Making the move from private, employer-provided health insurance to Medicare can be a daunting task. First, there is the new lexicon: Medicare Advantage, Medicare Part B, Medicare Part D, Medigap – what do they all mean? Then there’s the fear. After all, your health care decisions at this pivotal time can affect your out-of-pocket medical costs for the rest of your life and determine which doctors and other medical professionals you can see.
It is a lot of pressure. But with some research and careful consideration, you can find a Medicare plan that works for you. Here are some steps to help make the right choice for your health and budget needs.
How to Pick a Medicare Plan
Check your timing
According to Diane Omdahl, co-founder and president of 65 Incorporated, a Medicare education company, most people need to enroll during the initial enrollment period, which is the seven months surrounding one’s 65th birthday – including the three months before your birthday month and the three months after. For those receiving Social Security payments, you’ll automatically be enrolled in Medicare parts A and B when you turn 65.
Patients may be responsible for late enrollment penalties and lapses in coverage if they neither apply for Medicare during this period nor qualify for a special enrollment period. Special enrollment periods allow people to enroll outside of their 65th birthday window following unplanned events, such as job loss.
But for those still working, there’s often no need to enroll.
Omdahl points out that people still working at 65 or over 65 make the most mistakes during Medicare enrollment. “There is a perception that you must enroll when you turn 65. That is true except with people still covered by an employer plan,” she says. Federal law states that an employer group health plan (sponsored by a company with 20 or more employees) can be the primary carrier, regardless of age.
If you work for a company that employs fewer than 20 people, you can wait until you stop working to enroll in Part B. If you don’t have to pay a premium for Part A, there’s no reason to wait to sign up for it. Your insurance through your employer will pay first and then Part A will pick up remaining expenses for eligible hospitalization costs while you are enrolled in both plans. The same applies regarding the company size of your spouse if you are insured through them. If you or your spouse are employed and insured by a company with fewer than 20 employees, you’ll enter a special enrollment period when you retire or otherwise cease to be covered by the employer. You will be given eight months after losing your job-based coverage to enroll in Medicare without having to pay a penalty. For those already enrolled, the annual open enrollment period runs from October 15 until December 7 each year and is the best time to consider switching plans or adding coverage. Your coverage will begin on January 1, regardless of when you sign up during this period. During this time, you might:
- Switch from original Medicare to a Medicare Advantage plan.
- Join, drop or switch to another Medicare Advantage plan (or add or drop prescription drug coverage.
- Join a Medicare prescription drug plan if you are in Original Medicare
- Switch from one Medicare prescription drug plan to another if you are in Original Medicare
Learn about your options
There are two types of Medicare coverage: original Medicare and Medicare Advantage. According to Medicare.gov, original Medicare is a government-provided, fee-for-service plan that is made up of two parts: Medicare Part A is hospital insurance, and Medicare Part B is medical insurance.
After you pay a deductible, Medicare pays its share of the approved amount, and you pay your share through coinsurance and deductibles. Prescription drug coverage requires signing up for Medicare Part D, with an additional premium, if you opt for original Medicare – Parts A and B. There are also supplemental policies, known as Medigap policies, which can help pay your share of out-of-pocket costs in Original Medicare such as co-payments, deductibles and other out-of-pocket expenses. Medigap policies do not help to pay for anything not covered by original Medicare, such as dental or vision care. Medicare Advantage is a plan offered by a private insurance company that contracts with Medicare. These plans include parts A and B coverage. They also typically include prescription drug coverage and may offer vision, dental and other services.
Look closely at prescription drug coverage
When researching plans, keep all of your current medications handy. “I find that when people call us, they often don’t have their medication names, dosages or frequencies,” says Tatiana Fassieux, a training and education specialist for California Health Advocates, a Medicare advocacy organization. And every year, plans change where prescription drugs are placed in their payment tiers and which pharmacies they work with to offer the most affordable prices. Check your plan’s formulary carefully each year to see what may have changed.
“Don’t be complacent,” Fassieux says. “If a person doesn’t proactively review prescription drug coverage, or in the case of a Medicare Advantage plan — the entire benefits package, in the end, it can cost them hundreds if not thousands of dollars.” Another common fallacy is that part D plans with the highest premiums will cover the most prescription medications – this isn’t necessarily true.
Pick your plan
“If you are new to Medicare, your first decision is a simple fork in the road,” says Andrew Shea, Executive Adviser at Walter Alan & Associates, a boutique consultancy. “Do you want original Medicare or an Advantage plan? They are very different plans. Each has pros and cons.”
Of course, the monthly premium is one important factor when choosing a plan. But there is much more to it than that, according to 65 Incorporated:
- Other costs: What are the out-of-pocket costs, like copays and deductibles?
- Coverage: Is there coverage for all your physicians, medications and required services?
- Quality: How does CMS rate plans in terms of patient experience, safety of care and other important factors?
You can find out how Medicare Advantage plans, Medicare prescription drug plans and Medigap policies are rated on the medicare.gov website.
Another primary consideration is future possibilities. What if you found out that you have a major illness next year – would the plan you are considering still work well for you?