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Don't miss your Medicare enrollment window

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For most people who reach age 65 and leave full-time employment, a critical decision about their health insurance awaits. With ever-fewer workers getting employer-sponsored health insurance in retirement these days, more of them depend on Medicare.

But if you don't sign up for Medicare during the required enrollment windows, you can face life-long penalties and costly coverage gaps.Here's what you need to know.

Medicare comes in two parts

Medicare, the government-sponsored health insurance program for those age 65 and older is the primary source of most retirees' health coverage. For that group, Medicare covers over 60 percent of medical expenses, compared to less than 20 percent that private insurance covers. Most people are automatically enrolled at age 65 in Medicare's hospital insurance component, also called Medicare Part A. It comes at no cost as long as you or your spouse paid Medicare taxes during your working years.

The medical insurance component under Medicare is called Part B, and it covers the services of your doctor, outpatient hospital care, physical and occupational therapy and even some home health care. But unlike Medicare Part A, Part B isn't free. For 2019, monthly premiums can range from about $135 to as much as $325 for singles earning over $500,000 and up to $460 for marrieds earning over $750,000.

But here's the catch: You must enroll during your "special enrollment period" or "initial enrollment period." If you delay signing up for Medicare when you're initially eligible to do so, you cold incur a delayed enrollment penalty of 10 percent for every 12 months you were eligible to enroll in Medicare Part B but didn't.

If you delay enrolling for two years, you would pay 20 percent more per month for the rest of your life for Part B coverage.

Enrollment windows

For individuals 65 and older who are covered under a creditable health insurance plan (which generally includes most employer health plans), the penalty-free special enrollment period for Medicare Part B begins when that coverage ends and extends for up to eight months afterward.

If you aren't covered by a creditable health plan, the Part B initial enrollment period is a seven-month window beginning three months before your 65th birthday, includes your birth month and extends for the following three months.

Also a general enrollment window runs from Jan. 1 through March 31 each year, and your coverage then begins on July 1.

Two important options

Because Medicare includes reimbursement limits and co-payments, expect to pay significant out-of-pocket health care costs when it's your only health insurance. These costs can be a significant financial burden.

For this reason, many people also purchase a supplemental, or Medigap, policy. This is additional coverage that fills in the gaps. Medigap policies may offer more choices as to where you get your medical care, but you may pay a higher premium for this. You'll also have to manage more than one policy and ID card.

Another option to consider is a Medicare Advantage, or Managed Care Plan. This is also referred to as a Medicare Part C plan. It's an all-in-one policy that combines both Medicare Part A and B. It replaces your Medicare plan and often comes with additional prescription drug coverage as well.

Check out the federal government's Medicare site to help you find plans and compare the costs of coverage that best suits your needs. Also check out plans available from groups like AARP, which may provide lower costs and additional benefits.

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