Let’s face it – Medicare can be confusing. Figuring out when to enroll, what to enroll in and what coverage will be best for you can be daunting. To help you or a loved one navigate Medicare, I’ve listed seven essential things you need to know.
Medicare Comes with a Cost
Medicare coverage has several different parts.
- Part A pays for hospital services. It’s free if either you or your spouse paid Medicare payroll taxes for at least ten years. (People who aren’t eligible for free Part A can pay a monthly premium of several hundred dollars.)
- Part B covers doctor visits and outpatient services. For most people in 2019, the monthly cost is $135.50.
- Part D covers prescription drug costs. Its monthly cost varies depending on which plan you choose; the average Part D premium is about $33 a month for 2019.
On top of the premiums, Medicare has co-payments, deductibles, and other out-of-pocket costs.
You Can Fill the Gap
Many people on traditional Medicare sign up for a Medigap supplemental insurance plan. These plans from private insurance companies help cover deductibles, co-payments and other gaps.
The letters A through N identify the different Medigap policies. Each policy that goes by the same letter must offer the same basic benefits. Usually the only difference between same-letter policies is the cost. Plan F is the most popular policy because of its comprehensive coverage.
The good news is that you can switch Medigap plans at any time. The bad news: you could be charged more or denied coverage based on your health (unless within the first six months of first signing up for Part B.)
There Is an All-in-One Option
You can choose to sign up for traditional Medicare — Parts A, B and D, and a supplemental Medigap policy. An alternative is Medicare Advantage, also called Part C.
These plans provide medical and prescription drug coverage through private insurance companies. The monthly cost (in addition to the Part B premium) varies depending on which plan you choose.
A few things to note about these plans:
- You don’t need to sign up for Part D or buy a Medigap policy.
- You’ll be subject to co-payments, deductibles and other out-of-pocket costs like standard Medicare.
- The total costs tend to be lower than for traditional Medicare. Often, Advantage policies charge lower premiums but have higher cost-sharing.
- You may be more limited in your choice of providers than with traditional Medicare.
High Incomers Pay More
With traditional Medicare, if your income is above a certain threshold you’ll pay more for Parts B and D.
You will pay more in 2019 if your modified adjusted gross income (MAGI) in 2017 was more than $85,000 (single) or $170,000 (married filing jointly). Your Part B premium will be between $189.60 and $460.50/month, depending on your MAGI.
You’ll also pay extra each month for Part D coverage, from $13 to $74.80 on top of your regular premiums.
When to Sign Up
You are eligible for Medicare when you turn 65.
If you already collect Social Security, Parts A and B begin automatically. You can choose to turn down Part B, since it has a monthly cost. If you keep it, the cost is deducted from your Social Security amount.
If you haven’t started taking Social Security, you have to sign yourself up for Parts A and B. The initial enrollment period starts three months before the month you turn 65 and ends three months after your birthday month. To ensure coverage starts by the time you turn 65, sign up in the first three months.
If you have coverage through an employer (through your employer or a spouse’s), you may be able to delay signing up for Medicare. Pay attention to the rules and sign up for Medicare within eight months of losing your employer’s coverage! Otherwise, you’ll face significant penalties when you do enroll.
A Quartet of Enrollment Periods
There are several enrollment periods other than the seven-month initial enrollment period:
- Missed the Part B initial enrollment period (and don’t have coverage through an employer). You can sign up for Part B during the general enrollment period from January 1 to March 31. Your coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B.
- Still covered by an employer’s plan. You can sign up later without penalty during a special enrollment period. You have eight months after losing that employer coverage, even if you have retiree health benefits or COBRA!
- Missed your special enrollment period. You will need to wait to the general enrollment period to sign up.
- Open enrollment. From October 15 to December 7 every year, you can change Part D plans or Medicare Advantage plans for the following year. (People can now change Medicare Advantage plans outside of open enrollment. They need to switch into a plan given a five-star quality rating by the government.)
You Get More Free Preventive Services
Medicare beneficiaries can receive many free preventive services, including:
- A free annual “wellness” visit to develop or update a personalized prevention plan;
- Free cardiovascular screening every five years;
- Screenings for cervical, prostate and colorectal cancers;
- Annual mammograms; and
- Annual flu shots.
Medicare coverage is loved by most of my clients. But like most health insurance, you need to understand your options and re-evaluate your coverage each year. That way, you keep the best coverage for your life situation right now!