How to Make the Most of Medicare


It's hard enough for retirees to juggle expenses without that regular paycheck they've been used to their whole lives. The financial challenges of retirement are even greater when you consider the increasing costs of health care.

Fortunately, the government's Medicare program offers help covering medical costs, and five years ago it added a prescription drug option to its coverage. Because prescription costs are such a big expense in retirement, if you're eligible for it, Medicare Part D can make a big difference in your pocketbook -- and help ensure your financial security throughout your golden years.

Here's a brief guide to your options and tips on how to get the most out of your coverage.

How Medicare Part D Works

As confusing as government programs can be, the idea behind Medicare drug coverage is simple. You can choose from a range of drug plans offered by different providers. Most of these providers charge a monthly or annual premium for their plans. Plans differ in how much they'll pay for drugs, which particular drugs they cover, and how much you'll have to pay out-of-pocket. Adding to the confusion, not all plans are available nationwide, so residents of a particular state may get shut out of a given plan.

What to Consider When Picking a Plan

With deadlines to pick a plan and penalties if you end up changing your mind, you need to be smart about getting it right the first time. Here are some things to keep in mind so you can do just that.

1. Consider your future needs.

On one hand, you want to pick a plan that will cover everything you need. Of course, it's impossible to know in advance what drugs you might need in the future. But if you look at what prescriptions you have now, it's a lot easier to figure out which plan will pay for them at the lowest cost.

2. Don't overpay for what you'll use.

At the same time, you also need to take into account the premiums you're paying. Sure, an ideal plan might pay for all of your prescription drugs. But if you have to pay hundreds of dollars in extra premiums for complete coverage, you could end up paying more in total than you would under a less-inclusive plan.

3. Use available tools to help you choose.

Medicare's website offers valuable information about prescription drug coverage, including a number of calculators and other tools to help you pick a plan. You can enter a list of your prescriptions, and the website will evaluate your plan options for you. Also, drug stores like Walgreens (WAG), CVS Caremark (CVS), and Rite Aid (RAD) have similar tools to help you evaluate plans and how your needs fit with them.

4. Get help if you can't afford coverage.

If you don't have much money, you might qualify for assistance for your drug coverage. Seniors with extremely limited incomes and financial resources may be eligible for low-income assistance with their prescription drug plan. Current income limits are $16,335 for unmarried seniors and $22,065 for married seniors who live together. Also, to be eligible, you can have no more than $12,640 in financial resources ($25,260 for married couples). But be sure to check the website, as certain types of income and assets don't count toward those totals -- in particular, your home.

Because making these calculations can get complicated, many people qualify for these savings and don't even know it. So before you conclude that you're not eligible, consider using the online application to determine your eligibility. You could end up saving an estimated $4,000 per year in prescription costs.

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Motley Fool contributor Dan Caplinger hopes Medicare will still be around by the time he needs it. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article.