The Advantage Group is a Tampa Bay-based health insurance brokerage with over 50 years of experience in helping individuals protect themselves and their families as they plan for retirement. Their expertise includes long-term care, annuities, life insurance, health insurance, and Medicare.
As we get older (time seems to fly by), it becomes incumbent upon us to plan for our future years – and we're not just talking about plans for kicking back and relaxing in retirement. Because the future is filled with uncertainties – especially related to our health – it's essential to make a plan to address whatever lies ahead.
But, it's not that simple. A largely unknown on the retirement horizon is what to do about medical insurance. When one reaches age 65 and becomes eligible for government-funded health coverage, an immediate list of questions crop up: How much will it cost?
Can I cover my family? Can I stay with my employer coverage? What options are available to me? What is the difference between Original Medicare and Medicare Advantage?
The answers to these questions are often elusive. It can all be very confusing and overwhelming. That's why we're here to help. Let's break down the options available to keep you taken care of throughout your golden years.
Health Insurance Coverage in Retirement
When it comes to health insurance coverage to help us as we age, there are various options to choose from. Some popular coverages you may consider are Original Medicare, Medicare Advantage Plan, and long-term care insurance. Read on to learn about the differences and why you may consider opting for more than one.
First, let's clear up a common point of confusion. The term Medicare is often used to group all retirement health insurance. However, there are two distinct categories for federally-funded insurance coverage: Original Medicare and Medicare Advantage Plan. The two together are often referred to simply as "Medicare."
Both Original Medicare and Medicare Advantage Plan are programs offered to individuals 65 or older, under 65 with certain disabilities, or any age with certain debilitating health conditions. As soon as you turn 65, Medicare becomes your primary insurer.
However, don't wait until you blow out your candles on your 65th birthday to get the ball rolling with Medicare coverage. Get ready in advance. You'll want to begin the process during the open enrollment period of three months before or three months after your birthday. It's also a good idea to get familiar with the specific coverage options available to you before enrolling.
Original Medicare vs. Medicare Advantage Plan
Health needs differ for each individual, so Medicare offers options for you to customize your plan. Original Medicare takes an "a la carte" approach to health insurance. Its benefits include hospital and medical insurance (or Parts A and B). You may also have the option of enrolling in Part D for prescription drug coverage. Typically, Original Medicare allows you to select any doctor, any clinic, or any hospital you’d like to visit, as long as they accept Medicare. One of the downsides is that it may come with more out-of-pocket costs.
Unlike the "pick and choose" approach of Original Medicare, the Medicare Advantage Plan is a bundled service. Although, with this option, there may be limits to which doctors you're able to select as the program has a fixed and predetermined network of offices and hospitals. With this plan, you may have access to additional significant benefits, such as Hearing, Dental, Vision, SilverSneakers (gym membership), as well as over-the-counter reimbursements.
Here are the five parts of Medicare Coverage explained below:
The Five Parts of Medicare Coverage
Part A refers to hospital insurance, and it covers hospital visits, nursing facilities, home health, and hospice care. Part A is included in Original Medicare.
Part B refers to medical insurance. It covers doctor's services, preventative care, mental health care, lab tests, and x-rays. You'll pay a monthly premium for Part B Medicare coverage. Part B is included in Original Medicare.
Part C, also known as Medicare Advantage, is the all-in-one alternative to Original Medicare. This bundled plan includes Part A, Part B, and often Part D.
Part D refers to drug coverage, and it helps cover the cost of prescription drugs, including the cost of recommended shots or vaccines. This is an optional add-on to Original Medicare.
Part G, know as Medigap, is a Medicare supplement. This benefit provides the 20% of the coverage that Part A and Part B will not cover.
One of the significant uncertainties on our horizon is the potential need for long-term care. Statistically, the cost for a private room in a long-term care facility is close to $100,000 per year. Needless to say, you don't have to be a mathematician to understand the impact of spending $100,000 of your retirement nest egg on an issue you hadn't planned for. How long before your cash runs out?
Although most people want to stay put in their homes as they grow older, those who are 65 years of age today have a 70% chance of needing some form of long-term care services in their remaining years. Fortunately, there is an answer, and it comes in the form of a long-term care insurance policy.
What is long-term care (LTC) insurance?
Long-term care insurance provides nursing home care, home health care, or personal care for those 65 years or older or those with a chronic or disabling condition that needs supervision.
Is the cost of long-term care worth it?
The cost of long-term care insurance can be exponential. As a private insurance option, the insurance is available to those that can afford to pay for it. That's why it's important to begin saving for retirement as early as possible in ways such as contributing to your employer's 401(k) plan and increasing savings with age. There's a good reason for the high costs, though.
Long-term care insurance comes with more flexibility and available options compared to Medicare. For shorter periods of care, you may even consider short-term care insurance. Short-term care typically provides similar benefits like long-term care, but for 12 months or less.
Why should I consider both Medicare and LTC insurance?
Consider enrolling in both Medicare and long-term care insurance for added security in your later years. Medicare options will cover services like doctor visits and medication, but the rules become more complicated when it comes to additional, longer-term assistance.
Depending on one's state and insurance plan, Medicare may cover home health services, but the rules are strict compared to LTC insurance. To qualify for home health care under Medicare, it must be for medical care, the individual must be unable to leave their home without assistance, and a doctor must prescribe it. Medicare Advantage is more lenient, but overall, the rules for home health care eligibility under Medicare are narrow and need to be signed off by a doctor.
Long-term care insurance covers services to assist with daily activities instead of medical care only, like bathing or getting out of bed. It benefits individuals with a chronic medical condition, disability, or disorder, that need help either in a nursing home, an assisted living facility, or even in their own home. Remember that individuals will not qualify for long-term care insurance after being diagnosed with a debilitating condition.
Regardless of the coverage you ultimately select, what's most important is that you begin the process early. If you're years away from qualifying for Medicare, ensure you're optimizing your retirement savings. As you inch closer to 65, consider applying before significant health issues take center stage. The sooner this process begins, the less expensive it will be for you and the more peace of mind you'll have as you head into your golden years.
The Advantage Group is pleased to offer specialized, no-cost Medicare resources to FrankCrum clients and employees to assist them in planning for the future.