Self-employed Individuals Are Allowed To Take A Tax Deduction For Their Medicare Premiums
If you are age 65 or older and self-employed, I have great news, you may be able to take a tax deduction for your Medicare Part A, B, C, and D premiums as well as the premiums that you pay for your Medicare Advantage or Medicare Supplemental coverage.
Self-employed Individuals Are Allowed To Take A Tax Deduction For Their Medicare Premiums
If you are age 65 or older and self-employed, I have great news, you may be able to take a tax deduction for your Medicare Part A, B, C, and D premiums as well as the premiums that you pay for your Medicare Advantage or Medicare Supplemental coverage. This is a huge tax benefit for business owners age 65 and older because most individuals without businesses are not able to deduct their Medicare premiums, so they have to be paid with after-tax dollars.
Individuals Without Businesses
If you do not own a business, you are age 65 or older, and on Medicare, you are only allowed to deduct “medical expenses” that exceed 7.5% of your adjusted gross income (AGI) for that tax year. Medical expenses can include Medicare premiums, deductibles, copays, coinsurance, and other noncovered services that you have to pay out of pocket. For example, if your AGI is $80,000, your total medical expenses would have to be over $6,000 ($80,000 x 7.5%) for the year before you would be eligible to start taking a tax deduction for those expenses.
But it gets worse, medical expenses are an itemized deduction which means you must forgo the standard deduction to claim a tax deduction for those expenses. For 2022, the standard deduction is $12,950 for single filers and $25,900 for married filing joint. Let’s look at another example, you are a married filer, $70,000 in AGI, and your Medicare premiums plus other medical expenses total $12,000 for the year since the 7.5% threshold is $5,250 ($70,000 x 7.5%), you would be eligible to deduct the additional $6,750 ($12,000 - $5,250) in medical expenses if you itemize. However, you would need another $13,600 in tax deductions just to get you up to the standard deduction limit of $25,900 before it would even make sense to itemize.
Self-Employed Medicare Tax Deduction
Self-employed individuals do not have that 7.5% of AGI threshold, they are able to deduct the Medicare premiums against the income generated by the business. A special note in that sentence, “against the income generated by the business”, in other words, the business has to generate a profit in order to take a deduction for the Medicare premiums, so you can’t just create a business, that has no income, for the sole purpose of taking a tax deduction for your Medicare premiums. Also, the IRS does not allow you to use the Medicare expenses to generate a loss.
For business owners, it gets even better, not only can the business owner deduct the Medicare premiums for themselves but they can also deduct the Medicare premiums for their spouse. The standard Medicare Part B premium for 2022 is $170.10 per month for EACH spouse, now let’s assume that they both also have a Medigap policy that costs $200 per month EACH, here’s how the annual deduction would work:
Business Owner Medicare Part B: $2,040 ($170 x 12 months)
Business Owner Medigap Policy: $2,400
Spouse Medicare Part B: $2,040
Spouse Medigap Policy: $2,400
Total Premiums: $8,880
If the business produces $10,000 in net profit for the year, they would be able to deduct the $8,880 against the business income, which allows the business owner to pay the Medicare premiums with pre-tax dollars. No 7.5% AGI threshold to hurdle. The full amount is deductible from dollar one and the business owner could still elect the standard deduction on their personal tax return.
The Tax Deduction Is Limited Only To Medicare Premiums
When we compare the “medical expense” deduction for individual taxpayers that carries the 7.5% AGI threshold and the deduction that business owners can take for Medicare premiums, it’s important to understand that for business owners the deduction only applies to Medicare premiums NOT their total “medical expenses” for the year which include co-pays, coinsurance, and other out of pocket costs. If a business owner has large medical expenses outside of the Medicare premiums that they deducted against the business income, they would still be eligible to itemize on their personal tax return, but the 7.5% AGI threshold for those deductions comes back into play.
What Type of Self-Employed Entities Qualify?
To be eligible to deduct the Medicare premiums as an expense against your business income your business could be set up as a sole proprietor, independent contractor, partnership, LLC, or an S-corp shareholder with at least 2% of the common stock.
The Medicare Premium Deduction Lowers Your AGI
The tax deduction for Medicare Premiums for self-employed individuals is considered an “above the line” deduction, which lowers their AGI, an added benefit that could make that taxpayer eligible for other tax credits and deductions that are income based. If your company is an S-corp, the S-corp can either pay your Medicare Premiums on your behalf as a business expense or the S-corp can reimburse you for the premiums that you paid, report those amounts on your W2, and you can then deduct it on Schedule 1 of your 1040.
Employer-Subsidized Health Plan Limitation
One limitation to be aware of, is if either the business owner or their spouse is eligible to enroll in an employer-subsidized health plan through their employer, you are no longer allowed to deduct the Medicare Premiums against your business income. For example, if you and your spouse are both age 66, and you are self-employed, but your spouse has a W2 job that offers health benefits to cover both them and their spouse, you would not be eligible to deduct the Medicare Premiums against your business income. This is true even if you voluntarily decline the coverage. If you or your spouse is eligible to participate, you cannot take a deduction for their Medicare premiums.
I receive the question, “What if they are only employed for part of the year with health coverage available?” For the month that they were eligible for employer-subsidized health plan, a deduction would not be able to be taken during those months for the Medicare premiums.
On the flip side, if the health plan through their employer is considered “credible coverage” by Medicare, you may not have to worry about Medicare premiums anyways.
Multiple Businesses
If you have multiple businesses, you will have to select a single business to be the “sponsor” of your health plan for the purpose of deducting your Medicare premiums. It’s usually wise to select the business that produces a consistent net profit because net profits are required to deduct all or a portion of the Medicare premium expense.
Forms for Tax Reporting
You will have to keep accurate records to claim this deduction. If you collect Social Security, the Medicare premiums are deducted directly from the social security benefit, but they issue you a SSA-1099 Form at the end of the year which summarized the Medicare Premiums that you paid for Part A and Part B.
If you have a Medigap Policy (Supplemental) with a Part D plan or a Medicare Advantage Plan, you normally make premium payments directly to the insurance company that you have selected to sponsor your plan. You will have to keep records of those premium payments.
No Deduction For Self-Employment Taxes
As a self-employed individual, the Medicare premiums are eligible for a federal, state, and local tax deduction but they do not impact your self-employment taxes which are the taxes that you pay to fund Medicare and Social Security.
