7 Things You Need to Know About Medicare

By: The Kiplinger Washington Editors

Heading into your retirement years brings a slew of new topics to grapple with, one of them being Medicare. Planning for your medical expenses will help you keep your financial plan on track; after all, it is estimated that 90% of your lifetime’s medical expenses will be incurred, during retirement.

Figuring out when and what to enroll in and what coverage will be best for you can be daunting. To help you navigate these waters more easily, we share seven essential aspects you need to know about Medicare.

1. Medicare has a cost

Medicare is divided into parts:

• Part A: Pays for hospital services. It does not entail an additional cost if you or your spouse paid Medicare taxes, deducted from your payroll check, for at least ten years. People who are not eligible to get Part A for free could have the benefit by paying a monthly premium.
• Part B: Covers doctor visits and outpatient services. For 2024, its minimum cost is $174.70 per month (varies according to income).
• Part C: Known as Medicare Advantage (MA) plans. All participants with active Parts A and B are eligible. It does not entail an additional cost in premium, but it does in your copays.
• Part D: Corresponds to prescription drugs and your monthly fee varies depending on the plan you choose. In 2024, its maximum premium in Puerto Rico is $75.90 per month. In addition to the monthly premium, it will also be subject to copays, deductibles, and other costs.

2. It is possible to cover the gaps

Traditional Medicare beneficiaries will probably want to purchase the Medigap supplemental insurance plan offered by private insurers to help cover deductibles, copays, and other gaps. You can change Medigap plans at any time, but if you choose or change plans more than six months after first enrolling in Part B they may charge more or deny coverage depending on your health status. Medigap policies are identified with the letters A through N. Each policy bearing the same letter must offer the same basic benefits; the cost is usually the only difference between same-letter policies. However, effective January 1, 2024, parts F, G, and J can be purchased with higher deductible options ($2,800 out of pocket, excluding monthly premiums).

3. There is an option that has it all

You can choose to enroll in traditional Medicare: Parts A, B, and D and purchase a Medigap supplemental policy. Or you can enroll in Medicare Advantage, which provides medical and prescription drug coverage through private insurers. Part C (Medicare Advantage) has no additional cost since the beneficiary is only responsible for paying Part B. As with traditional Medicare, you will be subject to copays, deductibles, and other costs, although the totals tend to be lower than those of traditional Medicare.

4. People with high incomes pay more

The cost of Medicare Part B varies according to the person’s income. Premiums for both parts (Part B and D) may have an additional charge if your adjusted gross income (plus tax-exempt interest) exceeds $103,000 if you are single, or $206,000 if you are married and file a joint tax return. In 2024, high-income people paid between $244.60 and $594 a month for Part B, depending on their income level. To this you must add the cost of Part D, which ranges from $11.90 to $75.90.

5. When to enroll

You are eligible for Medicare when you turn 65. If you are receiving Social Security benefits, you will be automatically enrolled in Parts A and B. You can choose to decline Part B, as it has a monthly cost. If you keep it, the cost will be deducted from your Social Security payment if you have already claimed benefits.

People who have not begun receiving their Social Security payments will have to enroll in Parts A and B. The initial enrollment period (which lasts seven months) begins three months before the month you turn 65 and ends three months after your birthday month. To ensure that coverage begins as soon as you turn 65, enroll during the first three months.

You can postpone enrollment in Medicare if you are still working and have health insurance through your employer (or if you are covered by the health insurance plan offered by your spouse’s employer). Once there is termination of coverage from your employer’s health insurance, you have up to eight months to enroll in Medicare. Penalties will apply if you don’t do it within the corresponding period.

6. Several enrollment periods

In addition to the initial seven-month enrollment period, there are other enrollment periods. If you did not enroll in Part B during the initial period and are not working (or are not covered by the health insurance provided by your spouse’s employer), you can enroll in Part B between January 1 and March 31; coverage will begin on July 1. However, you will have to pay a lifetime penalty of 10% for each 12-month period that you delay enrolling in Part B.

People who are covered by their current employer’s health plan can enroll later, without penalty, during a special enrollment period that lasts eight months, after losing the coverage provided by the employer’s health plan (regardless of whether you have retiree health benefits or COBRA). If you miss your special enrollment period, you will have to wait until the next general enrollment period, better known as the Annual Enrollment Period or AEP. Open enrollment, which runs from October 15 to December 7 of each year, allows you to change Part D or Medicare Advantage plans for the following year, should you choose to do so. (People can now change Medicare Advantage plans outside the open enrollment period if they choose one that has received a government-issued five-star quality rating.)

7. More free preventive services

Medicare beneficiaries can receive several free preventive services. You are entitled to a free annual “wellness” visit to develop or update a personal prevention plan. Beneficiaries also receive a free cardiovascular exam every five years, annual mammograms, annual flu shots, and screening tests for cervical, prostate, and colorectal cancer.

Planning your medical expenses now can improve your quality of life and determine the strength of your finances during retirement. Your Popular One¹ team can help you prepare for retirement. Contact your Private Banker and start planning your future with the help of your team of specialists. Call 787-281-7272 or write to PopularOne@popular.com.