Healthcare in Retirement: What You Need to Know About Medicare and Social Security

For most Americans, Social Security income is a lifelong investment and an established benefit to look forward to after decades of work. However, it’s important to develop a firm understanding of the program so that you can make the right decisions once it comes time to collect payments. While the program’s close ties to Medicare will help cover crucial healthcare-related costs, Social Security also involves the same payment elements as many health insurance plans (including copays, premiums, and coverage limits). 

Luckily, there are also plenty of alternative and supplemental options available to support yourself and your spouse in your advanced years. In this article, we’ll break down the basics of securing healthcare coverage past retirement and provide you with valuable resources to plan for your future. 

Healthcare For U.S. Citizens Over 65

As the federal government’s social insurance program, Social Security is one of the most important tax investments you contribute to throughout your time as a working adult. In order to access retirement, disability, and survivor benefits, individuals must claim their social security benefits and use them as part of a wider income plan.  

Social Security and Medicare work closely together to provide healthcare coverage for those reaching retirement age. While you can begin collecting Social Security benefits as early as 62, federal health insurance provided by Medicare only becomes available once you reach age 65 and meet the following requirements:

• You have worked a minimum of 10 full years or meet the requirements to access benefits for your spouse’s work.
• You are a U.S. citizen or permanent resident, or your spouse is one and has paid Social Security for at least 10 years. 
• Those with disabilities who are younger than 65 may also be eligible for Medicare benefits.

You’re automatically enrolled in Part A and Part B at age 65 if you file for Social Security benefits. If you’re not receiving Social Security you won’t be automatically enrolled –  in that case, you’ll need to register for Medicare benefits during the seven-month Initial Enrollment period that begins three months before your 65th birthday. Registering within this time frame will ensure you avoid late penalties and delayed coverage. Those who are still working and receiving health insurance from their employer or union during this time qualify for a later Special Enrollment period. 

Understanding Medicare 

Medicare is broken down into different policies, each with its own specific qualifications and coverage types — some offered directly through the federal government and some by federally-approved private institutions. It’s important to understand the different options available and to choose the best one for your needs and financial situation. 

Traditional Medicare

The first two, most widely-known components of Medicare are fee-for-service federal programs that cover basic healthcare needs:  

• Part A: This section covers hospital coverage — including inpatient care as well as home and hospice services. It includes a deductible for each benefit period which is updated annually. 
• Part B: Doctor visits, outpatient services, and other healthcare expenses not included in Part A are covered in Part B. This section acts as a medical insurance plan, with both a monthly premium that depends on your income and a yearly deductible. 

Federally-Approved Private Care

As an alternative to traditional Medicare, you can purchase plans through a private insurer for customizable coverage: 

• Medicare Advantage (MA): Also known as Part C, MA plans are structured as either Preferred Provider Organizations (PPOs) or Health Maintenance Organizations (HMOs). You must purchase parts A and B before being able to access secondary insurance from an MA — which provides all of the coverage offered by parts A and B, as well as additional benefits like dental, hearing, vision, and even accessibility aids like wheelchair ramps. 
• Prescription drug coverage: While many MAs also cover prescription drugs, Part D plans are an alternative option for you to pay premiums on medicines up to a yearly limit. You must be enrolled in Medicare Part A and/or Part B to enroll in this coverage. Each Medicare provider maintains a formulary, or list of prescriptions they cover. Check the formulary for each plan you are considering to ensure your specific medications are included.

Supplementing Medicare Coverage 

If you have Medicare but are seeing a gap in the amount of coverage you obtain every year, a supplement may be an optimal investment. Supplements offered by licensed private insurance companies are a great alternative to MA plans to cover medical costs that Medicare alone does not. The most widely-used example is Medigap, which covers expenses like copayments, coinsurance, deductibles, and even healthcare abroad for those enrolled in parts A and B. 

HSAs: Save for Retirement Expenses 

Health Savings Accounts (HSAs) are a great way to invest in your future retirement expenses and are available from both insurance companies and other financial institutions. The money contributed to an HSA is pre-tax income that can be used to pay future deductibles, copayments, and other expenses. However, only those with High Deductible Health Plans (HDHP) can begin investing into these accounts. Licensed providers are happy to answer any questions about your eligibility for HSAs.  

Financial Advisory Services for Retirement-age Investors

Ready to begin your Medicare journey, but need extra guidance and support choosing among the wide variety of federal and private options? Chesapeake Growth Network helps Maryland residents over 65 plan their investments and acquire insurance for a healthy, protected life after retirement. Industry professional Mike Kelly, Jr. and his team provide supplemental programs and advisory services to help individuals create plans for their specific needs. They also help those with HDHP insurance plans invest in their future with HSA funds. 

Contact Chesapeake Growth Network today to learn more about our services. In our next article, we’ll explore the difference between a revocable trust and a revocable will, and how to know which makes sense for you.