Amending Your Tax Returns
If you have been self-employed for a few years, paying Medicare premiums, and are just finding out now about this tax deduction, the IRS allows you to amend your tax returns up to three years from the filing date. But again, the business had to produce a profit during those tax years to be eligible to take the deduction for those Medicare premiums.
DISCLOSURE: This information is for educational purposes only. For tax advice, please consult a tax professional.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Medicare Is Projected To Be Insolvent In 2028
The trustees of the Medicare program just released their 2022 annual report and it came with some really bad news. The Medicare Part A Hospital Insurance (HI) Trust is expected to be insolvent in 2028 which currently provides health benefits to over 63 million Americans. We have been kicking the can down the road for the past 40 years and we have finally run out of road.
The trustees of the Medicare program just released their 2022 annual report and it came with some really bad news. The Medicare Part A Hospital Insurance (HI) Trust is expected to be insolvent in 2028 which currently provides health benefits to over 63 million Americans. The U.S. has been kicking the can down the road for the past 40 years and we have finally run out of road. In this article I will be covering:
What benefits Medicare Part A provides that are at risk
The difference between the Medicare HI Trust & Medicare SMI Trust
If Medicare does become insolvent in 2028, what happens?
Changes that Congress could make to prevent insolvency
Actions that retirees can take to manage the risk of a Medicare insolvency
Medicare HI Trust vs. Medicare SMI Trust
The Medicare program provides health insurance benefits to U.S. citizens once they have reached age 65, or if they become disabled. Medicare is made up of a few parts: Part A, Part B, Part C, and Part D.
Part A covers services such as hospitalization, hospice care, skilled nursing facilities, and some home health service. Medicare is made up of two trusts, the Hospital Insurance (HI) Trust and the Supplemental Medical Insurance (SMI) Trust. The HI Trust supports the Medicare Part A benefits and that is the trust that is in jeopardy of becoming insolvent in 2028. This trust is funded primarily through the 2.9% payroll tax that is split between employees and employers.
Medicare Part B, C, and D cover the following:
Part B: Physician visits, outpatient services, and preventative services
Part C: Medicare Advantage Programs
Part D: Prescription drug coverage
Part B and Part D are funded through a combination of general tax revenues and premiums paid by U.S. citizens that are deducted from their social security benefits. Most of the funding though comes from the tax revenue portion, in 2021, about 73% of Part B and 74% of Part D were funded through income taxes (CNBC). Even though they are supported by the SMI Trust, it would be very difficult for these sections of Medicare to go insolvent because they can always raise the premiums charged to retirees, which they did in 2022 by 14%, or increase taxes.
Part C is Medicare Advantage plans which are partially supported by both the HI and SMI Trust, and depending on the plan selected, premiums from the policyholder.
What Happens If Medicare Part A Becomes Insolvent in 2028?
The trustees of the Medicare trusts issue a report every year providing the public the funding status of the HI and SMI trusts. Based on the 2022 report, if no changes are made, there would not be enough money in the HI trust that supports all of the Part A health benefits to U.S. citizen. The system does not completely implode but there would only be enough money in the trust to pay about 90% of the promised benefits starting in 2029.
This mean that Medicare would not have the funds needed to fully pay hospitals and skilled nursing facilities for the services covered by Medicare. It could force these hospital and healthcare providers to accept a lower reimbursement from the service provider or it could delay when the reimbursement payments are received. In response, hospitals may have to cut cost, layoff workers, stop providing certain services, and certain practices may choose not to accept patients with Medicare coverage, limiting access to certain doctors.
Possible Solutions To Avoid Medicare Insolvency
The natural question is: If this is expected to happen in 2028, shouldn’t they make changes now to prevent the insolvency from taking place 6 years from now?” The definitely should but Medicare is a political football. When you have a government program that is at risk of going insolvent, there are really only three solutions:
Raise taxes
Cut Benefits
Restructure the Medicare Program
As a politician, whatever weapon you choose to combat the issue, you are going to tick off a large portion of the voting population which is why there probably have been no changes even though the warning bells has been ringing for years. The reality is that the longer they wait to implement changes, the larger, and more painful those changes need to be.
Some relatively small changes could go a long way if they act now. It’s estimated that if Congress raises the payroll tax that funds the HI Trust from 2.9% to 3.6% that would bump out the insolvency date of the HI Trust by about 75 years. If you go to the spending side, it’s estimated that if Part A were to cut its annual expenses by about 15% per year starting in 2022, it would have a similar positive impact (Source: Senate RPC).
Another possible fix, they could restructure the Medicare system, and move some of the Part A services to Part B. But this is not a great solution because even though it helps the Part A Trust insolvency issue, it pushes more of the cost to Part B which is funded be general tax revenues and premiums charged to retirees.
A third solution, Medicare could more aggressively negotiate the reimbursement rates paid to healthcare providers but that would of course have the adverse effect of putting revenue pressure on the hospitals and potentially jeopardize the quality of care provided.
The fourth, and in my opinion, the most likely outcome, no changes will be made between now and 2028, we will be on the doorstep of insolvency, and then Congress will pass legislation for an emergency bailout out package for the Medicare Part A HI Trust. This may buy them more time but it doesn’t solve the problem, and it will add a sizable amount to debt to the U.S. deficit.
What Should Retirees Do To Prepare For This?
Even though the government may try to issue more debt to bailout the Medicare Part A trust, as a retiree, you have to ask yourself the question, what if by the time we reach 2028, the U.S. can’t finance the amount a debt needed to stave off the insolvency? The Medicare Part A HI Trust is not the only government program facing insolvency over the next 15 years. One of the PBGC trusts that provides pension payments to workers that were once covered by a bankrupt pension plan is expected to be insolvent within the next 10 years. Social Security is expected to be insolvent in 2035 (2022 Trustees Report).
The solution may be to build a large expense cushion within your annual retirement budget so if the cost for your healthcare increases substantially in future years, you will already have a plan to handle those large expenses. This may mean paying down debt, not taking on new debt, cutting back on expenses, taking on some part-time income to build a large nest egg, or some combination of these planning strategies.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
When To Enroll In Medicare
Medicare has important deadlines that you need to be aware of during your initial enrollment period. Missing those deadlines could mean gaps in coverage, penalties, and limited options when it comes to selecting a Medicare
Medicare has important deadlines that you need to be aware of during your initial enrollment period. Missing those deadlines could mean gaps in coverage, penalties, and limited options when it comes to selecting a Medicare Supplemental Plan.
