Before retiring, get the fact about Medicare |

Before retiring, get the fact about Medicare

Tracy Tutag and Jeffrey Apps
Vail, CO, Colorado

There’s some good news and some bad news when it comes to your retirement.

The good news is you are actually planning a retirement and have been consciously earmarking funds for it. Unlike generations before, today’s retirees can look forward to enjoying active post-career lifestyles that can span decades.

The bad news is your medical care needs may increase just when your medical insurance coverage decreases. If you are like the majority of Americans, you will lose your employer-sponsored medical coverage when you stop working and you will need to rely on Medicare. Since most of us, at some point, will become insured through Medicare, it is important to understand what’s covered and what’s not and then decide how future health care needs figure into an overall financial plan. The best place to begin is with the facts.

Medicare is not Medicaid

Yes, Medicare and Medicaid are both government sponsored health plans. But the differences are distinct:

Medicare is primarily for seniors. As long as you or your spouse have worked at least 10 years and you are either receiving or are eligible to receive Social Security benefits, you are eligible for Medicare when you turn 65 regardless of your retirement income or savings. If you have started receiving Social Security benefits, you will be automatically enrolled in Medicare Part A ” the hospital insurance. If you have not yet begun receiving Social Security, you will be sent an enrollment package about three months prior to your 65th birthday which you must fill out and return for your hospital coverage to be initiated.

Medicare Part B ” the medical insurance ” is elective and you may choose to decline coverage or enroll and pay the monthly premiums. Medicare Advantage, often called Part C or Medicare+Choice, offers beneficiaries the option of receiving their benefits through private health insurance plans. In addition to insuring seniors, Medicare insures younger Americans with End Stage Renal Disease and those with certain disabilities.

Medicaid, on the other hand, is designed to help the poorest Americans of any age. Each state sets its own eligibility requirements. On average, an individual cannot earn more than $525 per month nor have more than $1,500 in countable assets. For a couple, the limits are $904 and $2,250, respectively for 2006. To apply for Medicaid you must contact your local social services office and prove your financial need.

Medicare does not cover all your medical needs

Medicare helps pay the cost of medical care for those it insures, but it is not free. In fact, you may be surprised to learn that Medicare does not cover hearing aids, eye exams, routine dental work, or wvisits such as annual physicals. Additionally, Medicare will not cover services deemed unnecessary or in-hospital care case workers think could have been handled elsewhere. Plus, there are co-pays required of Medicare recipients. Depending on the procedure or care received, these costs can add up.

To fill the “gap” that Medicare coverage may leave, many seniors opt to buy “Medigap” insurance. There are 12 variations of these plans. Named A – L, the plans are differentiated by their cost and the levels of coverage. Medicare SELECT is another type of Medigap policy available in some states and may cost less. However, Medicare SELECT limits your choice of doctors and hospitals.

Medicare is not free

Originally, Medicare was divided into two parts. Part A covers inpatient hospital, skilled nursing, and home health care. This coverage is free to those who qualify (people who age 65 or older who have worked for at least 10 years).

Part B, however, is elective and has fees attached. Doctor’s visits, outpatient hospital care, ambulance services, rehabilitation therapy and some medical devices and supplies are covered under this part. Since Part B carries a cost ($88.50 per month in 2006), you can opt to decline coverage.

If you choose not to enroll when you are first eligible at age 65 and then later change your mind, you can only enroll each year between January and March, with coverage beginning in July. But keep in mind that there is an enrollment penalty of 10 percent for each 12-month period of eligibility in which you decline coverage.

Sometimes, declining coverage may make financial sense, especially if you are still working and/or still covered within an employer-sponsored plan. However, if you decline coverage in lieu of an employer plan and then the employer plan coverage ends, you must enroll in Medicare Part B within eight months or risk higher premiums.

The drug plan is complex

After much hoopla over the high cost of prescription drugs and the financial hardship it causes countless fixed-income seniors, Medicare introduced a prescription drug program in 2006. Medicare Part D, as it’s called, is offered through several private insurance companies rather than directly through the government. This structure has made the coverage options disparate, often resulting in the same drug being covered or not covered or covered at different rates from one insurer to the next.

The annual deductible for 2006 is $250. Once this deductible is met, Part D prescription plans cover 75% of approved prescriptions, up to a limit of $2,250 annually. Thereafter, people fall into what is called the “donut hole” where they are then required to foot the entire bill for all prescriptions until they hit the $3,600 out-of-pocket threshold. Once this “catastrophic” threshold is reached, 95 percent of approved drugs will be covered.

Long term care not covered

Long term care describes the range of medical and/or social services designed to help people who have disabilities or chronic care needs. These services can be separated into custodial and non-custodial categories. Non-custodial care is provided by a medically trained professional such as a doctor, whereas custodial care is provided by someone not medically trained. Custodial caretakers help people perform the activities of daily living, such as eating, bathing, dressing, and toileting.

Generally Medicare only covers non-custodial care. Therefore, if an individual needs constant nursing home care or in-home assistance with the activities of daily living,

Medicare will not pay for it. Considering the sobering statistic that at least half of the population over age 85 will need daily assistance, combined with the exorbitant cost of long-term care ” over $50,000 per year in most states ” the financial implications of long-term care needs can be crippling.

Long term care insurance may be worth exploring. These policies are designed to protect you (and your family) from the high cost of long-term care. Without it, lifetime savings and accumulated assets will be depleted paying for your care. If you should run out of money and fall below the poverty line, you may qualify for Medicaid and be forced to receive care from a facility of their choosing ” often, these places are far more crowded and far less comfortable than private facilities.

If you think you are interested in purchasing a long term care policy, speak with a reputable financial professional.

You can have your dream retirement

After 30, 40, or even 50 years of working, you truly earn your retirement and the freedom that comes with it. Your time will at last be your own.

Staying healthy may be the single most valuable part of an activity-filled retirement. Understanding your health care options can dramatically impact the quality of care you receive and its financial impact on your budget.

Medicare is the nation’s largest insurance plan, and it helps millions afford the health care they need. But it cannot be all things to all people. Like all government-sponsored plans, its benefits are subject to change or discontinuation at any time. Recognizing the role Medicare may play in your retirement, and finding the best options to round out your insurance and financial needs, will help you have the robust retirement you’ve been working toward.

Tracy Tutag and Jeffrey Apps sell securities through AXA Advisors, LLC, 1290 Avenue of the Americas, New York, NY 10104, 212-314-4600, member NASD, SIPC, and sell annuity and insurance products through AXA Network, LLC and its subsidiaries. They can be reached at 926.0601 or

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