Health Care Options in Retirement

For Americans turning 65, signing up for Medicare is a rite of passage. It's also the entrance to a labyrinth of choices and tradeoffs. What follows is a guide that can help you untangle the way through it.

Medicare's Basics

Medicare is the nation's largest health insurance program, covering millions of Americans. Generally speaking, if you are eligible for Social Security or Railroad Retirement Board benefits, or you've paid Medicare taxes while working in a government job, you are eligible for Medicare benefits when you turn 65, even if you haven't yet retired. Those benefits come in one or more of these packages:

Premiums for Parts B and D vary depending on your income level and coverage choices. While typical costs are about $100 per month for each part, high income people with expansive prescription coverage may pay as much as $500 to $600 per month. In addition to Medicare, many people also sign up for in private insurance policies called Medigap plans to help pay for any deductibles and copayments they might incur. Medigap policies may cost about $100 to $200 per month, but the normal out of pocket costs for a significant illness or injury can be several thousand dollars. Also, many union and employer-sponsored retiree health programs are essentially mechanisms to finance Part B, Part D, and Medigap coverage.

Non-Medicare Coverage Issues

People who work past age 65 may have employer-sponsored health insurance in addition to their Medicare coverage. In this case, you may be asked to sign up for Part A while using your employer coverage to substitute for Parts B and D. If you do opt for employer coverage at age 65, you may not be penalized if you later enroll for the optional parts of Medicare when your employer coverage ends. Some people over age 65 may also be covered by a spouse's employer-sponsored health plan. The choices in this case would be comparable to those for someone covered by their own employer's plan.

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