Many seniors rely on Medicare to provide comprehensive health coverage during retirement. But the program has its fair share of rules, and not knowing them all could derail your finances once your career is over. Here are some lesser known facts about Medicare you need to know.
1. Registration is not free
Medicare is broken down into several different parts:
- Part A covers hospital care and care facilities
- Part B covers outpatient care and diagnostics
- Part D covers prescription drugs
While Medicare Part A is generally free for registrants, Parts B and D cost money. The good news, however, is that if you have funds in a Health Savings Account (HSA), you can use them to cover your health insurance premiums.
Of course, in addition to your health insurance premiums, you will also be responsible for a certain cost-sharing amount in the form of deductibles, coinsurance, and co-payments. While there are a few exceptions (for example, you are entitled to a free well visit every year), you should expect to pay something when you use your Medicare coverage.
2. Your costs could change over time
The amount you pay for Parts B and D may change from year to year. And this is something you will need to factor into your retirement budget.
If you are affiliated with social security, any increase in Part B that decreases will be automatically deducted from your monthly benefits. Now, thanks to a key provision, you cannot have a scenario where an increase in Part B premiums results in a lower Social Security benefit than you collected. But if there’s a year with a stingy Social Security cost-of-living adjustment and Part B goes up a lot, your increase could indeed be reversed.
3. Many essential services are not covered
There are some common health care services that Medicare will not pay for. These include dental cleanings, hearing aids, and eye exams.
If you sign up for Medicare Advantage, which is an alternative to original Medicare (which consists of Parts A, B, and D), you will have these services covered. Otherwise, expect to pay them off in full, either with funds from an HSA or another source, like your IRA or 401 (k) plan.
4. There are penalties for late registration
Your initial Medicare enrollment window spans seven months. It begins three months before the month you turn 65 and ends three months after that month.
If you don’t sign up during your initial period, you could end up being charged more for Part B on a permanent basis. In fact, for each one-year period that you are eligible for Medicare but do not enroll, you will face an additional 10% on your Part B costs. You could also face costs. penalties for delaying your Part D enrollment, so read the rules and make sure you get coverage at the right time.
Medicare is a complex program. The more you learn about it, the less likely you are to miss out on key information that could help you better plan and manage your health care expenses in your old age.