Medicare costs jumped 3.4 percent last year. Drug prices gained a whopping 11 percent. Medicare parts A&B does not cover prescriptions and the gap between what it does cover and your out of pocket expenses could break you.

Last week, while walking Titus, our chocolate Lab, I bumped into a fellow dog walker. I'll call him Abe. Abe is retired and on a tight budget. In an effort to save money, he elected not to acquire drug prescription insurance called Medicare Part D.

"After all," he explained, I'm in my late seventies and aside from aspirin and the occasional antibiotic for the flu, I've been drug-free for as far back as I can remember." Until now — Abe has just been diagnosed with diabetes and is required to take self-injected drugs several times a week in his stomach for the illness. That works out to $39.95 a day for the rest of his life.  

It could happen to you when you least expect it and can't afford it. Medicare Part D is offered by private insurance companies that are approved by Medicare. Every plan has what is called a "formulary." A formulary is simply a list of drugs each plan will cover. The insurer will charge you a premium per month and most have an annual deductible you must meet before the insurance kicks in.

You need to do your research because what drugs and how much you pay for it will vary from plan to plan. It's called a "tier" system where some insurers don't carry a specific drug or only the generic version of it. Others may reimburse you differently, depending on what tier your drug (s) of choice falls into. If you are already taking a prescription drug(s) you need to check for the best deal you can get among insurers. There's also the infamous "doughnut hole" that you must consider.

Medicare drug coverage plays a portion of your drug costs and you pay the rest. As your drug costs add up, you may have to pay more and more of the costs (the doughnut hole) up to a certain level ($4,950 in 2017). After that, you pay only 5 percent of your drug cost for the rest of the year and then it starts all over again.

As you might expect, people with higher incomes pay an extra amount every month for Medicare Part D. If you earn $85,000 or less ($170,000 for a couple), you pay whatever basic premium your plan charges. Over that, you could pay as low as $53.50 a month to as much as $294.60 a month, depending on your income level.

In most cases, if you owe this extra amount, Social Security will deduct it from your Social Security check. To determine your 2017 Medicare premiums, Social Security will normally look at your federal income tax return you filed in 2016 (for tax year 2015). If your income has gone down since then, which usually happens when one retires; you can request a new decision from Social Security.

In our next column, we will examine two additional forms of insurance that you should consider: Medigap Insurance Plans and Medicare Advantage. Both can assist you in covering the gap between what Medicare pays for and what you do.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Financial markets, under the new president, continue to react on an hour-by-hour basis to Donald Trump's latest electronic missives. That's no way to conduct business but it is what it is. At what point will traders begin to discount these tweets?

It will take some time, in my opinion, because there has been nothing quite like this in the history of the world. What makes it worse, as it turns out, some of the new president's statements have proven less than factual, while others have clarified the growing mountain of fake news that media outlets appear happy to broadcast. In the middle are the High Frequency Traders and the computer algorithm geeks who find themselves running from one end of the boat to the other as markets gyrate to the political tune of the day.

I have no sympathy for these boys. They have controlled well over 70 percent of the volume in stock markets for years. It was a game they controlled thoroughly. I suspect that may change because Trump's outbursts and actions are so unpredictable that programming computers to react to him is well-nigh impossible. Once enough money is lost in the attempt, traders will learn not to react to all these statements.

In the meantime, readers, we have the advantage. Although this week was chock full of volatility, those who remained invested did OK. Markets held their own moving marginally higher or lower versus last week's close. Part of the reason was better than expected non-farm payrolls, which came in at 227,000 jobs gained versus an expected 175,000.

Overall, U.S. job growth accelerated in January by 1.64 percent. That compares to a 1.5 percent rate in December, but what is even better, in my opinion, is that blue-collar wages jumped by 2.9 percent. That's one for the little guy! To be fair, former President Obama should get the credit for these good numbers, but Trump's blue-collar constituency will give the new president credit for the improvement. There may be some truth in that, since small business owners (who account for the lion's share of America's employment) have become decidedly more positive about the country's future under Trump.

For those who care, there was a lot to hate (or love) about the tweets of the new president this week. Health care (repeal of Obamacare), tax reform (Congress and Trump agree), Iran ("Put on notice"), Australia ("Dumb" refuges deal), Mexico ("Bad hombres") are but a few controversial areas he addressed.