Many people are aware of the age 65 start date for Medicare, however, it’s not uncommon for individuals to work past age 65 and have health insurance coverage through their employer or through their spouse’s employer. For many of these individuals working past age 65, they are often surprised to find out that even though they are still covered by an employer sponsored health plan, depending on the size of the employer, and the insurance carrier, they may still be required to enroll in Medicare at age 65.
In this article we will cover:
Enrollment deadlines for Medicare
When to start the enrollment process
Effective dates of coverage
Special rules for individuals working past age 65
Medicare vs. employer health coverage
Initial Enrollment Period
For many individuals, when they turn age 65, they are required to enroll in Medicare Part A and Part B which becomes their primary health insurance provider. The Medicare initial enrollment period lasts for seven months. This period begins 3 months prior to the month of your 65th birthday and ends 3 months after that month.
medicare initial enrollment period
Example: If you turn age 65 on June 10th, your initial enrollment period begins on March 1 and ends on September 30.
Retired and Collecting Social Security
If you are retired and you are already receiving Social Security benefits prior to your 65th birthday, no action is needed to enroll in Medicare Part A & B. Your Medicare card should arrive in the mail one or two months prior to your 65th birthday.
However, even though you are automatically enrolled in Medicare Part A and Part B, if you are not covered by a retiree health plan through your former employer, you should begin the process of enrolling in either a Medicare Supplemental Plan or Medicare Advantage Plan at least two months prior to your 65th birthday. Medicare Part A and Part B by itself, does not cover all of your health costs which is why most retirees obtain a Supplemental Plan. If you wait until your 65th birthday, the effective date of that Supplemental coverage may not begin until the following month which creates a gap in coverage.
As soon as you receive your Medicare card, you can enroll in a Medicare Supplemental Plan or Medicare Advantage Plan to ensure that both your Medicare coverage and Supplemental Coverage will begin as soon as your employer health coverage ends.
Retired But Not Collecting Social Security Yet
If you are retired, about to turn age 65, but you have not turned on your Social Security benefits yet, action is required. Medicare is not going to proactively notify you that you need to enroll in Medicare Part A & B. The responsibility of enrolling at the right time within your initial enrollment period falls 100% on you.
Three months prior to your 65th birthday you can either enroll in Medicare online or schedule an appointment to enroll in Medicare at your local Social Security office.
Note: If you plan to enroll in Medicare via an in-person meeting at the Social Security office, it is strongly recommended that you call your local Social Security office two months prior to the beginning of your initial enrollment period because they may require you to make an appointment.
If you decide to enroll online, it’s a fairly easy process, and it should only take you 10 to 15 minutes. Here is the link to enroll online: https://www.ssa.gov/benefits/medicare/
If you are simultaneously applying for Medicare and Social Security to begin at age 65, there is a separate link where you can enroll in both online: https://www.ssa.gov/retire
Working Past Age 65
If you or your spouse plan to work past age 65 and will be covered by an employer sponsored health plan, you may or may not need to enroll in Medicare at age 65. Unfortunately, many people assume that because they are covered by a company health plan, they don’t have to do anything with Medicare until they officially retire. That assumption can lead to problems for many people when they go to enroll in Medicare after age 65.
The following factors need to be taken into consideration if you have employer sponsored health coverage past age 65:
How many employees work for the company
The insurance company providing the health benefit
Does the plan qualify as “credible coverage” in the eyes of Medicare
The terms of your company’s plan
At Age 64: TAKE ACTION
I’m going to review each of the variables listed above but before I do, I want to make a blanket recommendation. If you plan to work past age 65 and will be covered by your employer’s health insurance plan, right after your 64th birthday, go talk to the person at your company that handles the health insurance benefit and ask them how the company’s health plan coordinates with Medicare. Do not wait until a week before you turn 65 to ask questions. If you or your spouse are required to enroll in Medicare, the process takes time.
19 or Fewer Employees
Medicare has a general rule of thumb that if a company has 19 or fewer employees, at age 65, employees have to enroll in Medicare Part A and B. Medicare becomes your primary insurance coverage and the employer’s health plan becomes your secondary insurance coverage. Your open enrollment period is the same as if you were turning age 65 with no employer health coverage.
20 or More Employees
If your company has 20 or more employees and the health insurance plan is considered “credible coverage” in the eyes on Medicare, there may be no action needed at age 65. As mentioned above, you should go to your human resource representative at your company, after your 64th birthday, to verify that the health plan that they have is considered “credible coverage” for Medicare. If it is, then there is no need to sign up for Medicare at age 65, your employer health coverage will continue to serve as your primary coverage until you retire.
However, if your company’s health plan does not qualify as “creditable coverage” then you will have to enroll in Medicare Part A & B at age 65 to avoid having to pay a penalty and avoid gaps in coverage once you officially retire.
Action: 90 Days Before You Retire
If you work past age 65 and have credible employer health coverage, 90 days before you plan to retire, you will need to take action regarding your Medicare benefits. This will ensure that your Medicare Part A & B coverage as well as your Medicare Supplemental coverage will begin immediately after your employer health insurance coverage ends.
When you retire after age 65, Medicare provides you with a “Special Enrollment Period”. You have 8 months to enroll in Medicare Part A & B without a late penalty:
63 Day Enrollment Window: Medicare Supplemental, Advantage, & Part D Plans
Even though the Special Enrollment Period lasts for 8 months, you only have 63 days after your employer coverage ends to enroll in a Medicare Supplemental, Medicare Advantage Plan (Part C), or a Medicare Part D Prescription Drug Plan. But remember, you are not eligible to enroll in those plans until after you have already enrolled in Medicare Part A & B which is why you need to start the process 90 days in advance of your actual retirement date to make sure you meet the deadlines.
COBRA Coverage Does Not Count
Some individuals voluntarily elect COBRA coverage after they retire to extend the employer based health coverage. But be aware, COBRA coverage does not count as credible insurance coverage in the eyes of Medicare regardless of the plan that you are covered by. If you do not enroll in Medicare within the eight months after leaving employment, you may face gaps in coverage and permanent Medicare penalties once your COBRA coverage ends.
Spousal Coverage After Age 65
You have to be very careful if you plan to be covered by your spouse’s employer sponsored health insurance past age 65. Some plans with 20 or more employees will serve as primary insurance provider for the employee but not their spouse. In these plans, the non-working spouse is required to enroll in Medicare at age 65.
