Medicare is our countries government administered health care program.  At the ripe age of 33, I have many years before I have to worry about signing up.   I do, however, have several clients that depending when they qualify for Medicare is big determent on when they retire.   It’s huge for many retirees.

There are essentially two groups of people who qualify for Medicare health insurance coverage – those who have reached age 65 and those with disabilities.

Adults Over 65

Most adults in the United States are eligible for Medicare when they turn 65. Individuals must be US citizens or permanent residents and enroll in the Medicare program to qualify.

Individuals who are already receiving Social Security benefits will be automatically enrolled in the Medicare program. Approximately three months before their 65th birthday, an enrollment package will be sent and must be completed to activate coverage. Medicare part A, which covers hospitalizations, requires no payment. However, adding part B – which is for doctors visits and outpatient procedures – or additional coverages, such as prescription drug coverage does cost money. The premium is determined based on income level. So individuals must decide what plan is best for them when enrolling and what they can afford to have..

Who Does NOT Qualify for Medicare

People who are not already receiving Social Security benefits will need to contact their local social security office to apply for Medicare coverage. This should be done three months before the individuals 65th birthday. The enrollment period begins in the three months before the month of the 65th birthday and ends three months after. If one enrolls during this time frame there is no cost for enrollment and coverage should begin at the start of the 65th birthday month or shortly thereafter (if one applies after their birth date). If, however, one does not apply during that enrollment period then fees apply. So it is important to apply on time, and as close to the three month prior date as possible. This will ensure everything is done correctly and coverage starts at the beginning of the individuals birth month.

Individuals with Disabilities

Medicare coverage is also available to individuals with disabilities regardless of their age. Once an individual has been collecting social security disability payments for twenty four months, they become eligible for Medicare during the 25th month. An enrollment package will be sent a few months before a person becomes eligible for Medicare coverage. If a person with social security disability does not receive the enrollment package, they should contact their local social security office to request a packet.

Like an individual who is over age 65, disabled persons who have been getting SSI disability payments are automatically eligible for Medicare. There is no reason to decline coverage as Medicare part A costs nothing and covers hospital care and nursing facility care. However, if a disabled individual would like, they can decline Medicare Part B coverage which would require premium payments. There is a card that comes with the enrollment package that the individual can mail back declining part B coverage.

With the high costs of health care it makes sense for those eligible for Medicare to take advantage of this government administered health care program.

photo credit: anolobb

Are you a retiree or soon to be retiree and are you concerned about the rising costs of medical care?  If you’re not, you should be.  When meeting with clients that are either in retirement or approaching retirement, one of the most unexciting things to talk about is the rising cost of medical care.  But for obvious reasons, this is a discussion that must be brought up; otherwise we will not have planned for what could potentially be the demise of our retirement portfolio.

Health Care Costs During Working Years

In your working years, the cost of health care is usually an afterthought.  If you’ve got a good employer with decent insurance, routine visits to the doctor are taken care of just by paying simple co-pay.  In fact, when either my wife or I go to the doctor, we are only required to pay a $15 co-pay for what is called a wellness visit.  But upon retirement, things change.  

Medical Care For Retirees, Let’s Look at the Numbers

Although despite retirees do have access to Medicare at the age of 65, the cost of health care retirees is getting higher and higher each and every year.  In the report that was done by the Employee Benefit Research Institute, they have projected that people retiring in the year 2018 that are retiring at age 65 would need approximately $325,000 just to handle the gap between Medicare part A and Medicare part B.  The institute also had projected that a man currently age 55 will need to accumulate $132,000 by the year 2018 to help pay for the Medigap policy.

The scary thing about these numbers is that these are just the average.  Studies show that more than half the population lives longer than the average life expectancy.  If prescription drug consumption was assumed to be average but a couple lived to be in the top 25% percentile, the necessary amount needed at age 65 would balloon to be $424,000.  If you happen to live in the top 10%, then now your costs have skyrocketed to $511,000.  Remember, these costs do not include basic visits to your dentist or any other out of pocket medical equipment such as wheelchairs or canes or anything else that may be needed.

How To Plan For These Costs

Based on these numbers, what is one to do?  Do you plan for the average of $325,000 or do you assume you will be in the top 10% that will require over $500,000 just to get by on medical care costs?  Obviously, it always makes sense to plan for the worst, but in some cases, it is almost impossible. Especially if retirement is just around the corner.  All in all, it pays to understand your Medicare coverage and to know what you are eligible by.  Medicare coverage is definitely something you do not want to underestimate, and don’t opt for a different policy in retirement just because they offer a cheaper premium.

References:

Medicare.go