When you are planning ahead for retirement, you should be aware of what you can expect from the Medicare program. Sometimes people overestimate the capabilities of the program, and this can lead to difficulties late in your life.
To qualify for Medicare, you must accumulate at least 40 retirement credits. You earn retirement credits while you are earning income and paying taxes. Part of what you pay goes toward future Medicare coverage.
During 2014, you earn one retirement credit for every $1200 that you earn. The maximum you can accumulate in a single year is four retirement credits.
At the present time, the age of Medicare eligibility is 65.
There are four parts to Medicare. There is Medicare Part A, and this is the portion of the program that covers hospitalization. Clearly, Medicare Part A is going to be of great assistance if you spend time in a hospital, and there are no monthly premiums to pay.
However, there is a deductible. In 2014, the deductible is $1216 for each benefit period, and there can be co-payments for longer hospital stays.
Medicare Part B pays for visits to doctors and outpatient care. To obtain Medicare Part B coverage, you must pay a monthly premium. The exact amount of the premium that you pay depends on your income level. During the current calendar year, most people pay $104.90 per month. This is typically deducted from your Social Security check.
Medicare Part C allows you to participate in a Medicare Advantage Plan. If you go this route, you pay a private company that has a contract with the Medicare program to take care of your Part A and Part B needs.
Medicare Part D is a prescription drug plan, and you must pay a premium to obtain coverage.
As you can see, there are some significant out-of-pocket expenses that you must pay when you have Medicare coverage.
Long-Term Care Costs
Most of the senior citizens in the country are eventually going to need long-term care. This care is extremely expensive, with the average annual cost for a private room in a nursing home exceeding $90,000. People often spend multiple years receiving long-term care.
The Medicare program will not pay for long-term care costs. It will cover up to 100 days of convalescent care, but it will not pay for custodial care.
This is a very big gap that you should be aware of when you are calculating your retirement budget.
Many seniors who require long-term care seek Medicaid coverage, because Medicaid will pay for long-term care. Though it is a need-based program, you could give assets to your loved ones before you apply.
However, you should plan ahead because your eligibility can be delayed if you give away assets within five years of applying.
Free Elder Law Consultation
If you would like to discuss Medicare, Medicaid, and long-term care with a licensed elder law attorney, contact us through this link to set up a free consultation: Charlotte NC Medicaid Planning.