For clients approaching 65 years of age, navigating Medicare plans could be daunting. However, as an advisor navigating Medicare plans for my clients is extremely rewarding.
My client Charles will turn 65 in July. He is married and currently working. While each case is different, the case below reflects my client’s situation. This is meant to provide you with the basics of Medicare. However, please note that numbers in red can change annually and are customized for my client’s situation.
Medicare is Federal Health Benefits for Americans 65 and older. Spouses can also qualify at 65 based on their spouse’s work history. Eligible people are automatically enrolled if, at least, receiving retirement benefits. There are three parts to Medicare: A, B, and D.
Medicare Part A: This covers hospital services. Places include inpatient hospital care and home health care. It covers a semi-private room, meals, operating and recovery room, lab tests, and x-rays, as well as hospice coverage. It also covers a skilled nursing care facility following a covered hospital stay. The Benefit Period begins on the first day the insured is in the hospital and ends after 60 days.
The costs associated with these benefits are deductibles – $1,632 per benefit period and the first 60 days are just the deductible. Beyond 60 days, the following coinsurance amounts will apply: $408 per day for days 61-90; $816 for days 91-150 for each lifetime reserve day; $204 per day for skilled nursing care days 21-100. The first 20 days following a hospital stay are covered 100%.
Medicare Part B: This covers doctor visits, lab tests, ambulance, outpatient therapy, clinical research, durable medical equipment (wheelchairs, hospital beds, walkers, oxygen), mental health (impatient, outpatient, partial hospitalization), getting a second opinion before surgery, and home health care. Medicare also covers an initial preventative visit and annual wellness visit. Medicare does not cover dental, cosmetics, and vision.
Charles can be enrolled automatically in Part B unless he opts out. The standard premium is $329 per month and premiums are deducted from Social Security (higher premiums for individuals with income over $103K (single) or $306K (Married Filing Jointly). His deductible is $240 per year. After satisfying the deductible, Part B will cover 80%. There is no stop loss limit, meaning there is no point at which it covers 100%.
Medicare D: This covers prescription drug benefits and there is wide variation across plans. Most require a premium and have deductibles and co-pays.
Medicare Supplemental Insurance: This coverage is sold by private insurance companies and is designed to offset and cover costs associated with Medicare deductibles and coinsurance.
Charles has many options. For instance, he can delay enrolling in Medicare since he will still be working and will have coverage under his current plan. Once he enrolls in Medicare, he will not be able to contribute to an HSA. Regarding initial enrollment, Charle’s current income will be considered; three months before enrollment, enrollment month, and three months after enrollment.
Like many Americans approaching 65, applying for Medicare can be confusing. If you need help planning for Medicare, feel free to contact me directly at (925) 300-8805.
About the Author
Edward Vela is an M&A Advisor and independent Financial Planner with 15 years of wealth management experience. He earned a Journalism Certification from the University of Massachusetts, a BA in Political Science, a Financial Planning Certification at UCLA, and an MBA from the UCLA Anderson School of Management specializing in entrepreneurship and finance. You can contact Edward at 925-300-8805 or the empirikal partners team at empirikalpartners.com.
