For the vast majority of retirees, Medicare is an essential element for getting healthcare during retirement. But for those with significant wealth, living in a healthcare world that now includes the option of concierge medicine, is it even worth the effort to explore the ins and outs of Medicare and all the associated options? Read on, and then you be the judge.
A Medicare Primer
First, it’s important to understand what Medicare is. Basically, it’s a program that provides health insurance for those 65 and older. It also covers younger people with disabilities and others with specific conditions such as end-stage renal disease. Medicare has four parts: Part A (hospital benefits), Part B (outpatient and physician benefits), Part C (Medicare Advantage Plan), and part D (prescription drug insurance coverage).
Medicare Part A covers inpatient hospital and skilled nursing facility care, home care, hospice care, as well as outpatient care. Part B of Medicare provides outpatient medical services like doctor’s visits and preventive services. It also covers durable medical equipment and some vaccines. Private insurance companies offer Part C of Medicare as an alternative to Parts A and B, while prescription drugs are covered by Part D.1
This is, of course, a very basic intro to Medicare. If you are nearing age 65, you can expect more than your share of Medicare-related information (and advertising, for that matter) coming your way. If you work with a financial advisor, they should be well versed in explaining the options to you in a way that would integrate with your overall financial and retirement planning.
How Medicare is Funded
The primary funding for Medicare comes from two trust funds held by the U.S. Treasury. These funds are what fund Part A and Part D of the program. But, there are other ways Medicare is funded, such as the money individuals pay when they pay premiums and copays for Medicare.
Part A of Medicare is mostly funded through payroll taxes and the FICA (Federal Insurance Contributions Act). In other words, that lifetime of taxes that turned your gross pay into the much smaller net pay in your paychecks: a significant portion of that money went toward the Medicare benefits that become available during retirement. Part B is funded with general government funds and premiums. The trust funds also help fund Medicare Advantage plans, which are offered to beneficiaries as options.
Is Medicare for Everyone?
As you think back to all that you’ve paid into Medicare over the years, you may wonder what you’ll get out of it. But consider this: the average retirement now stretches out to thirty years, so receiving benefits from Medicare over that time span can really add up.
Now, no matter which Medicare plan you choose, it’s important to remember that Medicare is not a one-size-fits-all program. That’s why there are so many different plans, and that’s also why it’s so important to be proactive about making informed decisions about your coverage. You will want to make sure you’re maximizing your benefits while, if possible, saving money as well.
Medicare choices seem like solely personal ones, but there’s more to it than that. It is, of course, part of the wider social support network set up alongside Social Security, but focused on health. Without the Medicare program, it’s likely that the quality of health of millions of aging Americans would drop significantly. The direct and indirect costs of care would probably increase and, as a result, impact the economy in negative ways.2 As mentioned above, Medicare spending also helps those under 65 with certain disabilities. So, even if some may feel like Medicare wouldn’t make a noticeable difference in their financial situation during retirement, it still matters to others. And, as financial advisors, we think most retirees should seriously consider their Medicare options and make sure they fit with their retirement planning goals.
1 “Get Started with Medicare,” https://www.medicare.gov/basics/get-started-with-medicare
Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at jlbainbridge.com and https://adviserinfo.sec.gov/firm/summary/108058.
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