For many, your 65th birthday will hardly pass unnoticed. Months in advance, insurance companies will fill your mailbox with ads for medical policies in anticipation of your enrollment in Medicare. Although birthday greetings from loved ones are preferable, for some, the shift from higher cost individual policies to price controlled Medicare (commonly $330/month) can provide welcomed cost savings – not a bad birthday gift!
In order to take advantage of these savings, Medicare eligible individuals will need to enroll in the program. Therefore, it is important to remember that the 7 month Medicare enrollment period begins 3 months before your 65th birthday. But, the number of choices can make your head spin and the program itself can seem much more confusing than it should be. The purpose of this article is to assist you in streamlining your decision making process.
Step 1 – Traditional Medicare or Medicare Advantage
Traditional Medicare is administered by the U.S. Government and includes Part A for hospitals and Part B for general medical care. Patients with Traditional Medicare can also purchase a Medigap or Supplement policy and a Part D Prescription Plan.
Also available are Medicare Advantage Plans, which are designed to insure all medical expenses including prescriptions. Medicare Advantage Plans are offered by private insurance companies and function much like a company group plan with HMO (Health Maintenance Organizations) or PPO (Preferred Provider Organizations) options. Only one such policy is needed.
Generally speaking, Traditional Medicare (including supplemental plans and prescriptions) has higher monthly premiums than Medicare Advantage. However, Medicare Advantage patients can face large deductible and co-insurance payments if hospitalized or undergoing an out-patient procedure. Co-pays are also required under Medicare Advantage. Pay up front with Traditional Medicare or pay-as-you-go for Medicare Advantage.
A common draw to the more popular Traditional Medicare is the “no hassle” approach to healthcare. The patient can go to any doctor or hospital in the country that accepts Medicare (most do) without worrying about networks or referrals. Medicare Advantage patients must deal with both and is less desirable for individuals who split time between two residences.
Step 2 – Selecting a Medicare Supplement Policy – Traditional Medicare
Traditional Medicare Parts A and B are designed with deductibles and co-insurance. Medicare Supplement Policies were created to insure these costs and close any “gaps” in coverage. Thus, Supplement Policies are also called Medigap policies. Supplements are offered by private insurance companies.
Medicare Supplements have been standardized by the government and categorized into 10 policy designs, named after a letter – A through N, except E, G, and J which have been retired. To confuse matters more, one policy is only slightly different than the next and the cost difference is minimal. Most patients select Plan F because it is the most comprehensive.
Although policy benefits are standardized (Plan F is always Plan F), pricing can vary. Some carriers charge more at younger ages and moderate the premium increases as the years progress. Others price more competitively upon application but have a history of greater increases.
Medical underwriting is required to change from one insurance company to another. Therefore, most patients stay with the same provider.
Step 3 – Shopping for a Part D Prescription Plan – Traditional Medicare
Selecting a Part D plan may be the most difficult part of Medicare enrollment given the number of choices available which can exceed 30 plans in a given zip code. Part D plans should be customized to the patient according to their medications, zip code, and pharmacy preference. Medicare.gov offers a search program to locate plans in your area and even ranks the plans by out-of-pocket cost based on the medications inputted.
Costs will likely include a monthly premium, deductible, co-pays, and cost sharing during the “donut hole,” in other words, the coverage gap after the patient and drug plan have spent $2,960 on covered medications until catastrophic coverage kicks in after the patient is out-of-pocket $4,700.
The Part D plan selection must be monitored as medications and insurance company formularies change. If a change is warranted, a new policy can be acquired without underwriting during the annual open enrollment period starting in October.
If you have questions about Medicare enrollment or your current Medicare coverage, please contact your Moneta Family CFO. And Happy Birthday!