To those approaching their 65th birthday: Congratulations. You’ve got a lot to look forward to. Among the good things about turning is 65 is that you’ll be eligible for Medicare, health insurance usually becomes more affordable, and you can’t be denied coverage for pre-existing conditions.
Despite these benefits, you still face a critical fundamental decision as this landmark birthday arrives. This decision will have a lasting impact on your life. It’s important that you take the time to analyze your new health insurance choices.
Parts of Medicare
First, you’ll want to understand the four parts of Medicare:
- Part A covers in-patient care in hospitals, skilled nursing facility care, hospice care, and some home healthcare services.
- Part B covers services from doctors and other qualified health care providers, outpatient care, some home healthcare services, durable medical equipment, and many preventative services.
- Part C, also known as Medicare Advantage plans, is like a health maintenance organization (HMO) or preferred provider organization (PPO) that combines Parts A and B in one network of health care providers. Medicare Advantage plans typically include coverage for prescription drugs that are covered under Part D (described next). They might also include extra coverage for services like vision care, dental care, hearing aids, and wellness services.
- Part D helps pay for prescription drugs. It’s run by Medicare-approved private insurance companies that follow rules set by Medicare. If you enroll in a Medicare Advantage plan, however, you most likely won’t need to buy a separate insurance policy for Part D benefits.
Note that Medicare doesn’t cover services for dental or vision care, unless it’s the result of a trauma or accident. Medicare doesn’t cover the cost of hearing aids. You’ll want to make plans for paying for these expenses out of pocket or for purchasing a separate policy that covers them.
The four parts of Medicare have many parts and provisions beyond what’s sketched out here. It’s vital that you visit Medicare’s helpful website, which contains excellent descriptions of its coverage as well as some brochures that offer additional information.
Traditional vs. Medicare Advantage Plan
Once you have figured out the parts of Medicare, then you have to make another important decision: whether you’ll participate in original Medicare (aka traditional Medicare) or whether you’ll choose a Medicare Advantage plan. With this fundamental choice, you might not get a “do-over” that would allow you to change your coverage in the future. It’s key to understand your options to make the best choice for you.
The first step is to learn more about each of these choices because the differences can be crucial.
You can elect original Medicare — that is, Medicare Parts A and B and a separate prescription drug plan under Part D. Here are a few key details:
- Most retirees receive Part A coverage without paying a monthly premium.
- You’ll need to pay a monthly premium for Part B, which is $134 for most new retirees in 2018. Retirees with high incomes may pay a higher premium.
- Part D also requires a separate premium.
Medicare’s coverage has gaps due to the significant deductibles and co-payments, which can amount to thousands of dollars. As a result, most people who elect original Medicare also buy a separate Medicare Supplement insurance plan, also known as a Medigap plan, that pays for many of the expenses Medicare doesn’t cover. It’s sold by private insurance companies, and you’ll pay a monthly premium for it in addition to the Medicare Part B premium.
One critical advantage of original Medicare, when it’s supplemented by a Medigap plan, is that you can self-refer to any health care providers who accept Medicare reimbursement. This gives you some degree of freedom when choosing your providers — a freedom you may not have with a Medicare Advantage plan. This is important if you want to have the broadest possible access to medical professionals and specialists.
When you’re first eligible for Medicare, you can’t be excluded from buying a Medigap plan for pre-existing conditions. Nor can you be charged a higher premium. As long as you continue the coverage by paying the premiums, your policy is guaranteed renewable for the rest of your life.
If you want to change plans after you’re first eligible for Medicare, however, insurance companies are then allowed to apply medical underwriting. This means they can either exclude you altogether because of pre-existing conditions or charge you a higher premium if they deem you to be unhealthy. That’s why when you’re first eligible for Medicare, you’ll want to carefully consider the Medigap plan that will best suit your needs for the rest of your life. You may not be able to upgrade to a more generous policy in future years.
Medicare Part C, or Medicare Advantage, is an alternative to original Medicare. These plans are more like an HMO or PPO, and they combine Parts A and B to provide integrated hospital, physician and outpatient coverage. Medicare Advantage plans have their own deductible and co-insurance schedules, so you don’t need to buy a separate Medigap policy, as you would with original Medicare.
By law, Medicare Advantage plans must provide the same services as Medicare Parts A and B, but the plan providers are in charge of how they’ll deliver medical services.
Medicare Advantage plans usually cover Part D prescription drug benefits, and they may include extra coverage for special items such as vision care, dental care, hearing aids and wellness services. One goal of Medicare Advantage plans is to simplify your life by bundling health care services in a managed care environment.
Be aware that if you choose a Medicare Advantage plan, you might not be able to switch to a Medigap plan during a future open-enrollment period should your health or circumstances change. You will be able to switch to original Medicare or another Medicare Advantage plan during open enrollment. It’s the supplemental Medigap plan that you might be prevented from selecting.
In addition to your Part B Medicare premium, you’ll usually pay a monthly premium for the Medicare Advantage plan. In some instances, however, there’s no additional premium for so-called “zero premium plans.” In this case, you only need to pay your usual Part B premium.
Things to Consider
Your choice often boils down to this: If you value the simplicity that comes with packaging all your healthcare providers into one institution, you might prefer a Medicare Advantage plan.
On the other hand, if you want the freedom to choose your medical providers at any time in the future, and you don’t mind the additional complexity associated with multiple insurance plans, you might prefer original Medicare together with a Medigap plan.
If you go the Medigap route, Diane Omdahl of Sixty-Five Incorporated, an independent Medicare consultant, calls the Medigap plan you choose “your buddy for life,” since it’s very hard to make changes after your initial enrollment period.
With either choice, it’s important to look beyond the initial monthly premium amounts. It’s often the case that plans with lower monthly premiums have higher co-insurance and co-payment amounts, and you won’t save money with the lower monthly premium plan when you consider all your out-of-pocket expenses.
Here’s another important consideration: you might be healthy now and think you don’t need the ability to select your health care providers. At a later age, however, you might develop a serious condition. Then you might prefer the freedom to choose your medical providers and specialists.
Take the time now to learn more and carefully analyze your choices. Get help if you feel intimidated by your decision, and think long-term. Your choice today can help you live a longer, healthier life.
If you would like more information the team at Shelton Care Management may be able to help! Contact us today!