We’re nearing the end of Medicare’s open enrollment period for 2022 policies, which began October 15th and ends on December 7th this year, so if you’ve reached 65 you’re probably being inundated with marketing about Medicare Advantage and prescription drug insurance plans. And if you’re getting close to 65 and will be signing up for the first time, you have some timing issues and plan differences to keep in mind as you approach your initial signup.
While Medicare may seem straightforward at first, there are a few things that can cause problems during initial sign-up. With annual changes in Medicare Advantage plans, your own medications and healthcare providers, there are things to consider before making changes during the open enrollment period as well.
Types of Coverage
Medicare Part A is sometimes referred to as hospital insurance, and covers inpatient hospital care, a limited time in a skilled nursing facility for recovery after hospitalization, hospice care, lab tests, surgery and limited home health care like physical therapy and drug infusions – usually after hospitalization. This part of Medicare is premium free to you if you’re over 65 and you or your spouse worked and paid Medicare taxes for at least 10 years.
Medicare Part B basically covers most medical expenses that Part A does not, as long as it is considered necessary to diagnose or treat your medical condition and it meets accepted standards of medical practice. As a result, some cancer treatments that are considered experimental may not be covered, and most dental care, eye exams, hearing aids and long-term care are not either. Preventative services like flu shots and annual physicals are included under Part B, and you pay nothing for them if your provider agrees to be paid directly by Medicare for the amount Medicare has approved. You can find out if an expense will be covered using the Medicare coverage search on Medicare.gov.
Parts A and B are also known as Original Medicare. Medicare Part C, also known as Medicare Advantage, is basically an HMO or PPO type coverage that combines Parts A and B and usually includes prescription drug coverage as well, but with limitations on where you can obtain your services and how you access them. Each plan is different, with some companies charging out-of-pocket for visits and others requiring you to get a referral from your general practitioner before you can see a specialist. These rules can change each year. On the plus side, these plans can be less expensive than Original Medicare, with an average premium of $19 a month for 2022 according to the Centers for Medicare and Medicaid Services. In addition, these plans include supplemental benefits like eyewear, hearing aids, preventative and comprehensive dental and some fitness benefits.
Medicare Part D covers prescription drugs. You can enroll in Part D if you have Original Medicare.
Medigap Plans are supplemental insurance plans that are designed to cover the expenses that Original Medicare doesn’t. Like Medicare Advantage plans, they’re sold by a variety of health insurance companies and can have significant differences between them.
You’re eligible to sign up for Medicare 3 months before you turn 65 and up to 3 months after your 65th birthday. This is known as your Initial Enrollment period, and if you miss this 7-month window you may be subject to a late enrollment penalty for as long as you have Part B coverage, with the penalty increasing the longer you wait.
Working Past 65
Many people work past 65 and have health coverage through their employer they want to keep, which makes signing up for Medicare a little more complicated. In general, if you or your spouse have group health insurance coverage through your job you don’t need to sign up for Medicare while you (or your spouse) are still working. But if your employer has less than 20 employees, your health insurance carrier may not cover you unless you are signed up for both Part A and B as your primary coverage. Since many smaller companies can have fluctuations in the number of employees that may put them under this target, it’s important to speak with your employer and get a confirmation about your plan requirements before assuming anything.
Once you stop working or your job-based coverage ends, you have up to 8 months to sign up for Medicare, and you’ll need documentation from your employer to qualify for the Special Enrollment Period. If you miss this 8-month window, you’ll be subject to the same late enrollment penalty as people who miss the age 65 deadline described above.
Healthcare Savings Accounts and Medicare
High deductible health insurance plans combined with Healthcare Savings Accounts (HSAs) have become the most common plans in effect at most companies, and HSAs are an excellent tool to accumulate funds to pay for health care as Sarah outlined in her blog last year.
But if you are signing up for Medicare, you and your employer must stop contributing to your HSA 6 months before you sign up for Part A (or apply to start getting Social Security benefits) to avoid a tax penalty. You can continue to be covered by your employer’s high deductible insurance plan if you continue to work, but you can no longer make contributions to your HSA account. This is another rule that catches some people who work past 65 and the details are complex as this article in the Journal of Accountancy outlines. If you have any questions about your personal situation, be sure to get in touch with us, and we can help you sort through it.
Which Plan is Right for You?
This decision is as individualized as a financial plan because your lifestyle and personal preferences are the most important factors for selecting the right coverage. If you live in different places during the year or plan to spend much of your time traveling, a plan that restricts you to specific healthcare providers is not a good fit even if the cost appears lower. If you have specific medications you must take and do not tolerate a generic equivalent, a plan with a restrictive prescription program won’t work either. This chart on Medicare.gov does a good job of comparing Original Medicare and Medicare Advantage Plans in general to help you get started.
If you create an account on Medicare.gov, you can shop for drug plans and Medicare Advantage Plans by entering in your specific healthcare providers and medications to see if they are covered. We also recommend that you talk with a qualified, independent insurance agent who is knowledgeable about Medicare and Medigap plans to help you with your decision. It’s important that you share your medical history and current situation with them so they can match you up with the best plan. If you are interested in reviewing Original Medicare vs. Medicare Advantage, Part D or Medigap plans and you do not have an agent, we can refer you to one.
Opportunities for Enrollment or Changes
After the Initial Enrollment Period when you turn 65, and the Special Enrollment Period if you’ve worked past 65 and were covered by your job-related health insurance, you have another opportunity to enroll in Medicare.
The General Enrollment Period runs January 1 to March 31st each year, with coverage beginning July 1st. If you are eligible for Medicare Parts A and/or B but haven’t signed up yet, this is the time you can do so, but you’ll have to pay a premium penalty if the reason for your delay doesn’t meet any of the enrollment exceptions.
The opportunity to make changes to your coverage happens during the open enrollment period each year, which began in October and continues through December 7th this year. During this time, you can change your Medicare Advantage Plan, switch from a Medicare Advantage Plan back to Original Medicare, add a prescription plan (Part D) and purchase a Medicare Supplement Insurance (Medigap) policy.
To change your Medicare Advantage Plan, you simply chose a new plan and you’ll be automatically disenrolled from your old plan when the new coverage begins. Switching back to Original Medicare requires you to contact your current plan provider or 1-800-MEDICARE to make the change.
Healthcare is an important part of your retirement plan, and we’re here to help you make the right choices. Don’t hesitate to ask for our help if you need it.