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Know your health care options and possible changes

A proper health care plan is a necessity for everyone. But for those preparing for retirement, it is vital to also be prepared for health care needs — and options — to change. Health care needs and costs inevitably increase as we age. When incorporating these costs into retirement savings, most people consider Medicare beginning at age 65. Medicare, which is an aid program provided by the federal government, naturally is a complex system riddled with intricacies often unbeknownst to pre-retirees and retirees.

Keeping Medicare in mind as an option in order to stretch your money as far as you can during retirement may seem like an obvious choice. Unfortunately, it is not the only thing you need to consider.

You must carefully select your individual retirement Medicare plans. Choosing the best or most impressive plan overall does not necessarily mean it is the best plan for your personal situation. What do you specifically need in the next five years? Which aspects of each coverage plan apply to you, and which ones don’t? Consider these questions, among many others specific to your case, when making your selection.

The process of figuring out your health care options with Medicare can be convoluted and exhausting to navigate. As difficult as it can be to get things done with Medicare, it is easier when you have a foundation of understanding with which to start. Medicare’s many components require disciplined education, especially in light of the upcoming Annual Election Period. Here’s a guideline of what to consider for weighing the best options that suit your immediate and long-term needs:

Types of Medicare

Medicare Part A is for hospitalization, and Medicare Part B is for medical insurance. Part B costs $135 per month for most people. However, both plans have co-pays and deductibles that are too high for some people, so buying either a Medicare Supplement or a Medicare Advantage becomes an alternative option.

Supplemental Medigap Insurance covers any gaps in the standard Medicare coverage options. There are 10 standardized Medicare plans available to choose from, and each is identified by a letter of the alphabet. Insurance companies are required to offer the same benefits based on the letter; the difference lies in the price. Plan A has the least benefits and Plan F has the most; however, Plan C and Plan F will no longer be offered in 2020. Because of this, you might want to think about looking at other options to avoid potential cost increases in the future.

Another plan, Medicare Part D, helps cover the cost of prescription drugs. It is important for you to check for any changes to the plan you are currently on to ensure the costs and benefits are still the right combination for you. Check your medication list against the list of medications the plan covers, also known as formulary, to make sure your medications are still on that list and have not been placed in a more expensive tier. You can go to Medicare.gov and compare your coverage with the 23 or so other options available.

As if none of that is confusing enough, there is a third major option: Medicare Advantage Plans. MAPs are offered as alternatives to Parts A and B. You must still pay for Part B, but you will use an Advantage Plan provider. These Medicare Advantage plans have certain co-pays and deductibles, and for most of them, you have to go to an in-network doctor or hospital for the lowest co-pay. Most of these plans also include Medicare Part D benefits, so you don’t have to purchase a separate one like you do in a Medicare supplement.

Key guidelines:

▪ Medicare changes can be made between Oct.-Dec. 7.

▪ Changes made during this window of time will take effect on Jan. 1, 2018.

▪ Stay on top of Medicare changes.

▪ Look at options that will help you keep your costs stable and stay on top of any changes in the future.

▪ Remember that including and projecting your health care costs is vital to the success of your retirement plan. The premiums involved, any prescription costs and an appropriate number of medical provider visits must all be factored in.

It is important you shop around for the best deal for your unique situation, even though it is not necessarily between two competing insurance companies. Often times, the same insurance company offer multiple plans. It is time well-spent to do a cost-benefit analysis to determine which plan would be best for you and your lifestyle heading into retirement.

Ash Toumayants is the founder of Strong Tower Associates, a retirement planning firm dedicated to helping clients in all stages of life prepare for retirement.

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