Employers and Employees Can Benefit From Understanding Medicare
Medicare only covers several types of medical costs for retirees, not including premiums and deductibles. Experts say it’s time for both groups to learn what that means.
Many people younger than 65 who are preparing for retirement think Medicare will cover their health care expenses once they retire. But that’s not always the case.
Medicare—which is administered by the Centers for Medicare & Medicaid Services (CMS) and is part of the Department of Health and Human Services (HHS)—is a national health insurance program that began in 1966 as a solution to provide health insurance coverage for those 65 and older.
While the program covers several types of medical costs, it doesn’t include everything. Additionally, experts note, retirees are responsible for paying premiums and deductibles. This could result in retirees paying hundreds of dollars a month just to have the benefit.
“The premiums aren’t always zero dollars,” says John Barkett, senior director of policy affairs for Willis Towers Watson in Washington, D.C. “For example, you have to pay a Medicare Part B premium, which varies depending on your income, but for most people is about $140 a month.
“And that’s just when you become eligible for Medicare,” he adds.
Employers can step in to educate their employee base—and especially those nearing retirement—on the elements of Medicare coverage and what they will likely pay. Sources say providing education on the basics of Medicare terminology—such as Part A, B, C and D— and on additional savings benefits such as Medicare Advantage and Medicare Savings Programs (MSPs) can help participants map out their future health care costs.
“It really is important to start at the beginning,” notes James Jiang, the co-founder and CEO of Spark Advisors, a brokerage firm that partners with independent advisers to serve those navigating retirement benefits and Medicare. “Make sure that people have basic awareness of Medicare and all the various programs available.”
Experts recommend plan sponsors and their employees learn the ABCs of Medicare. According to eHealth Insurance, a private online marketplace for health insurance, Medicare Part A largely covers hospital expenses including inpatient hospital care, nursing facility care, hospice services and limited home health care. Medicare Part B, on the other hand, provides medical insurance and covers outpatient care, mental health services, lab tests, doctor visits, medical equipment and preventative services.
Aetna Medicare solutions provides a downloadable chart highlighting what Medicare Parts A and B (together, also known as Original Medicare) cover.
Medicare Advantage Plans, also known as Part C, are offered by private companies approved by Medicare. As Aetna’s research explains, these plans are serviced by private insurance companies and often include dental, vision or hearing services, prescription drug coverage and/or fitness club memberships. A Medicare Advantage plan offers at least the same benefits as Parts A and B.
Similar to Medicare Advantage, Part D is also offered through a network of private insurance companies approved by Medicare and is primarily used to fund a retiree’s prescription drug plan.
Medicare health care coverage is complex, and it’s even more convoluted for the average pre-or-current-retiree. In fact, it’s fairly common for an employee who is approaching age 65 to contact their employer and ask questions about Medicare, Barkett notes, adding that plan sponsors need to be prepared for that.
“Understand the rules and provide every source for employees to get more information on what they should be considering while they’re still working and when they are approaching Medicare age,” he says.
Jiang adds that plan sponsors should consider speaking with a financial adviser or providing a Medicare expert to host on-site or virtual meetings. Such experts can answer questions on when to claim Medicare benefits and whether enrolling into Medicare Advantage or a Supplemental Savings Plan is the right move for a particular employee.
“There is a huge advantage in bringing in a trusted adviser and someone who is really working for the employee,” he says. “There is an advantage to working with an adviser who is building a long-term relationship with the employee and is committed to doing basic education and ensuring these issues are top of mind for people as they enter Medicare eligibility.”