We have even seen plans where the health insurance for the non-working spouse ends on the first day of the calendar year that they are scheduled to turn age 65. This creates a whole other issue because there is a gap in coverage between January 1st and when the non-working spouse turns age 65. Again, as soon as you or your spouse turn age 64, you should start asking questions about your health coverage.
The Insurance Company Matters
There are a few insurance companies that voluntarily deviate from the 19 or less employees rule listed above. These insurance companies serve as the primary insurance coverage for employee that work past age 65 regardless of the size of the company. Medicare does not fight it because the government is more than happy to allow an insurance company to foot the bill for your health coverage. In these cases, even if your company employs less than 20 employees, you do not have to take any action with regard to Medicare at age 65.
You Cannot Enroll Online
If you work past age 65 and have employer based health coverage, you do not have the option to enroll in Medicare online. You have to prove to Medicare that you have maintained credible health insurance coverage through your employer since age 65, otherwise you face penalties and potential gaps in coverage. You will need to make an appointment at your local Social Security office to enroll. Your employer or the health insurance company will provide you with a letter which serves as your proof of insurance coverage.
Enrolling in Medicare Supplemental or Medicare Advantage Plans
Once enrolled in Medicare Part A and part B, individuals that do not have retiree health benefits, will enroll in either a Medicare Advantage Plan or Medicare Supplemental Plan. You have to be enrolled in Medicare Part A & B, before you can enroll in a Supplemental or Advantage Plan.
It’s extremely important to understand the differences between a Medicare Supplemental Plan and Medicare Advantage Plan which is why we dedicated an entire article to this topic:
Article: Medicare Supplemental Plan vs. Medicare Advantage Plan
Retiree Health Benefits Through Your Former Employer
For employees that have retiree health coverage, you still need to enroll in Medicare Part A & B which serves as the primary insurance coverage and the retiree health coverage serves as your secondary insurance coverage.
Some larger employers even give employees access to multiple retiree health plans. You have to do your homework because some of those plans are structured as Supplemental Plans while others are structured as Advantage Plans.
Medicare vs Employer Health Coverage
Once you turn age 65, if you plan to continue to work, and have access to an employer based health plan, you still need to evaluate your options. A lot of companies have high deductible plans where the employee is required to pay a lot of money out of pocket before the insurance coverage begins. In general, Medicare Part A & B, paired with a Supplemental Plan, can offer very comprehensive coverage at a reasonable cost to individuals 65 and old. You have to compare how much you are paying in your employer health plan and the benefits, versus if you decided to voluntarily enroll in Medicare and obtain a Supplemental policy.
The results vary on a case by case basis and each person’s health needs are different but it’s worth running a comparison. In some cases, it can save both the employer and the employee money while providing the employee with a higher level of health insurance coverage.
Contact Us For Help
If you have any questions about anything Medicare related, please feel free to contact us at 518-477-6686. We are independent Medicare brokers and we can make the Medicare enrollment process easy, help you select the right Medicare Supplemental or Advantage Plan, and provide you with ongoing support with your Medicare benefits in retirement.
Other Medicare Articles
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Medicare Supplemental Plans ("Medigap") vs. Medicare Advantage Plans
As you approach age 65, there are a lot of very important decisions that you will have to make regarding your Medicare coverage. Since Medicare Parts A & B by itself have deductibles, coinsurance, and no maximum out of pocket
As you approach age 65, there are a lot of very important decisions that you will have to make regarding your Medicare coverage. Since Medicare Parts A & B by itself have deductibles, coinsurance, and no maximum out of pocket protection for retirees, individuals fill in those cost gaps by enrolling in either a Medicare Supplemental Plan or Medicare Advantage Plan. Most retirees have no idea what the differences are between the two options but I would argue that making the right choice is probably one of the most important decisions that you will make as you plan for retirement.
Making the wrong decision could cost you thousands upon thousands of dollars in unexpected medical and prescription drug costs in the form of:
Inadequate coverage
Paying too much for Medicare insurance that you are not using
Healthcare that is provided outside of the plan’s network of doctors and specialists
Expensive prescription drugs
Insurance claims that are denied by the insurance company
Original Medicare
Before we jump into the differences between the two Medicare insurance options, you first have to understand how Original Medicare operates. “Original Medicare” is a combination of your Medicare Part A & Part B benefits. Medicare is sponsored and administered by the Social Security Administration which means that the government is providing you with your healthcare benefits.
Medicare Part A provides you with your coverage for inpatient services. In other words, health care services that are provided to you when you are admitted to the hospital. If you worked for more than 10 years, there is no monthly premium for Part A but it’s not necessarily “free”. Medicare Part A has both deductibles and coinsurance that retirees are required to pay out of pocket prior to Medicare picking up the tab.
Medicare Part B provides you with your outpatient services. This would be your doctor’s visits, lab work, preventative care, medical equipment, etc. Unlike Medicare Part A, Part B has a monthly premium that individuals pay once they enroll in Medicare. For 2020, most individuals will pay $144.60 per month for their Part B coverage. However, in addition to the monthly premiums, Part B also has deductibles and coinsurance. More specifically, Part B has a 20% coinsurance, meaning anything that is paid by Medicare under Part B, you have to pay 20% of the cost out of pocket, and there are no out of pocket maximums associated with Original Medicare. Your financial exposure is unlimited.
Filling In The Gaps
Since in most cases, Original Medicare is inadequate to cover the total cost of your health care in retirement, individuals will purchase Medicare Insurance to fill in the gaps not covered by Original Medicare. Medicare insurance is provided by private health insurance companies and it comes in two flavors:
Medicare Supplemental Plans (Medigap)
Medicare Advantage Plans (Medicare Part C)
Medicare Supplemental Plans (“Medigap”)
We will start off by looking at Medicare Supplemental Plans, also known as Medigap Plans. If you enroll in a Medicare Supplemental Plan, you are keeping your Medicare Part A & B coverage, and then adding a Medicare Insurance Plan on top of it to fill in the costs not covered by Part A & B. Thus, the name “supplemental” because it’s supplementing your Original Medicare benefits.
There are a variety of Medigap plans that you can choose from and each plan has a corresponding letter such as Plan A, Plan D, Plan G, or Plan N. See the grid below:
When you see a line item in the chart that has “100%”, that means the Medigap plan covers 100% of that particular cost that is not otherwise covered by Original Medicare. For example, on the first line you see 100% across the board, that’s because all of the Medigap plans cover 100% of the Medicare Part A coinsurance and hospital costs. As you would expect, the more each plan covers, the higher the monthly premium for that particular plan.
