Jill On Money: Club Medicare

On July 30, 1965, President Lyndon B. Johnson signed the Medicare bill into law. The program was intended to provide medical care and health insurance to most Americans age 65 or older and has evolved in the near six decades since its inception.

The first major addition occurred in 1972, which was an expansion to Americans under 65 with certain disabilities and anyone with permanent kidney disease requiring dialysis or transplant and those with ALS (Lou Gehrig’s disease).

The next major change to the Medicare program occurred in December 2003, when Congress added outpatient prescription drug benefits.

Here are the most frequently asked questions that I receive about joining “Club Medicare,” or as my friend likes to call it, Club Med!

What do all of the Medicare letters represent?
The alphabet soup of coverage is composed of four parts:

— Medicare Part A: insurance for hospitalization, home or skilled nursing, and hospice

— Medicare Part B: medical insurance

— Medicare Part C (Medicare Advantage Plans): private insurance option for covering hospital and medical costs

— Medicare Part D: prescription medications

What’s the difference between Original Medicare and Medicare Advantage?
Original Medicare is composed of Part A and Part B, and it “covers most, but not all of the costs for approved health care services and supplies.” That said, Original Medicare does not cover some key benefits like eye exams, most dental care, and routine exams.

Additionally, there’s no limit on what you’ll pay out-of-pocket in a year. That’s why many people opt to buy a Medicare Supplement Insurance (Medigap) policy to help lower their share of costs for services you get. With the original, you purchase Medicare drug coverage (Part D) separately.

Medicare Advantage is a private option, which bundles Part A, Part B, and usually Part D coverage into one plan. Most of these plans offer some extra benefits that Original Medicare doesn’t cover — like vision, hearing, and dental services. Each plan can have different rules for how you get services, like needing referrals to see a specialist. Costs for monthly premiums and services vary depending on which plan you join.

How do I enroll in Medicare?
If you are 65 and not receiving Social Security benefits yet, you must apply online for Medicare, although there are exceptions if you are covered with a health care plan through your employer. Check with the Social Security Administration for more details.

If you have taken Social Security before turning 65 (something that I do not usually recommend, due to the permanent reduction in benefits), you will be enrolled automatically in Medicare Part A and Part B. Importantly, Medicare is for YOU only, it does not include coverage for your spouse or your family.

When do I have to apply?
Mark Miller, author, journalist, and founder of the excellent Retirement Revised web site notes that unless you qualify for the employment exception, “Medicare rules require that you sign up during a seven-month initial enrollment period that includes the three months before, the month of, and the three months following your 65th birthday. Not enrolling during that window triggers substantial late-enrollment penalties levied in the form of higher premiums for Part B and Part D that continue for life.”

Can I pay someone to do this for me?
Yes, but like many parts of the financial services world, you need to conduct some research, ask a lot of questions, and be careful. Start by asking your CFP or CPA for a referral. You should also investigate the National Council on Aging’s (NCOA) Medicare Standards of Excellence site.

To be eligible to be listed on the site, Medicare agents and brokers must go through a rigorous review and training process, which meets NCOA’s standards. The goal is that consumers can “receive unbiased education, practical decision support, and trusted enrollment options when you connect with a Medicare partner.”

Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.