How To Choose A Medicare Plan

What Is Medicare?

Medicare is a federal healthcare program that focuses on helping the elderly with healthcare costs. According to the Medicare site, the program focuses on assisting these three groups:

• People over the age of 65
• People younger than 65 who collect Social Security Disability Insurance
• People suffering from End Stage Renal Disease (some may be under 65)

Medicare was passed into law in the 1960s under the Social Security Administration. It’s funded partly by a payroll tax, partly by funding from the government, and partly by the people who get Medicare themselves through premiums and other payments.

The program is split up into four parts—A through D—that all cover various healthcare needs like hospital stays, visits to the doctor, prescriptions, and more.

As of 2017, the federal government spent more than $700 billion on Medicare—or about $14,500 on each person over the age of 65 in the United States. And this is just the average cost that is saved per elderly person. Each person then spends a varying amount of money out-of-pocket to cover remaining costs.

How to Choose A Medicare Plan

When it comes to settling in on a Medicare plan, the Medicare website suggests delving through these three main points:

Choose Between An Original Medicare Plan Or Medicare Advantage Plan

Though every question or decision you make with Medicare is important, the utmost important decision you make is what the base of your healthcare moving forward in your elderly life will look like. There are two options you can go with: an Original Medicare Plan or a Medicare Advantage Plan. Let’s discuss what these two are.

Original Medicare Plan

An Original Medicare Plan consists of one or two parts—A and B. They cover various medical costs like stays at hospitals, doctor visits, skilled nursing home care, and other benefits. You can add either Part A and/or B to your plan, but you will need to have both parts to acquire added benefits like a Medicare Advantage Plan or Medigap, which we’ll discuss later.

What are the Highlights of an Original Medicare Plan?

Part A

Every one of the 55 million-plus people who have Medicare have Part A. It covers medical costs that deal with hospital care, hospice care, nursing home care, skilled nursing home care, and more. To understand specifically what is covered by Part A, visit the Medicare website to check your plan once you acquire it.

While there is no premium (an advanced monthly payment whether you use the services or not), there is a $1,340 deductible (a threshold that must be met before insurance takes over payments) for hospital stays and other various coinsurance payments for lengthy stays.

Part B

This Part covers doctors’ visits, preventive care (flu shots and things that help you detect maladies at their early stages), “medically necessary services” (actions deemed necessary to “diagnose or treat your medical condition and that meet accepted standards of medical practice”), ambulance costs, certain medical equipment, and more. Given that Part B covers a wider range of services, you will be required to pay a premium.

For someone (or someone and a spouse) who make less than $85,000 (or $170,000 between the two), the premium is $134 per month for each individual as of 2018. This price can raise if you’re receiving Social Security benefits or it can raise if you make more money. This cost is directly taken from Social Security payments if you’re receiving it.

There is also a yearly $183 deductible for these services and other varying copayment and coinsurance costs. More than 90 percent of Medicare recipients have Part B. If you don’t start Medicare coverage with Part B and decide to want it down the road, there is a late-enrollment fee for every 12 months you don’t have it.

Now, when it comes to choosing a plan, it’s vital to know that in order to add any sort of supplemental coverage, which we’ll discuss soon, you need to have both parts A and B of Medicare. You’ll be paying for both parts A and B with your Medicare Advantage plan, as well.

Medicare Advantage Plan

This plan is Part C of Medicare.

Advantage plans cover all the same benefits of parts A and B of Medicare. Most Advantage plans also include dental, vision, and hearing coverage, which aren’t covered by parts A and B. Some plans pay for prescription drugs, too which we’ll discuss in a moment. These plans are bought from a private insurance company that are approved by Medicare.

You may choose a Medicare Advantage Plan because it features a wider array of doctors, or because a private insurance company you’re comfortable with offers it at a reasonable rate.

These plans also can potentially cover some of your copayments and coinsurance payments from Part B of Medicare. Advantage plans also help people who use a lot of the services offered by parts A and B, because most of them have a limit on how much you pay out-of-pocket every year. Once you hit that limit, then your plan takes over for the rest of it.

A Medicare Advantage Plan can only be acquired if you already have parts A and B of Medicare. You will need to pay the premium on Part B as well as your Medicare Advantage Plan. Then there will be another premium for your advantage plan. It’s hard to dictate how much a Medicare Advantage Plan will cost because it differs for each person’s age, medical history, and what type of coverage they want with the plan.

Do You Need Prescription Drug Coverage?

Here is the next vital question: do you need prescription drug coverage as a Part of your plan? As an elderly person, the answer is almost always yes.

Prescription drugs are expensive, even if you’re just taking one drug and getting it filled every month. This is especially true for seniors. Despite making up less than 15 percent of the entire United States population, the elderly consume one-third of the prescription drugs taken in the country.