The markets also had to contend with the social unrest brought about by last Friday's executive action on immigration. And let's not forget this week's Berkeley burnings on campus as well as several other university protests over everything Trump. Get used to it.

The most positive aspect of all of these protests and marches is that this nation is finally going to get some exercise. Do not expect this civil disobedience to wane anytime soon. As such, the volatility in the financial markets will continue. What is important, however, is that you do not get sucked into these emotional sell-offs.

You may feel good (or bad) that someone is expressing their outrage over the Trump presidency. You may even be involved in said-outrage but don't carry those feelings over to your retirement portfolios. Instead, try and focus on the economic facts of life. The economy appears to be improving and economists are predicting that 2017 should see a higher growth rate in GDP. Clearly, unemployment is falling, wages are gaining, and this quarter's earnings season is turning out to be better than expected. These are the variables that will determine your portfolio returns for 2017.

Your views on politics and social issues are your own. You may not like what's going on in this country, but as far as your stock market returns are concerned, you can cry all the way to the bank.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

More of us are signing up for Medicare every day. And like social security, there are plenty of unanswered questions for those of us who are beginning the process. There are plenty of places to seek answers, but how to separate facts from sales pitches from health insurance brokers is part of the problem. Here is a primer that may help you navigate these muddy waters.

Presidents as far back as Teddy Roosevelt in 1912 toyed with the idea of a government-sponsored health insurance program. Harry S. Truman and John F. Kennedy both tried and failed to get an act passed. But in 1965, under the administration of Lyndon B. Johnson, Medicare was finally passed.

You qualify for Medicare at age 65, or older, if you are a citizen or permanent legal resident who has lived in the U.S. for at least five years.  Here are the qualification rules: You (or your spouse) need to have worked long enough to qualify for Social Security or railroad retirement benefits, or worked as a government employee or retiree who may not have paid into Social Security, but has paid Medicare payroll taxes while working.

In addition, you qualify for Medicare if you are disabled and have received Social Security benefits for at least two years. A disability pension from the Railroad Retirement Board or Lou Gehrig's disease, permanent kidney failure, and a kidney transplant also counts toward Medicare benefits as long as you or your spouse have paid some Social Security taxes over a certain length of time.

Last year, nearly 165 million American workers were contributing to Medicare through payroll taxes and roughly 57 million people are receiving Medicare benefits, with 9.1 million of them disabled.

For those who don't know it, Medicare has two main parts: Medicare Part A, which is hospital insurance that helps pay for inpatient hospital care as well as short-term care in a skilled nursing facility. It will also partially cover in-home care and/or hospice care.

Medicare Part B is medical insurance that helps pay for outpatient care: things like doctor visits, tests, medical equipment, supplies and some home health services. Many preventive health services such as screening for cancer, heart disease and diabetes are free under Part B.

As long as you or your spouse paid Medicare taxes during your working life, you don't have to pay a monthly premium for "A," but you will have to pay some costs like co-payments, co-insurance and hospital deductibles. The Medicare system is based on benefit periods. For example, a hospital stay is a "benefit" that begins on the day you're admitted. It ends when you haven't received any inpatient care for 60 days.

You will need to pay a deductible of $1,316 (in 2017) for every benefit period. You pay nothing after that for up to 60 days, but for every day after that you remain in the hospital, you are charged a co-pay that starts at $329/day.

You do pay a monthly premium for Part B, which is based on your yearly income. For those filing a joint tax return of $170,000 or less ($85,000 or less as an individual) you will pay $134 a month. Your payments increase on a sliding scale with those who are making more than $428,000/year paying the top premium of $428.60/month ($214,000 or more as an individual). In addition, there is a $183 deductible you will pay for Part B in 2017.  After that, you will typically pay 20 percent of the cost of any medical care.

The bottom line here folks is that Medicare, contrary to many reader's impressions, is not free and costs can mount up quickly depending on your health problems. Remember too that there is no yearly limit on how much you might be required to pay. In my next column, I will explore two kinds of insurance that you can buy that will protect you from any gaps between your health care costs and your income.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.