Begun in 1965, Medicare has grown to become the most important provider of health insurance to older Americans. Although various media reports have discussed the potential long-term insolvency of Medicare, the program's popularity nearly guarantees that the government will find a way to continue to fund the program.
Health care expenses are one of the least predictable and potentially most expensive parts of retirement planning. Medicare does wonders to introduce some structure to the health care maze. Here are the four parts of Medicare:
Medicare Part A
Medicare Part A is for hospital expenses. It is provided at no additional cost to retirees who have paid at least 10 years into the system.
Medicare Part B
Part B of Medicare covers doctors visits, lab work, and outpatient services such as physical therapy. To receive Medicare Part B coverage, you must be eligible and pay a monthly premium. The amount of the premium varies based on your income, so the more you make during retirement, the higher your Medicare Part B premium.
Medicare Part C
Medicare Part C is commonly known as Medicare Advantage. At a high level, Part C provides an alternative to Parts A and B and usually eliminates the need for Medigap insurance. (Medigap insurance is a commonly selected option for those with Parts A and B. Medigap covers the holes in Medicare coverage).
Medicare Part D
Medicare Part D is the newest part. Established in 2003, Medicare Part D covers prescription drugs for those who choose to purchase this part through the payment of monthly premiums. To enroll in Part D, you must have either Parts A and B or Part C. Like all insurance policies, there are variations in terms of deductible levels and premium costs so it pays to shop around before making your Part D choice.