Medigap Plans Are Standardized
It's very important to understand that Medical Supplemental Plans are “standardized” which means by law each plan is required to covers specific services. The only difference is the cost that each insurance company charges for the monthly premium.
For example, Insurance Company A and Insurance Company B both offer a Medigap Plan N. Regardless of which insurance company you purchased the policy through, they provide the exact same coverage and benefits. However, Insurance Company A might charge a monthly premium of $240 for their Plan N but Insurance Company B only charges a monthly premium of $160. The only difference is the cost that you pay. For this reason, it's prudent to get quotes from all of the insurance companies that offer each type of Medigap plan in your zip code.
Some zip codes have only a handful of insurance providers while other zip codes could have 15+ providers. Instead of spending hours of time running around to all the different insurance companies getting quotes, it’s usually helpful to work with an Independent Medicare Broker like Greenbush Financial Group to run all of the quotes for you and identify the lowest cost provider in your area. In addition, there is no additional cost to you for using an independent broker.
Freedom of Choice
By enrolling in a Medicare Supplemental Plan you're allowed to go to any provider that accepts Medicare. You do not have to ask your doctors or specialists if they accept the insurance from the company that is sponsoring your Medigap policy. All you have to ask them is if they accept Medicare. When you access the health care system, the doctor’s office bills Medicare. If Medicare does not cover the total cost of that service but it’s covered under your Medigap plan, Medicare instructs the insurance company to pay it. The insurance company is not allowed to deny the claim.
This provides individuals with flexibility as to how, when, and where their health care services are provided.
Part D – Prescription Drug Plan
If you enroll in a Medigap plan, you will also need to obtain a Part D Prescription Drug plan which is separate from your Medigap plan. Part D plans are sponsored by private insurance companies and carry an additional monthly premium. Based on the prescription drugs that you are currently taking, you can select the plan that best meets your needs and budget.
Medicare Advantage Plans
Now let's switch gears to Medicare Advantage Plans. I will start off by saying loud and clear:
“Medicare Supplemental Plans and Medicare Advantage Plans are NOT the same.”
All too often we ask individuals what type of Medicare plan they have and they reply “a Medigap Plan”, only to find out that they have a Medicare Advantage Plan. The differences are significant and it's important to understand how those differences will impact your health care options in retirement.
Medicare Advantage Plans REPLACE Your Medicare Coverage
Most people don’t realize that when you enroll in a Medicare Advantage Plan it DOES NOT “supplement” your Medicare Part A & B coverage. It actually REPLACES your Medicare coverage. Once enrolled in a Medicare Advantage Plan you are no longer covered by Medicare.
There are pluses and minuses to Medicare Advantage Plans that we are going to cover in the following sections. Remember, your health care needs and budget are custom to your personal situation. Just because your coworker, friend, neighbor, or family member selected a specific type of Medicare Plan, it does not necessarily mean that it’s the right plan for you.
Lower Monthly Premiums
The primary reason why most individuals select a Medicare Advantage Plan over a Medicare Supplemental Plan is cost. In many cases, the monthly premiums for Advantage Plans are lower than Supplemental Plans.
For example, in 2020, in Albany, New York, a Medicare Supplemental Plan G can cost an individual anywhere between $189 to $432 per month depending on the insurance company that they select. Compared to a Medicare Advantage Plan that can cost $0, $34, all the way up to a few hundred dollars per month.
Time Out!! How Do $0 Premium Plans Work?
When I first started learning about Medicare Advantage Plan, when I found out about the $0 premium plans or plans that only cost $34 per month, my questions was “How does the insurance company make money if I’m not paying them a premium each month?”
Here is the answer. Remember that Medicare Part B monthly premium of $144.60 per month that I mentioned in the “Original Medicare” section? When you enroll in a Medicare Advantage Plan, even though you are technically not covered by Medicare any longer, you still have to pay the $144.60 Part B premium to Medicare. However, instead of Medicare keeping it, they collect it from you and then pass it on to the insurance company that is providing your Medicare Advantage Plan.
But wait…..there’s more. Honestly, I almost fell out of my seat what I discovered this little treat. For each person that enrolls in a Medicare Advantage Plan, the government issues a monthly payment to the insurance company over and above that Medicare Part B premium. These payments to the insurance companies from the U.S government vary by zip code but in our area it’s more than $700 per month per person. So the insurance company receives over $8,400 per year from the U.S. government for each person that they have enrolled in one of their Medicare Advantage Plans.
Plus, Advantage Plans typically have co-pays, deductibles, and coinsurance that they collect from the policyholder throughout the year.
Don’t worry about the insurance company, they are getting paid. For me, it just sounded like one of those too good to be true situations so I had to dig deeper.
Insurance Companies WANT To Sell You An Advantage Plan
Since the insurance companies are receiving all of these payments from the government for these Advantage Plans, they are usually very eager to sell you an Advantage Plan as opposed to a Medicare Supplemental Plan. If you go directly to an insurance company to discuss your options, they may not even present a Medicare Supplemental Plan as an option even though that might be the right plan for you. Also be aware, that not all insurance companies offer Medicare Supplemental Plan which is another reason why they may not present it as an option.
Now I’m not saying Medicare Advantage Plans are bad. Medicare Advantage Plans can often be the right fit for an individual. I’m just saying that it’s up to you and you alone to make sure that you fully understand the difference between the two types of plans because both options may not be presented to you in an unbiased fashion.
HMO & PPO Plans
Most Medicare Advantage Plans are structured as either an HMO or PPO plan. If your employer provided you with health insurance during your working years, you may be familiar with how HMO and PPO plans operate.
With HMO plans, the insurance company has a “network” of doctors, hospitals, and service providers that is usually limited to a geographic area that you are required to receive your health care from. If you go outside of that network, you typically have to pay the full cost of those medical bills. There is an exception in most HMO plans for medical emergencies that occur when you are traveling outside of your geographic region.
PPO plans offer individuals more flexibility because they provide coverage for both “in-network” and “out-of-network” providers. Even though the insurance plan provides you with coverage for out-to-network providers, there is typically a higher cost to the policy owner in the form of higher co-pays or coinsurance for utilizing doctors and hospitals that are outside of the plan’s network. Since PPO plans offer you more flexibility than HMO plans, the monthly premiums for PPO are typically higher.
