10 percent increase in your premium. In other words, if you re-apply five years later, you will witness a 50 percent increase in your monthly premiums.

For more guidelines, read more at Medicare.gov.

Medicare Part A

Medicare part A is also known as hospital insurance. This insurance covers inpatient care such as those in hospitals, skilled nursing care, or hospice services. This service does not typically require a monthly premium. However, this will depend on your circumstances. If you receive part A, it is very likely that Medicare part B will also be required.

Medicare Part B

This insurance is also called medical insurance and covers medical care that is necessary in outpatient settings such as doctor’s offices. It also covers ambulance fees and durable medical equipment such as wheelchairs. It is aimed at diagnosing, treating, and preventing healthcare conditions. A part of the preventative services includes lab testing and the influenza vaccine. This insurance policy requires a monthly premium, which in 2017 was approximately $134 a month. However, if you also receive Social Security benefits, this premium is deducted from your income.

Medicare Part C

Part C is also called Medicare Advantage. Private insurance companies run your insurance policy and determine the amount of money you will receive to cover your health expenses monthly, regardless of whether it meets the cost of your services. In other words, your policy can determine you will only receive $200 a month for your health care, even if your health care is $500 a month. To apply for this insurance, you will need to be enrolled in part A and part C. You get several options, however. Your policy can be a Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), or a Medical Savings Account (MSA).

Medicare Part D

Medicare part D covers prescription drugs and also have a monthly premium like part B. However, there is a limited amount of money given to you for your prescription drugs. For example, in 2017 the limit was $3,700. If you reach that limit, you are required to cover the cost of your medication. If you have name-brand prescriptions, you are required to pay at most 40 percent of the plan’s cost. If you have generic prescriptions, you are required to pay 51 percent of the cost. However, it is important to note the coverage gap is expected to be phased out by 2020.

Retirement is a difficult topic to discuss when there are so many factors. However, with a basic understanding of how Medicare can help you with retirement, we hope this has given you a starting point. Medicare is important in maintaining your health in your older years. Your financial advisors can assist you in determining how Medicare fits into a retirement plan, which can ease your transition into retirement. Talk to your financial advisor today to determine which Medicare parts apply to you.

Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Your health will greatly impact how you plan for retirement, and it is important you get that information in an easy to read manner! If you are interested in understanding how your health influences your retirement, ask your advisor for an assessment with Genivity’s HALO.