Health care figures to be one of the biggest parts of our retirement budgets. Fortunately, Medicare will provide help for millions of seniors to be able to meet these medical bills.
As important as Medicare is for many retirees, it’s also a complex program, leading to many misconceptions about the benefits it provides. A clear understanding of exactly what Medicare covers–and perhaps more importantly, what it does not cover–can help you better plan for your health care costs in retirement.
In our experience, these are the four most common Medicare misconceptions we see:
1. Medicare is “Free”
The perception from many people is that once someone is eligible for Medicare, health care costs are largely eliminated. It’s true that Part A is typically free, but there are monthly premiums, deductibles, coinsurance and copayments associated with the other parts of Medicare that you’ll need to be prepared to pay for. Depending on your income, your Part B monthly premium in 2021 will be $148.50—$504.90. If you add a Medicare Advantage Plan (Part C) or a Medicare prescription plan (Part D), you’ll face additional monthly and yearly expenses.
2. Medicare Covers All Medical Expenses
From preventative services to medically necessary supplies like wheelchairs and walkers, Medicare covers a large number of medical devices and services you may need in retirement. But there are also many services that Medicare doesn’t cover that could prove to be very expensive. Most of your dental care, “cosmetic” surgeries and hearing aids are all things that you’ll either have to pay for out-of-pocket or purchase through a Medicare health plan that covers them.
Perhaps the biggest health care expense that isn’t covered by Medicare is long-term care (LTC). Many people assume they won’t need any LTC, but the fact is someone turning 65 today has an almost 70% chance of needing some type of LTC. The high likelihood of needing care, coupled with the high costs of LTC (for example, a private room in a nursing home could cost upwards of $8,800 a month), could make LTC insurance an invaluable investment.
3. It Doesn’t Matter When I Enroll
It’s true that you can delay enrolling in Medicare, but doing so could come with a hefty cost. In most scenarios, your best option will be to enroll in Medicare during your Initial Enrollment Period. The Initial Enrollment Period covers the three months before you reach age 65, the month of your 65th birthday, and the three months after you turn 65. If you fail to sign up during this period, you’ll have to wait for the General Enrollment Period from January 1 through March 31 every year, with coverage beginning on July 1. In addition to the waiting period that could leave you without coverage, you could also face a 10% penalty on your Part B premiums for every year you delay enrolling.
4. Once My Spouse is Eligible for Medicare, I’ll Also be Covered
If your spouse is getting ready to enroll into Medicare but you’re still younger than 65, you will still not be eligible for Medicare coverage. Medicare does not offer any family coverage, and only those with a disability will be eligible for early Medicare benefits. For younger spouses, consider COBRA or an individual policy to bridge the years until you become eligible for Medicare.
This is just the tip of the iceberg when it comes to fully understanding your Medicare benefits. Working with a financial advisor or an insurance specialist can help you navigate this complex program and find specific policies that can suit your individual needs.