Non-Standardize Plans
Unlike Medicare Supplemental Plans, Medicare Advantage plans are non-standardized plans. This means that the benefits and costs associated with each type of plan are different from insurance company to insurance company. Insurance companies also typically have multiple Medicare Advantage plans to choose from. Each plan has different monthly premiums, benefit structures, drug coverage, and additional benefits. You really have to do your homework with Medicare Advantage Plans to understand what's covered and what's not.
Medicare Advantage plans include prescription drug coverage
Unlike a Medicare Supplemental Plan which typically requires you to obtain a separate Part D plan to cover your prescription drugs, most Medicare Advantage plans include prescription drug coverage within the plan. However, there are some Medicare Advantage plans that don't have prescription drug coverage. Again, you just have to do your homework and make sure the prescription drugs that you are currently taking are covered by that particular Advantage Plan at a reasonable cost.
Changes To The Network
Since Medicare Advantage Plans incentivize individuals to obtain care from “in-network” service providers, it’s important to know that the doctors, hospitals, and prescription drug coverage can change each year. This is less common with Medigap Plans because the doctor or hospital would have to stop accepting Medicare. The coverage for Medicare plans runs from January 1st – December 31st. The insurance company is required to issue you an “Annual Notice of Change” which summarizes any changes to the plans cost or coverage for the upcoming calendar year.
The insurance company will typically send you these notices prior to September 30th and if you find that your doctors or prescription drugs are no longer covered by the plan or covered at a higher rate, you will have the opportunity to change the type of Advantage Plan that you have during the open enrollment period which lasts from October 15th – December 7th each year.
Thus, Medicare Advantage plans tend to require more ongoing monitoring compared to Medicare Supplemental Plans.
Additional Benefits
Medicare Advantage plans sometimes offer additional benefits that Medicare Supplemental Plans do not, such as reimbursement for gym memberships, vision coverage, and dental coverage. These benefits will vary based on the plan and the insurance company that you select.
Maximum Out of Pocket Limits
As mentioned earlier, one of the largest issues with Original Medicare without Medicare Insurance is there is no maximum out of the pocket limits. If you have a major health event, the cost to you can keep stacking up. Medicare Advantage Plans fix that problem because by law they are required to have maximum out of pocket limits. Once you hit that threshold in a given calendar year, you have no more out of pocket costs. The maximum out of pockets limits vary by provider and by plan but Medicare sets a maximum threshold for these amounts which is $6,700 for in-network services. Notice it only applies to in-network services. If you go outside of the carriers network, there may be no maximum out of pocket protection depending on the plan that you choose.
Most Medigap plans do not have maximum out of the pocket thresholds but given the level of protection that most Medigap plans provide, it’s rare that policy holders have large out of pocket expenses.
New York & Connecticut Residents
When it comes to selecting the right type of Medicare Plan for yourself, residents of New York and Connecticut have an added advantage. For most states, if you choose a Medicare Advantage plan you may not have the option to return to Medicare with a Medigap Plan if your health needs change down the road. Most states allow the insurance companies to conduct medical underwriting if you apply for Medicare Supplemental insurance after the initial enrollment period and they can deny you coverage or charge a ridiculously high premium.
In New York and Connecticut, the insurance laws allow you to change back and forth between Medicare Supplemental Plans and Medicare Advantage Plan as of the first of each calendar year. There are even special programs in New York, that if an individual qualifies for based on income, they are allowed to switch mid-year.
While this is a nice option to have, the ability to switch back and forth between the two types of Medicare plans, also makes Medicare Supplemental Plans more expensive in New York and Connecticut. Individuals in those states can elect the lower cost, lower coverage, Medicare Advantage plans, and if their health needs change they know they can automatically switch back to a Medicare Supplemental Plan that provides them with more comprehensive coverage with a lower overall out of pocket cost.
The Plan That Is Right For You
As you can clearly see there are a lot of variables that come into play when trying to determine whether to select a Medicare Supplemental Plan or Medicare Advantage Plan in retirement; it’s a case by case decision. For clients that live in New York, that are in good health, taking very few prescription drugs, a Medicare Advantage plan maybe the right fit for them. For clients that plan to travel in retirement, have two houses, like the flexibility of seeing any specialist that they want, or clients that are in fair to poor health, a Medicare Supplemental Plan may be a better fit.
Undoubtedly if you live outside of New York or Connecticut the decision is even more difficult knowing that people are living longer, as you age your health care needs become greater, and you may only have one shot at obtaining a Medicare Supplemental Plan
No Cost To Work With Us
As independent Medicare brokers we are here to help you navigate the Medicare enrollment process and to obtain the Medicare insurance plan that is right for you. Our goal is to make the process easy, make sure all of your doctors and prescription drugs are covered by your plan, select a plan that meets your budget, and provides you with ongoing support.
The best part is it costs you nothing to work with us. If Insurance Company ABC is offering a Medicare Advantage that cost $0 per month, it’s going to be $0 per month whether you go directly to the insurance company or work with us as your independent broker. As a Medicare broker, we are compensated by the insurance company that issues you the insurance policy and that cost is not passed on to you.
Feel free to contact us at 518-477-6686 for a free consult or we would be more than happy to run quotes for you.
Other Medicare Articles
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Introduction To Medicare
As you approach age 65, there are very important decisions that you will have to make regarding your Medicare coverage. Whether you decide to retire prior to age 65, continue to work past age 65, or have retiree health benefits,
As you approach age 65, there are very important decisions that you will have to make regarding your Medicare coverage. Whether you decide to retire prior to age 65, continue to work past age 65, or have retiree health benefits, you will have to make decisions regarding your Medicare coverage and for many of those decisions you only get one shot at making the right one. The wrong decision can cost you tens of thousands, if not hundreds of thousands of dollars, in retirement via:
Gaps in your coverage leading to unexpected medical bills
Over coverage: Paying too much for insurance that you are not using
Penalties for missing key Medicare enrollment deadlines
The problem is there are a lot of options, deadlines, rules to follow, and with rules there are always exceptions to the rules that you need to be aware of. To make an informed decision you must understand Medicare Part A, Part B, Medicare Supplemental Plans, Medicare Advantage Plans, Part D drug plans, and special exceptions that apply based on the state that you live in.
I urge everyone to read this article whether it’s for you, your parents, grandparents, friends, or other family members. You may be able to help someone that is trying to make these very important healthcare decisions for themselves and it’s very easy to get lost in the Medicare jungle.