Up to 90 percent of elderly people (over 40 million) use at least one prescription drug a month, and nearly 40 percent of people 65 and older use five prescriptions every month. These costs can add up without some level of prescription drug insurance coverage. This is where Medicare helps immensely.

Medicare’s Part D is all about prescription drugs. This coverage is purchased through a private health insurance company approved by Medicare, and there is a monthly premium to pay, no matter how many prescriptions you use—just like Part B.

The average cost for this premium is $34 as of early 2018. This cost may be a little higher if your income is above $85,000 (this extra cost will be paid directly to Medicare) or if you enroll late in Part D coverage.

You can compare Medicare Part D costs based on your zip code and other Medicare coverage on the Medicare website.

Do You Need Supplemental Medicare Coverage?

As we’ve seen, Medicare comes with varying costs from premiums, deductibles, copayments, and so forth. You can get supplemental coverage to help cover these costs, and it’s known as Medigap.

Medigap comes in many different forms—parts A, B, C, D, F, G, K, L, M, and N—that help varying cover varying levels of copayments, coinsurance, extra hospital costs, pints of blood, deductibles, foreign travel insurance, and more.

The most popular Medigap plan is Part F, and it’s also the most expensive. Two-thirds of people who get a Medigap plan get Part F. Benefits included in this plan include (but aren’t limited to):

• Deductibles for parts A and B
• Coinsurances for parts A and B
• 80 percent of foreign travel insurance costs
• Three pints of blood

There are premiums on these plans, and you will have to pay this monthly payment on top of your premiums for Part B and D. You may also have a yearly deductible you need to reach before your Medigap plan takes over payments.

Supplemental coverage is great for those who often need to use their Medicare services and may have high out-of-pocket costs due to Part A and B copayments and coinsurances.

When Can I Enroll In Medicare?

Remember, you are automatically eligible to receive Medicare the day you turn 65. If you are already receiving Social Security benefits and enrolled in Medicare before you hit 65, you will automatically be enrolled in Part A of Medicare.

However, if you don’t receive retirement benefits yet, elderly people can begin to enroll in Medicare—beyond Part A—three months before they turn 65, the month of your birthday, and three months after it. This seven-month period is called the Initial Enrollment Period. Applying for Medicare Advantage Plans and prescription plans occur during this period as well, and supplemental plans can be added at any time.

If you don’t apply for Part B within this enrollment period, there can be late fees for enrolling at other times.

Just in case you miss the IEP, the General Enrollment Period for Medicare is between January 1 and March 31.

You can apply at a handful of places:

• Visit SocialSecurity.gov
• Call the Social Security Administration
• Visit your local Social Security office

The process for enrolling in Part A takes less than 10 minutes, and adding on other plans won’t take much longer—especially if you’ve done your research beforehand.

Can I Add, Drop, And Change Coverage?

Yes, and no.

You can’t add, drop, and change coverage as you please. There are certain times and dates when you can do this. There can also be some confusion as to whether or not there will be fees or penalties for adding certain coverage or dropping it from your plan.

Let’s go through each situation and see if you can drop or add it, if there will be any penalties, and when you can do it.

Can I add Part A later?

No, this is what you start with. If you don’t qualify for Part A but do later down the road, you can add it then.

Can I drop Part A later?

Yes, but you shouldn’t— especially because there are no monthly premiums.

Can I add Part B later?

Yes, but there is a 10 percent late enrollment fee for every 12 months you don’t have Part B after you initially enroll.

Can I drop Part B later?

Yes. This may occur when a spouse or loved one finds a job that covers all the costs that Part B covers. There is no penalty to do this.

Can I change from a Medicare Original plan to a Medicare Advantage Plan after and vice versa?

Yes, you can add the Advantage Plan later, but you can only do so in the open enrollment period (OEP) from October 15 to December 7. You can switch to the Original Medicare plan in the same time.

Can I change from one Medicare Advantage Plan to another?

Yes, during the aforementioned open enrollment period mentioned in the last section.

Can I disenroll from my Advantage Plan?

Yes, there is a period from January 1 to February 14 when you can disenroll.

Can I add Part D later?

Yes, but like Part B, there is a fee for every 12 months you don’t enroll when you first have the opportunity.

Can I drop Part D later?

Yes. If you are canceling because you’re getting coverage through a Medicare Advantage Plan, Medicare will automatically cancel it for you. If you are dropping it just to drop it, you can do so during the open enrollment period.

Can I have Medigap and a Medicare Advantage Plan?

No. You must have one or the other.

Can I add Medigap later?

Yes, as long as you don’t have a Medicare Advantage Plan. You can do so during the open enrollment period. Insurance companies will typically put your medical history to the side if you apply during this time.

Can I drop Medigap later?

You can suspend Medigap if you get similar coverage through a job. You can drop your policy at any time by contacting your insurance company.

If you have any questions regarding how to choose a Medicare plan, contact you local Social Security office or visit the Medicare website.