Fitness and Planning – Medicare Facts for Boomers

One of life’s lessons came while driving in sugar cane country twenty-some years ago. I was traveling a three lane road, alternating between single and double lanes on my side of the yellow line. But it was Florida – a place where drivers roared or limped at 75 or 45, in the left lane. And my business meeting was an hour and a half away.

Another danger came into view – an old man riding a scooter, weaving on and off the shoulder. I felt a bad scene. Someone was going to either hit him, or me as I slowed. But the fear and anger subsided. I checked the rearview mirror as I passed, and smiled. I pictured his wife standing on her porch every morning, tipping her coffee cup, and wishing the Gentleman Wild Hog another safe return home. He and his driver’s license had been separated for moons.

It was a vivid reminder of some basic human needs – freedom and living with dignity.

Many Americans are concerned or ill prepared for healthcare costs in retirement. Few visualize their future old age or understand Medicare. The impacts of Obamacare on our healthcare system, citizens, and economy are uncertain. Nevertheless, plan for what we do know. Here are four facts Boomers should know about Medicare.

1. Medicare is mandatory once you retire. It’s your primary payer after age 65, and enrollment is not automatic (unless you’re already on Social Security). Enrollment is required at 65 unless you’re working and covered under a large employer plan. If you’ve got medical insurance through a small employer plan with less than 20 participants, retiree plan, COBRA or private policy, you’ve got to enroll.

2. What if you don’t enroll on time? You’ve got gaps in coverage, and late enrollment penalties. Your seven month enrollment period begins three months before age 65. Part A (hospital) is generally free if you’ve paid into SS for 10 years. Part B (medical) incurs a 10% penalty for every twelve month period you’re late, and payable for the rest of your life. Penalty for Part D (prescriptions) is 1% for each month you were eligible but didn’t enroll, unless you have private prescription coverage as good as Medicare’s – creditable coverage. These are to discourage people from deferring enrollment until just prior to a major illness.

3. Medicare doesn’t cover everything. Excluded are long-term care, dental, vision, and others; fees that exceed Medicare limits; deductibles; and co-payments. Most retirees view supplemental coverage as essential (Medigap, Medicare Advantage or managed care plans). Supplemental plans might be standardized, but pricing isn’t. And plans can change annually.

4. Healthcare costs are probably higher than you think. Fidelity Benefits estimates a 65 year old couple may need $220,000 for medical expenses (excludes long-term care). Premiums are a big share and they’re highly inflationary. Part B premiums grew 6% annually the past 15 years – over twice SS benefit hikes. There’s a surcharge for higher income retirees for B and D. Proactive ways of reducing healthcare costs include generic drugs and reducing medicines and services (splitting pills, postponing procedures, etc.).

Jimmy Buffett sings “I’m growing older but up.” However, living a good long life has its aches and pains. Aging is a natural process. Plan ahead. Make good health a priority. Learn about Medicare. Talk openly with your family, healthcare professionals and caregivers. And build future health care costs into the retirement income plan.

About Brian Loy

Brian Loy writes insightful and inspiring articles about the ever-changing world of personal finance and the global trends that affect the risk and return on investments and shape the financial- and retirement-planning process.
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