Why do I need to plan ahead for retirement health care?

Health insurance helps protect you against high medical costs that could arise if you get sick or experience an accident. Though you may not be sick now, paying for health insurance protects you later if you or a member of your family get sick. There is no way to completely predict who will get sick, when they will need care, and how much that care will cost. Health insurance works by pooling large numbers of people together and then spreading the risk for high costs among everyone. That way, if you pay some money now, you can get benefits later if you need them.

Of course, health insurance can have major limitations. Most policies cover a defined range of treatments, tests, and doctors' visits. If you need a treatment or drug that is not covered, you could pay for it yourself. Most insurance also charges you more than just the premium. For example, you are likely to be required to pay copayments (fixed per-visit or per-prescription costs), deductibles (dollar thresholds you must pay before coverage kicks in), or other payments.

Policies may also limit the amount of covered care you can receive, the number of times you can go to a doctor in a year, or the total dollar amount for care. They may require you to pay a large portion of costs even after you've paid your premiums.

What health care costs does Medicare cover?

Medicare covers medically necessary doctor visits and hospitals stays for disabled people and anyone over 65 years of age. Medicare also covers health care costs and dialysis for anyone with end-stage renal disease.

Medicare Part A is an insurance for hospital stays and limited stays in skilled nursing homes. For most people there is no monthly premium for Part A because everyone pays for it out of their taxes. Generally, Part A covers care after you pay about $1,000 in deductibles for the first 60 days in the hospital. There is also a $250-per-day co-insurance for days 61-90 and a $500-per day coinsurance for days 91-150. Part A generally pays all costs if you spend more than 150 days in the hospital in a given year.

Medicare Part B covers outpatient Medicare care and doctors' visits. The plan generally covers 80% costs, while the patient pays 20%. The standard Part B premium is $93.50 per month, though this can vary according to the beneficiary's income. Beneficiaries are also responsible for a $131-per-year Part B deductible.

Part D is Medicare's insurance plan for prescription drugs. Though funded by a mixture of taxpayer money and beneficiary fees, Part D plans are offered by private insurance companies. There is a wide range of plans available with different benefit structures. Under Part D's "standard" benefit for middle class beneficiaries, the government pays 75% of all drug costs up to $2,400 in any single year, after monthly premiums and a $265 deductible are met. But coverage then stops until your drug costs reach $5,451. That coverage gap is known as Part D's "doughnut hole."

What are my options for Medicare insurance plans in my state?

Part A and B plans are standard everywhere in the country. But different states and even different counties vary in what Medicare Advantage and Medicare Part D prescription plans are offered.

The following web page lets you search Medicare plans in your state and compare them:
http://www.Medicare.gov/MPPF/Include/DataSection/Questions/ListPlanByState.asp

Can I change Medicare plans once I have enrolled?

Yes. For Medicare Advantage plans, you are allowed to change during open enrollment season, which is each year from Nov. 15 to Dec. 31. You may also change between Jan. 1 and March 31 if your Medicare Advantage plan does not include prescription drug coverage and you already have drug coverage through Part D.

For Part D plans, you may change plans during the open enrollment period each year between Nov. 15 and Dec. 31. If you do so, your new coverage takes effect on the following Jan. 1. Many vary from state to state, and you are also allowed to switch plans if you move out of your existing plan's service area. People who qualify for Part D's low-income benefits are allowed to change plans at any time. 

How can I pay for long-term care?

There are many ways to pay for long-term care. But the key is to be prepared. Families that can afford it can pay for long-term care with their own money. Purchasing long-term care insurance, especially while you're young, helps cover care later and can go a long way in protecting your and your family's assets. Veterans' benefits can pay for some long-term care costs, as can Medicaid, for low-income people.

This link connects to a chart listing some pros and cons of the different ways to pay for long-term care: http://www.Medicare.gov/LongTermCare/Static/PayingOverview.asp.

When am I eligible for the prescription drug plan?

All disabled or over-65 Medicare beneficiaries are eligible for Part D prescription drug benefits. You can sign up for a Part D plan up to three months before you turn 65. Benefits start on your 65th birthday. If you're disabled, you can start collecting Part D benefits after two years of qualified disabled status.

Does a Medigap policy cover me and my spouse?

No. Medigap policies only cover one policy holder. You and your spouse must purchase separate policies.