Choosing the Best Medicare Coverage Options
Those approaching the age of 65 face the responsibility of enrolling in Medicare, the health insurance program for seniors and people with disabilities. Medicare provides a wide variety of important health care coverage, but enrollment can seem complicated and confusing. Everyone nearing their 65th birthday should understand how Medicare enrollment works and what types of coverage are available, so they can make an informed decision about their health insurance.
How Medicare Enrollment Works
Medicare is available for everyone age 65 and older and for people of all ages with disabilities.1 Those who already collect Social Security from retirement or disability benefits will automatically be enrolled in Medicare when they turn 65. Those who haven’t started collecting Social Security will need to apply during their Initial Enrollment Period.
The Initial Enrollment Period begins three months before the month the beneficiary turns 65 and ends three months after. If the individual doesn’t enroll during this time, they may have to pay a late enrollment penalty for Medicare Part B. However, eligible individuals can also enroll in Medicare during the General Enrollment Period from January 1 to March 31.
Eligible individuals can apply for Medicare on the Social Security website, at a local Social Security office, or over the phone. Anyone who has worked and paid taxes for at least 10 years can receive Medicare Part A for free, so everyone should apply for Part A when they become eligible. Some people who still receive health insurance from their employers choose not to enroll in Part B right away.
Medicare Coverage Options
The two main types of coverage are Original Medicare and Medicare Advantage, and beneficiaries can buy additional coverage with Medicare Part D or through supplemental insurance. Each coverage option has its advantages and disadvantages, so the best choice depends on the individual’s unique health care needs.
Original coverage, which is the most popular type of coverage, includes Medicare Parts A and B. Part A covers hospital stays and inpatient treatment, and Part B covers outpatient services like doctor visitors, preventive care, and lab work.2
The standard premium for Medicare Part B is $134 per month, and most services also require a coinsurance payment.3 In most cases, Part A is free, but some people do need to pay a premium for their hospital coverage.
Original Medicare is ideal for many people because the plans come directly from the federal government, not a private insurance company. There is no risk of a plan shutting down, and coverage isn’t limited to a specific region. However, monthly premiums are often higher than Medicare Advantage, and out-of-pocket costs can be steep for people with serious health conditions.
Medicare Advantage, also known as Part C, provides health coverage from private insurance companies.4 These companies are approved by the federal government to provide both hospital and outpatient services. There are several types of Medicare Advantage plans:
- HMO (Health Maintenance Organization): uses a designated network of health care providers and usually requires referrals for specialists.
- PPO (Preferred Provider Organization): recommends preferred health care providers but doesn’t require referrals for specialists.
- PFFS (Private Fee for Service): determines how much they’ll pay the provider and how much the beneficiary will pay.
- SNP (Special Needs Plan): provides individualized plans for people with certain medical conditions.
- MSA (Medical Savings Account): deposits money into a checking account to be used for health care costs.
Medicare Advantage plans are often cheaper than Original Medicare plans, and some offer vision, dental, and hearing coverage. Supplemental policies usually aren’t necessary with an Advantage plan. However, because the coverage comes from a private company, a plan could shut down at any time, leaving the beneficiary without coverage until they find a new plan.
Medicare Part D
Medicare Part D is optional coverage that can be purchased alongside an Original Medicare or Medicare Advantage plan. Part D covers prescription drugs, but different plans cover different medications.5 All plans must cover at least two drugs in most categories and all drugs in the following categories:
- Antipsychotic drugs
- Anticancer drugs
- Anticonvulsive drugs
- HIV/AIDS medications
The average monthly premium for prescription drug coverage is $34 per month, and the maximum deductible in 2018 is $405. Any individual who takes a prescription medication should strongly consider enrolling in Part D.
Supplemental insurance, or Medigap, is another type of optional insurance that covers costs like co-payments, co-insurance, and deductibles. Supplemental plans are provided by private insurance companies, but they are standardized by the federal government. Beneficiaries must be enrolled in Original Medicare to be eligible for a supplemental plan.
Supplemental insurance is ideal for people who expect to have expensive health care costs. Coverage is guaranteed nationwide, and some plans even cover medical care outside of the United States.
Unfortunately, Medigap can be costly. The average monthly premium for most Medigap plans ranges from $200 to $400, so it’s only a worthwhile option for people who need extensive medical care.6 Also, a supplemental insurance plan only covers one individual, so each spouse or family member needs a separate policy.
Pitfalls to Be Wary Of
Choosing a Medicare plan can be complicated and enrolling in the wrong type of coverage may cause serious financial problems. Here are four of the most common pitfalls to avoid:
- Not enrolling in Part B: Individuals who still receive health insurance from an employer can delay their enrollment in Part B, but others need to sign up during their Initial Enrollment Period. Failing to enroll could result in extra fees or coverage gaps.
- Not enrolling in Part D: Medicare Part D is essential for those who have prescription medications, but even those who don’t currently have prescriptions should enroll. It’s impossible for an individual to predict their future medical needs and waiting until an urgent moment to enroll can result in late fees.
- Waiting until retirement age to enroll: Retirement age is increasing, but the age to enroll in Medicare is still 65. Those who mistakenly wait until they reach their retirement age to enroll may have to pay late penalties for failing to enroll on time.
- Not taking advantage of cost-saving plans: There are several types of Medicare Savings Programs that help low-income individuals pay for premiums, deductibles, and other out-of-pocket costs. These programs vary by state, but anyone struggling to pay their Medicare costs should look into their options.7
Careful research is essential before choosing a Medicare plan. Medicare provides valuable health care services for seniors, but it’s important to enroll properly in order to get the right coverage.