VIDEO: What You Need to Know About Your Medicare Plan

VIDEO: What You Need to Know About Your Medicare Plan

By Joe Dowdall, CFP®, RICP®, CRPC®, CCFC

It’s no secret that for many Americans, Medicare is a significant part of their healthcare plan in retirement. Despite its importance, many people don’t understand Medicare or the full scope of benefits to which they are entitled. Unfortunately, not having a complete picture of the system and how your benefits work could be financially devastating. Check out this quick video to help you understand the different parts of Medicare and how it can fit into your financial plan.

Transcript

Introduction to Medicare Basics by Joe Dowdall

Hi, my name is Joe Dowdall, and I am a financial planner at Worth Asset Management. At Worth Asset Management, I focus on working with people who are planning for or in retirement, building, implementing, and monitoring customized financial plans. I work primarily with people that are in the planning for or in retirement phase. I spend a lot of my time talking about Medicare. So today I wanted to just hit on some of the high points of, what is Medicare? Who can have Medicare? And you know, what are some of the benefits there. But for sure, Medicare is a very complex topic, so I’m not going to cover everything today, like I said, I just wanted to touch on the high points.

Understanding the Components of Medicare

Medicare is health insurance for people who are disabled or over 65 and it’s broken up into different parts or pieces. There are four primary parts of Medicare, Part A, Part B, Part C, and Part D. Now, Part A and Part B are what’s commonly referred to as Original Medicare. So Part A, this is free, depending on the taxes that you pay throughout your working career, but for the most part, for most people, it’s free and it covers hospital care, hospital coverage. Part B now that will have a monthly premium amount that can range, which I’ll talk here about in a little bit. But Part B is your doctor’s visits. So Part A and B, that’s Original Medicare. Part A, for most people, is free. Part B, you’re going to have a monthly bill.

Exploring Medicare Advantage and Prescription Plans

Now I’ll come back to Part C, but Part D is your drug plan that’s optional as well, comes with a monthly expense premium there. Now if you’re on Original Medicare, for most people, that will mean Part A and B, with a drug plan. Within that policy, there will be gaps. So what a lot of people do is buy what’s called a Medigap policy, which is an insurance policy to cover what Medicare or Original Medicare doesn’t cover so things like co-insurance, co-payments, things along those lines to help kind of round out the coverage, which it’s been my experience that the majority of people that go down the Medicare path that I work with will use Original Medicare. Now if you don’t go down the path of Original Medicare, you can look at Plan C OR Medicare advantage plan, which is a little bit different. It’s going to be a little bit more restrictive on your options there, but it tends to be quite a bit less expensive. So for most people, you have the option between Original Medicare or Medicare Advantage plan.

Understanding Premium Adjustments Based on Income

Now, I mentioned earlier that Medicare, Part B and Part D have a monthly premium. Now the amount of that monthly premium varies based upon what is called your income-related monthly adjustment amount. Now this is not a tax, but it’s an expense or additional cost for Medicare based upon your modified adjusted gross income. So if it sounds complicated, that’s because it is. But ultimately, as your modified adjusted gross income rises, your cost for Medicare rises, and it’s what’s commonly referred to as a cliff. So if you go over that level by just $1 your monthly premium amount will go to the next level. Now your premium amount is, as I said, based upon your modified adjusted gross income, but it’s from two years prior. So my modified adjusted gross income from two years ago will determine my monthly premium amount for the entire year. And those premiums can range from about $165 today up to over $500 a month. It’s the same insurance, but the cost rises as your income-related monthly adjustment amount, sometimes referred to as Irma, rises. So watching that modified adjusted gross income each year becomes very important, because we don’t want to overpay for Medicare if we can avoid it.

Eligibility and Enrollment Periods for Medicare

Now, as far as what you can expect from Medicare, it really depends upon how old you are and what phase of life you’re in. I’m not quite yet to Medicare age. So for me, I pay my taxes and move on. But for people that are approaching age 65 that are planning to sign up for Medicare at 65 they actually have a seven-month window. So you have the month that you turn 65 your birth month, three months before that, and three months after that, which is that seven-month window. If you are still working and covered by employer-sponsored health insurance, you may not need to sign up for Medicare at 65 now, there are some ins and outs to that. You’ve got to make sure that your employer your employer plan is providing you insurance, that it’s a large enough employer, etc. So you’ll definitely want to keep an eye on that. But if you are covered, then you won’t need to sign up for Medicare necessarily. At 65 you can wait until you separate from service.

Conclusion and Offer for Assistance

If this sounds confusing, you’re not alone. It is confusing. If you have questions, you know, I am happy to help, please feel free to reach out to me. This is a very, very important decision. In fact, if you do it wrong, you could be stuck with a 10% penalty for the rest of your life. So getting the timing right and the coverage right is extremely important. So if you have questions, if you’re confused, please reach out to me. You can email me or give me a call. I’m happy to help in any way I can. Well, I hope you enjoyed this video. Thank you. Have a great day and stay well.