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Medicare What you don’t know and what it could cost you.

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Presentation on theme: "Medicare What you don’t know and what it could cost you."— Presentation transcript:

1 Medicare What you don’t know and what it could cost you

2 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 2 Retirees’ Top Concerns Source: Principal Well-Being Index, fourth quarter 2013. Reduced Medical Benefits Reduction in Social Security Market Volatility Insufficient Retirement Savings 0%10%20%30%40%50%60%70%

3 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 3 Health Care Costs for Today’s Retiree A retired couple with average prescription drug expenses would need $259,000 to have a 90% chance of meeting their health care costs during retirement. And those are just out-of-pocket costs—beyond what Medicare covers. Employee Benefit Research Institute, October 2015. A retired couple with average prescription drug expenses would need $259,000 to have a 90% chance of meeting their health care costs during retirement. And those are just out-of-pocket costs—beyond what Medicare covers. Employee Benefit Research Institute, October 2015. Sources: Employee Benefit Research Institute, February 2015. Bureau of Labor Statistics, 2014. Consider the following: Age Average annual health care cost in 2015 Percentage of total average annual spending 65  74 $8,76611.3% The numbers shown here represent the average dollars spent in single and married households in 2015. You may spend less if you are single, or more if you are married.

4 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 4 What is Medicare? Federal health insurance program For people age 65 or older (or the disabled) Three main health care options: Parts A, B, and C Prescription drug coverage is Part D

5 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 5 Medicare Parts A & B Part A (Hospital Insurance)Part B (Medical Insurance)  Hospital Stays  Skilled Nursing Care  Home Health Care  Hospice Care  Doctors’ Services  Outpatient Medical/Surgical Services  Diagnostic Tests  Outpatient Therapy

6 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 6 Medicare Part C Part C (Medicare Advantage Plans)  Coverage provided by private insurance companies  Cost varies by plan  Get all of coverage in Parts A and B  May also get other benefits to help cover costs

7 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 7 Medicare Part C There are five types of Medicare Advantaged Plans:  Health Maintenance Organizations (HMOs)  Preferred Provider Organizations (PPOs)  Private Fee-for-Service Plans (PFFS)  Special Needs Plans (SNPs)  Medical Savings Accounts (MSAs)

8 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 8 Medicare Part D Part D (Prescription Drug Coverage)  Helps cover prescription drug costs  Provided through private companies  Voluntary enrollment  Must be enrolled in Parts A & B  Must enroll within three months of Medicare eligibility

9 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 9 Medigap  From a private insurance company  Premiums vary by company, coverage, and state  Generally doesn’t cover long-term care, vision, dental, hearing aids, eyeglasses, or private-duty nursing  Buy during a six-month open enrollment period  Any standardized Medigap policy is guaranteed renewable even with health problems

10 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 10 Medigap (continued) Ten standardized plans – A, B, C, D, F, G, K, L, M, and N Plans cover costs like copayments, coinsurance, and deductibles Standardized plans must all offer the same benefits Cost is usually the only difference between policies (with same letter) sold by different companies Some states (MA/MN/WI) are standardized in a different way

11 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 11 Key Medicare Decisions Step 1: Getting coverage Original MedicareMedicare Advantage Plan Part A (Hospital Insurance) Part B (Medical Insurance) Combines Parts A, B, and usually Part D Coverage provided by Medicare Choice of doctors, hospitals, and other providers (must accept Medicare) Patient or supplemental coverage pays deductibles and coinsurance Monthly premium for Part B Coverage provided by private insurance companies (must be approved by Medicare) Typically need to use plan’s doctors, hospitals, and other providers (or pay more or all of the costs) Pay a monthly premium (above Part B premium) and a co-payment or co-insurance for covered services Costs, extra coverage, and rules vary by plan

12 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 12 Key Medicare Decisions Step 2: Adding drug coverage Original MedicareMedicare Advantage Plan Part D (Prescription Drug Coverage) For people who chose Medicare Parts A & B:  Must choose and join a Medicare Prescription Drug Plan  Usually pay a monthly premium  Plans are run by private companies approved by Medicare For people who chose Medicare Advantage (if not already included in plan): In most cases, must get it through the plan If plans don't offer drug coverage, may be able to join a Medicare Prescription Drug Plan

