Medicare Primer 101

If your 65th birthday is around the corner or you're anxious about the Medicare open enrollment period (closing Dec. 7), it's a good time to start focusing on your options.

Healthcare choice is becoming a bigger factor in the lives of pre-retirees as the Patient Protection and Affordable Care Act (ACA) ‐ better known as Obamacare ‐ brings significant change to employer-sponsored and individually purchased health plans. Though a separate federal health insurance system with no connection to Obamacare or its online marketplaces, Medicare is going through its own evolution in terms of plan offerings and customer access.

Here's a basic primer for future Medicare enrollees:

What is Medicare? Medicare is a government-provided health and hospitalization insurance program for people 65 and older and for some people under age 65 based on disability or particular forms of illness.

What does it cost? Though you've likely paid taxes into the Medicare system your entire career, Medicare isn't a completely free program; you'll pay premiums deducted from your Social Security checks for some portions of your benefits. There may be copays and deductibles for certain services. If you have health issues already, it's a good idea to investigate coverage based on the services you're likely to need over time.

When do I get to join? You can apply for Medicare through your nearest Social Security office up to three months before your 65th birthday. If you wait longer than three months after your 65th birthday to apply, you may face a late enrollment penalty. If you are already drawing Social Security benefits at age 65, you'll be automatically enrolled in Medicare.

What does Medicare coverage look like? Keep in mind that you can get many current answers to Medicare questions online or in person at your nearest Social Security office. But as of late 2014, here's an overview of current Medicare plans:

• Parts A (Hospital) and B (Outpatient). Part A covers inpatient hospital care and Part B covers outpatient medical care and procedures. You'll hear Parts A and B referred to as "Original Medicare" or "Traditional Medicare" because if you choose to take this option, you'll sign up for them as a pair. You'll get to go to any doctor, hospital or facility that's enrolled in Medicare and accepting new Medicare patients. You'll end up paying a premium for Part B which can change from year-to-year while Part A is usually free for most people.
• Part C (Medicare Advantage). Call this one-stop shopping for your hospital, outpatient (Part A and B) and usually your prescription coverage (see Part D, below). Medicare Advantage policies are sold by private insurers ‐ Medicare pays their share and you pay your premium. They may include differing assortments of services ‐ vision, prescription drug, dental or hearing. But keep in mind different Medicare Advantage plans have different rules for services and can charge different out-of-network costs.
• Part D (Prescription drug coverage). Part D added prescription drug coverage to "Original" Medicare, but as mentioned, may be folded into Medicare Advantage coverage if you elect to take it.

What's "Medigap" insurance? If you go with "Original" Medicare (Part A and B), you'll find some gaps in your Medicare coverage. Medigap is the nickname for Medicare Supplement Insurance, which you purchase privately. Some employers and unions offer Medigap coverage to retirees, and these plans can vary widely in terms of cost, coverage and state participation. Also, if you're on Medicare Advantage, it's unlikely you'll need separate Medigap coverage, but it's important to check.

What if you plan to keep working with company health benefits after you turn 65? Confer with your financial advisor, human resources department and Medicare before you make any decisions, but you may qualify for a special enrollment period as a result. You'll need to coordinate with your spouse as well if you share any kind of health coverage as part of coordinating your overall retirement picture. People who continue to work past 65 may enroll in Part A but bypass Part B and D if they're already on a company plan.

Are your doctors on the plan? You've probably have some experience with this from checking to see whether your physicians are in-network with whatever health insurance you currently carry. You'll continue to do this on Medicare Advantage. Check availability of doctors and costs on any plan you're considering, particularly out-of-network costs.

What can your state do for you? If you find you're not getting answers on specific Medicare subjects from Medicare (http://www.medicare.gov) itself, your employer, your union, your financial advisor or Social Security, your state is a participant in the State Health Insurance Assistance Program or SHIP. SHIP is a national program that offers one-on-one counseling and assistance on Medicare to individuals and their families.

What's the best way to tie all this stuff together? Stop looking at your health, investment, retirement and tax issues separately. Medicare is a critical piece of the healthcare affordability puzzle, but it's important to consider choices ‐ and potential worst-case scenarios ‐ within the scope of your broader retirement plan. If you've never sat down with a financial planner and have five years or more until you plan to retire, find one and have a broad discussion about where you stand on health, retirement and estate issues. To find a qualified planner in your community, start with solid recommendations from friends and family and consult organizations like the Certified Financial Planner Board of Standards or the Association for Financial Counseling Planning and Education (https://www.afcpe.org/find-an-afcpe-certified-professional/).

Bottom line: Whether you plan to retire at 65 or stay in your career as long as possible, it's important to understand Medicare and how it can work for you.