Initially my goal was to write a single article to summarize the decisions that retirees face with regard to Medicare. I realized very quickly that the article would end up looking more like a book. So instead I’ve decided to separate the information into series of articles. This first article will provide you with a general overview of Medicare but at the bottom of each article you will find links to other articles that will provide you with more information about Medicare.
With that, let’s go ahead and jump into the first article which will provide you with a broad overview of how Medicare works.
What is Medicare?
Medicare is the government program that provides you with your healthcare benefits after you turn 65. Medicare is run by the Social Security administration, meaning you contact your Social Security office when you have questions or when you apply for benefits.
Original Medicare
While there are a lot of decisions that have to be made about your Medicare benefits, all of the benefits are built on the foundation of Medicare Part A and Medicare Part B. Medicare Part A and Part B together are referred to as “Original Medicare”. You will see the term Original Medicare used a lot when reading about your Medicare options.
Medicare Part A
Medicare Part A covers your inpatient health services such as:
1) Hospitalization
2) Nursing home (Limited)
3) Hospice
4) Home health services (Limited)
As long as you or your spouse worked for at least 10 years, Medicare Part A is provided to you at no cost. During your working years you paid the Medicare tax of 1.45% as part of your payroll taxes. If you or your spouse did not work 10 years or more then you’re still eligible for Medicare Part A but you will have to pay a monthly premium. There are special eligibility rules for individuals that do not meet the 10 year requirement but are either divorced or widowed.
Medicare Part A Is Not Totally “Free”
While there are no monthly premium payments that need to be made for enrolling in Medicare Part A there are deductibles and coinsurance associated with your Part A coverage. While many of us have encountered deductibles, co-pays, and coinsurance through our employer sponsored health insurance plans, I’m going to pause for a moment just to explain three key terms associated with health insurance plans.
Deductible: This is the amount that you have to pay out of pocket before the insurance starts to pay for your healthcare costs. Example, if you have $1,000 deductible, you have to pay $1,000 out-of-pocket before the insurance will start paying anything for the cost of your care.
Co-pays: Co-pays are those small amounts that you have to pay each time a specific service is rendered such as a doctor’s visit or when you pick up a prescription. Example, you may have to pay $25 every time you visit your primary care doctor.
Coinsurance: This is cost sharing between you and the insurance company that’s expressed as either a percentage or a flat dollar amount. Example, if you have a 20% coinsurance for hospital visits, if the hospital bill is $10,000, you pay $2,000 (20%) and the insurance company will pay the remaining $8,000.
Maximum Out Of Pocket: This the maximum dollar amount that you have to pay each year out of pocket before your health care needs are 100% covered by your Medicare or insurance coverage. If your insurance policy has a $5,000 maximum out of pocket, after you have paid $5,000 out of pocket for that calendar year, you will not be expected to pay anything else for the remainder of the year. Monthly premiums and prescription drug costs do not count toward your maximum out of the pocket threshold.
Medicare Part A Has The Following Cost Sharing Structure For 2019:
As you will see in the table above, while you don’t have a monthly premium for Medicare Part A, if you are hospitalized at some point during the year, you would have to first pay $1,364 out of pocket before Medicare starts to pay for your health care costs. In addition, there is a flat dollar amount co-insurance, which is in addition to the deductible, and that amount varies depending on when the health services are performed during the calendar year.
Medicare Part B
Medicare Part B covers your outpatient health services. These include:
1) Doctors visits
2) Lab work
3) Preventative care (flu shots)
4) Ambulance rides
5) Home health care
6) Chiropractic care (limited)
7) Medical equipment
Unlike Medicare Part A, Medicare Part B has a monthly premium that you will need to pay once you enroll. The amount of the monthly premium is based on your adjusted gross income (AGI). The higher your income, the higher the monthly premium. Below is the 2019 Part B premium table.
As you will see on the chart, the minimum monthly premium is $135.50 per month which translates to $1,626 per year. The income threshold in this chart will vary each year.
Medicare 2-Year Lookback At Income
Medicare automatically looks at your AGI from two years prior to determine your AGI for purposes of Part B premium. In the first few years of receiving Medicare, this 2-year lookback can create an issue. If you retire in 2019, they are going to look at your 2017 tax return which probably has a full year worth of income because you were still working full time back in 2017. If you AGI was $200,000 in 2017, they would charge you more than twice the minimum premium for your Part B coverage.
I have good news. There is an easy fix to this problem. You are able to appeal your income to the Social Security Administration due to a “life changing event”. You can ask Social Security to use your most recent income and you typically have to provide proof to Social Security that you retired in 2019. They will sometimes request a letter signed by your former employer verifying your retirement date and a copy of your final paycheck. You will need to file Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event Form)
How Do You Pay Your Monthly Premiums For Part B?
The Medicare Part B premiums are automatically deducted from your monthly Social Security or Railroad Retirement Benefit payments. If you are 65 and have not yet turned on Social Security, Medicare will invoice you quarterly for those premium amounts and you can pay by check.
Medicare Part B Deductibles and Coinsurance
In addition to the monthly premiums associated with Part B, as with Part A, there are deductibles and coinsurance associated with Part B coverage. Part B carries:
Annual Deductible: $185
Coinsurance: 20%
Example: In January, your doctor tells you that you need your knee replaced. If the surgery costs $50,000, you would have to pay the first $185 out of pocket, and then you would have to pay an additional $9,963 which is 20% of the remaining amount. Not a favorable situation.
But wait, wouldn’t that be covered under Medicare Part A because it happened at a hospital? Not necessarily because “doctor services” performed in a hospital are typically covered under Medicare Part B.
The Largest Issue with Original Medicare is……..
It unfortunately gets worse. If all you have is Original Medicare (Part A & B), there is no Maximum Out of Pocket Limit. Meaning if you get diagnosed with a rare or terminal disease, and your medical bills for the year are $500,000, you may have to pay out of pocket a large portion of that $500,000.
Also, there is no prescription drug coverage under Original Medicare. So you would have the pay the sticker price of all of your prescription drugs out of pocket with no out of pocket limits.
Medicare Part C, Medicare Part D, and Medicare Supplemental Plans
To help individuals over 65 to manage these large costs associated with Original Medicare, there is:
Medicare Part C – Medicare Advantage Plans
Medicare Part D – Standalone Prescription Drug Plans
Medicare Supplemental Plans (“Medigap plans”)
Who Provides What?
