If you are a Medicare beneficiary or plan to become a Medicare beneficiary, you need to understand your Medicare costs and responsibilities. Contrary to common belief, Medicare does not cover everything; you will have out-of-pocket costs and responsibilities.
Your Medicare expenses will likely change from year to year. Additionally, even as a Medicare beneficiary, you could still face high medical bills, as you will still be responsible for premiums, deductibles, copayments, coinsurance and excess charges.
Let’s dive deep into the costs associated with the different parts of Medicare. After reading this article, I’m confident you’ll understand your responsibilities and feel equipped to ensure financial health in your retirement.
Budgeting For Medicare Expenses
The first step in budgeting for Medicare is determining what your unique Medicare expenses will be. Your out-of-pocket costs will be determined by whether you have Medicare Part A, B or both.
Saving For Medicare Part A
Medicare Part A covers inpatient hospital care, inpatient rehabilitation facilities, skilled nursing facilities, hospice care and limited home health services.
Your Medicare Part A expenses in 2017 will typically include a Part A premium, hospital inpatient deductible, and coinsurance. The amount that you will pay for each of these factors will depend on a number of items. For example, your Part A premium could be completely free to you if you or your spouse worked and paid Medicare taxes for a certain number of years.
Saving For Medicare Part B
Medicare Part B covers ambulance services, inpatient and outpatient care, partial hospitalization, clinical research and durable medical equipment.
Your Medicare Part B expenses will typically include a Part B premium, deductible and coinsurance.
The amount that you will pay for your Part B premium depends mainly on your income. Additionally, if you want to enroll in Part B past your enrollment period, your premium could be 10% higher for every 12-month period that you were eligible for Part B but did not enroll.
Similar to Part A, your Part B deductible is subject to change every year. In 2017, the deductible is $183.
Finally, your Part B coinsurance is where you will pay the most out-of-pocket for medical expenses. You will pay a 20% coinsurance of the Medicare-approved amount for medical services, medical equipment and outpatient therapy.
Saving For Medicare Part D
If you have Medicare Prescription Drug Coverage, your Part D costs will depend on the plan you choose. Your Medicare Part D costs can typically include a premium, copayments/coinsurance and an annual deductible.
Saving For A Medicare Supplement
You are likely beginning to understand that you will still have many financial responsibilities with Medicare. Your exposure will be a deductible for Medicare Part A, a deductible for Part B and possible 15% excess charges (though rare nowadays). Your biggest threat is the 20% coinsurance you’ll be responsible for on medical expenses after you meet your Parts A and B deductibles.
Medicare supplement plans are offered by private insurance companies to help you pay for out-of-pocket costs for services under Medicare Parts A and B. If you have a Medicare supplement policy, the coverage is completely standardized by the federal government. However, the costs may vary by plan, even if the benefits are completely identical.
How To Choose A Medicare Supplement
Because Medicare supplement plans are standardized, your Medicare supplement plan will be completely identical regardless of which company you purchase the plan from. That being said, there are two questions you need to answer before you pick a plan and Medicare supplement company:
1. Do you want a Medicare supplement plan with a low premium that offers less coverage?
2. Would you rather pay more each month for a plan that offers full coverage?
Historically, Medicare supplement Plan F has been the most popular because it offers full coverage. Essentially, with a Plan F, you will have zero out-of-pocket costs other than your Plan F premium. Many Medicare beneficiaries choose the Plan F because they don’t want to worry about any expenses at the hospital.
While Plan F is still very popular, Plan G is becoming increasingly more popular. With a Plan G, your only responsibility will be the annual Part B deductible, which is $183 in 2017. Because of this deductible, beneficiaries will typically pay a lower premium for a Plan G. The savings in the lower premium will sometimes outweigh the Part B deductible required for the Plan G. Because of this, many beneficiaries are beginning to choose the Plan G over the Plan F.
While the above plans mentioned are the most popular Medicare supplement plans, there are many plans available. One of the less popular plans may be the wisest choice for you depending on your current health and financial situation. Because of this, you’ll want to ensure that you don’t end up with a higher premium for a plan that offers more coverage than you need.
It is important that you do plenty of research on all of your Medicare supplement plan options before you make a decision. Whether this means individually researching all of the plans online or working with an independent agent who can compare the rates for you, it is critical that you do your due diligence.