Many people believe Medicare is free once they age in at 65. Some people are under the impression their payroll taxes will ultimately pay for Medicare costs in full. This is not entirely true, and for some, this news can be very stressful and worrisome. If Medicare is in your near future, here’s what you need to know to prepare for the cost of Medicare.
Is Medicare Part A Free?
If you made payroll taxes in your life, you probably know they set aside a trust fund to help fund Part A. If you or a spouse contribute to Medicare taxes while working a minimum of 40 quarters in the U.S., then Part A is free. Beneficiaries that only contributed 30-39 quarters; your premium would be $252. Those with fewer than 30 quarters of contributions would pay the full premium, which is $458.
Is Medicare Part B Free?
Part B covers outpatient services. All routine outpatient services, like doctor visits, lab work, therapy, and more, are under Part B.Some services that happen in a hospital setting like surgeries, chemotherapy, dialysis, diagnostic imaging, and more are generally under Part B.
If Medicare is your primary coverage provider, Part B is necessary to have.
Most Part B enrollees have a standard monthly premium that can change from year to year. For 2020, the monthly premium for those in the lower tax bracket is $144.60.
Premiums reflect income. Therefore, if you’re in a higher income bracket, you will pay more for coverage.
Social Security determines Part B premium cost on AGI from the last two years before enrolling. You’ll pay an Income Related Monthly Adjustment Amount (IRMAA) if, as an individual, you made $87,000 or more; or, as a married couple $174,000 or more.
Begin to think about your preparation years before when you plan on retiring. Speak with your Medicare agent to see what your Part B premium will be. Then, you can start planning for retirement without paying a premium you didn’t anticipate on health insurance coverage.
Why Are Some Medicare Advantage Plans Free?
This is a common misconception. Yes, some Part C plans don’t require a monthly premium, but that doesn’t make them entirely free. You will still need to pay your Part B premium. These plans are tricky. They may offset the zero-dollar premiums by requiring higher copayments and coinsurance. They also tend to have higher out of pocket costs than Medigap Plans.
Is Medicare Part D Free?
In 2006, the creation of Part D under the Medicare Modernization Act made policy changes. Before this change, Medicare beneficiaries were responsible for paying for their retail prescription drugs out of pocket. As you could imagine, this could get very costly. Part D isn’t free; however, with a policy, some generics are $0.
You can think of your Part D plan as a pharmacy card that allows you to get your prescription medications by only paying a co-payment instead of the full retail price.
Part D plans are voluntary plans with premiums that vary in cost per month from state to state. Cost for your medications will depend on the type of drug and usage; you may need to spend a lot or only a little bit for your medications.
Every Part D drug plan has a stage where copay costs can rise if you spend more than a certain amount annually on prescription drugs. Your Part D drug plan will have a drug list of what medications they cover; this list is called a formulary.
If a medication you take no longer has coverage by the plan, they will issue out a notice letter to inform you of the change.
Part D drug plans are like Part B in the sense of Income-Related Monthly Adjustment Amount (IRMAA). Your income can impact your Prescription drug premiums. Higher-income individuals will pay a higher amount, and those with a low income could qualify for extra help.
Deductibles and Coinsurance Costs
Once you’re on Medicare, some costs may be a “pay as you go.” Just like many other health insurance policies, Medicare has deductibles and coinsurances.
Medicare isn’t free, and Part B only pays 80% of outpatient expenses; so, you’re responsible for the remaining 20%.
Get Coverage Because Medicare Isn’t Completely Free
A wide range of supplemental insurance options is still available to fill in these gaps in coverage. Each supplement plan will come with its monthly costs; consider this while planning and looking for what option is best for you and your wallet. In conclusion, Medicare is not free. However, Medicare will cover a decent portion of your healthcare expenses once you turn 65.
Proper planning can help you cover the costs of your future. The last thing we want once we retire is to find out were unable to pay for Medicare. Plan now, and avoid the headache.
Give us a call at the number above to discover your Medicare options. If you can’t call now, fill out an online rate form, and find the best rates in your area.