13 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 13 Key Medicare Decisions Step 3: Adding supplemental coverage Medigap Policy  Can buy a Medicare Supplement (Medigap) policy from a private company  Costs vary by policy and company  Employers/unions may offer similar coverage  Those who join a Medicare Advantage plan can’t have a Medigap policy

14 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 14 Eligibility The applicant must be:  Must be age 65 or older  Must qualify for Social Security benefits (elected or not)  May be eligible based on spouse’s or former spouse’s eligibility

15 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 15 Costs Part A: Premiums  Individual or spouse having 40 or more quarters of Medicare-covered employment – None  Individuals having 30  39 quarters of Medicare-covered employment – $226.00 per month  Individuals with less than 30 quarters of Medicare-covered employment – $411.00 per month

16 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 16 Costs Part B: Premiums File Individual Tax Return File Joint Tax ReturnYou Pay (Monthly) $85,000 or less$170,000 or less$121.80 $85,001 – $107,000$170,001 – $214,000$170.50 $107,001 – $160,000$214,001 – $320,000$243.60 $160,001 – $214,000$320,001 – $428,000$316.70 Above $214,000Above $428,000$389.80 Important note: If you don’t enroll when you’re first eligible, premiums will increase 10% for each full 12 months until you do enroll.

17 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 17 Costs Medigap Policies  Medigap policies are priced in three ways: - Community-rated (a.k.a. no-age-rated) Generally, same monthly premium charged to everyone who has the Medigap policy, regardless of age - Issue-age-rated (a.k.a entry age-rated) Premium is based on the age when the Medigap policy is purchased - Attained-age-rated Premium based on current age (age attained), so premium increases with age

18 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 18 Costs Part C (Medicare Advantaged): Premium  Substitute for Medicare Part A & B  When selected, Medigap Part B premium (and Part A if any) paid directly to the insurance company  There may be an additional premium cost

19 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 19 Costs File Individual Tax Return File Joint Tax Return Add the following amount to your Part D premium (Monthly) $85,000 or below$170,000 or below$0.00 $85,001 – $107,000$170,001 – $214,000$12.70 $107,001 – $160,000$214,001 – $320,000$32.80 $160,001 – $214,000$320,001 – $428,000$52.80 Above $214,000Above $428,000$72.90 Part D (Prescription Drug Plans): Premium  Premiums set for policy offered  If income above certain limit, an income-related adjustment amount is paid in addition to the premium  There may be an additional premium cost MAGI from 2011 Tax Return

20 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 20 Costs Part D – “Donut Hole”  Coverage gap  You pay full amount in the “donut hole”  Between $3,310 and $4,850 total retail prescription costs  Assistance for those who reach the donut hole in 2016 – 55 percent discount on brand-name drugs – 42 percent discount on generics

21 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 21 Enrollment Medicare Parts A and B:  Seven-month enrollment period – Starts three months before the month they reach 65; ends three months after the month they turn 65  General enrollment period – January 1 – March 31 annually  Open enrollment period – October 15 – December 7 annually  Special enrollment period - If covered under a group health plan based on current job  Medicare Part B – Must wait for next general enrollment period if not enrolled initially Enroll by:  Visiting ssa.gov  Calling 800-772-1213 to make an appointment

22 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 22 Resources Center for Medicare & Medicaid Services (CMS) Phone: 800-633-4227 Web: www.medicare.gov Social Security Administration (SSA) Phone: 800-772-1213 Web: www.socialsecurity.gov State Health Insurance Assistance Program (SHIP) www.medicare.gov/contacts Eldercare Locator www.eldercare.gov

23 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 23 Global Investment Management I Asset Allocation Expertise I Retirement Leadership Thank You

24 Global Investment Management I Asset Allocation Expertise I Retirement Leadership 24 The content of this presentation is based upon reliable source material and is believed to be correct as of the time of creation; however is subject to change at any time without warning. Investors should consider consulting with their tax professionals prior to making decisions due to their unique circumstances.. ​The subject matter in this communication is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. Principal Funds are distributed by Principal Funds Distributor, Inc. MM5944-05 | 12/2015 | t15120702xi ©2016 Principal Financial Services, Inc.

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