Before I get into what each option provides, let’s first identify who provides what:
Medicare Part A: U.S. Government
Medicare Part B: U.S. Government
Medicare Part C – (Medicare Advantage Plan): Private Insurance Company
Medicare Part D – (Prescription Drug Plan): Private Insurance Company
Medicare Supplemental Plan (“Medigap”): Private Insurance Company
The Most Important Decision
Here is where the road splits. To help retirees manage the cost and coverage gaps not covered by Original Medicare, you have two options:
Select a Medicare Advantage Plan
Select a Medicare Supplemental Plan & Medicare Part D Plan
When it comes to your health care decisions in retirement, this is one of the most important decisions that you are going to make. Depending on what state you live in, you may only have one-shot at this decision. It is so vitally important that you fully understand the pros and cons of each option. Unfortunately, as we will detail in other articles, there is big push by the insurance industry to persuade individuals to select the Medicare Advantage option. Both the private insurance company and the insurance agent selling you the policy get paid a lot more when you select a Medicare Advantage Plan instead of a Medicare Supplemental Plan. While this may be the right choice for some individuals, there are significant risks that individuals need to be aware of before selecting a Medicare Advantage Plan.
Medicare Advantage Plans
VERY IMPORTANT: Medicare Advantage Plans and Medicare Supplemental Plans are NOT the same. Medicare Advantage Plans are NOT “Medigap Plans”.
Medicare Advantage Plans do NOT “supplement” your Original Medicare coverage. Medicare Advantage Plans REPLACE your Medicare coverage. If you sign up for a Medicare Advantage Plan, you are no longer covered by Medicare. Medicare has sold you to the private insurance company.
Medicare Advantage Plans are not necessarily an “enhancement” to your Original Medicare Benefit. They are what the insurance industry considers an “actuarial equivalent”. The term actuarial equivalent benefit is just a fancy way of saying that at a minimum it is “worth the same dollar amount”. Medicare Advantage Plans are required to cover the same procedures that are covered under Medicare Part A & B but not necessarily at the same cost. The actuarial equivalent means when they have a large group of individuals, on average, those people are going to receive the same dollar value of benefit as Original Medicare would have provided. In other words, there are going to be clear winners and losers within the Medicare Advantage Plan structure. You are essentially rolling the dice as to what camp you are going to end up in.
If you enroll in a Medicare Advantage Plan, you will no longer have a Medicare card that you show to your doctors. You will receive an insurance card from the private insurance company. If you have a problem with your healthcare coverage, you do not call Medicare. Medicare is no longer involved.
Why Do People Choose Medicare Advantage Plans?
Here are the top reasons why we see people select Medicare Advantage Plan:
Provide Maximum Out Of Pocket protection
Prescription Drug Coverage
Lower Monthly Premium Compared To Medicare Supplemental Plans
Medicare Supplemental Plans (Medigap)
Now let’s switch gears to Medicare Supplemental Plans, also known as “Medigap Plans”. Unlike Medicare Advantage Plan that replace your Medicare Part A & B coverage, with Medicare Supplement Plans you keep your Original Medicare Coverage and these insurance policies fill in the gaps associated with Medicare Part A & B. So it’s truly an enhancement to your Medicare A & B coverage and not just an actuarial equivalent.
There are different levels of benefits within each of the Medigap plans. Each program is identified with a letter that range from A to N. Here is the chart matrix that shows what each of these programs provides.
For example if you go with plan G which is one of the most popular of the Medigap plans going into 2020, most of the costs associated with Original Medicare are covered by your Supplemental Insurance policy. All you pay is the monthly premium, the $185 Part B deductible, and some small co-pays.
Like Medicare advantage plans, Medicare supplemental plans are provided by private insurance companies. However, what’s different is these plans are standardize. “Standardized” means regardless of what insurance company you select, the health insurance benefits associated with those plans are exactly the same. The only difference is the price that you pay for your monthly premium which is why it makes sense to compare the prices of these plans for each insurance company that offers supplemental plans in your zip code.
VERY IMPORTANT: Not all insurance companies offer Medicare Supplemental Plans. Some just offer Medicare Advantage Plans. So if you end up calling an insurance company directly or meeting directly with an insurance company to discuss your Medicare options, those companies may not even present Medicare Supplemental plans as an option even though that might be the best fit for your personal health insurance needs.
However, even if the insurance company offers Medicare Supplemental plans, you still shop that same plan with other insurance companies. They may tell you “yes we have a Medigap Plan G” but their Medigap Plan G monthly premium may be $100 more per month than another insurance company. Remember, Medicare Supplemental plans are standardized meaning Plan G is the same regardless of which insurance company provides you with your coverage.
Part D – Prescription Drug Plans
If you decide to keep your Original Medicare and add a Medicare Supplemental Plan, you will also have to select a Medicare Part D – Prescription Drug plan to cover the cost of your prescriptions. Unlike Medicare Advantage Plan that have drug coverage bundled into their plans, Medicare Supplemental Plans are medical only, so you need a separate drug plans to cover your prescriptions. It can be beneficial to have a standalone drug plans because you are able to select a plan that favors the prescription drugs that you are taking which could lead to lower out of pocket costs throughout the year. Unlike a Medicare Advantage plan where the prescription drug plan is not customized for you because it’s a take it or leave it bundle.
Summary
This article was a 30,000 foot view of Medicare Part A, B, C, D, and Medicare Supplemental Plans. There is a lot more to Medicare such as:
Enrollment deadlines for Medicare
How to enroll with Medicare
Comparison of Medicare Advantage & Medicare Supplemental Plans
Special Exceptions for NY & CT residents
Working past age 65
Coordinating Medicare With Retiree Health Benefits
And so many more considerations that will factor into your Medicare decision as you approach age 65 or leave the workforce after age 65.
VERY IMPORTANT: People have different health needs, budgets, and timelines for retirement. Medicare solutions are not a one size fits all solution. The decisions that your co-worker made, friend made, or family member made, may not be the best solution for you. Plus remember, Medicare is complex, and we have found without help, many people do not understand all of the options. I have met with clients that have told me that “they have a supplemental plan” only to find out that they had a Medicare Advantage plan and didn’t know it because they never knew the difference between the two when the policies were issued to them. It makes working with an independent Medicare insurance agent very important.
Please feel free to contact us with your Medicare questions and we would be more than happy to run free quotes for you to help you select the right plan at the right cost.
OTHER ARTICLES ON MEDICARE
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
