When you reach 65, you face an important milestone: You are now eligible for Medicare.
Contrary to popular belief, Medicare is not free, and it’s important to understand the ins and outs of Medicare before you sign up. Making the wrong choices can be expensive.
Even if you’ve been on Medicare for years, you may want to re-evaluate your options annually to make sure you’ve got the right plan. The annual open enrollment period, during which you can switch Medicare plans, runs Oct. 15 through Dec. 7.
“I think everyone should consider switching,” says Lita Epstein, author of “The Complete Idiot’s Guide to Social Security and Medicare.” “Plans change, benefits change and the premiums change.”
It’s especially important to re-evaluate your options if you have a Medicare Part D drug plan or a Medicare Advantage plan because those plans can change significantly from year to year, dropping and adding drugs and doctors or changing copays and deductibles. “Even if they’re completely happy with their plan, they have to look because things change,” says Diane J. Omdahl, founder and Medicare expert at 65 Incorporated, which helps people choose Medicare coverage.
Medicare plans are actually broken into multiple parts:
- Part A covers hospital care, skilled nursing, hospice and some home health care. If you or your spouse has at least 10 years of Social Security work history, this part is free. If you don’t have that work history, it can be up to $413 per month. Your premium amount is determined by how many Social Security work credits you have.
- Part B covers doctor visits, preventive care, outpatient care and hospitals, and some home health care. In 2017, this part will average $109 a month for most Medicare beneficiaries whose incomes are $85,000 a year or less ($170,000 for a couple) and up to $428.60 for those whose annual income exceeds $214,000 ($428,000 for a couple). About 30 percent of beneficiaries will pay $134 per month, up from $121.80 in 2016. Most people find they need a Medigap plan in addition to parts A and B.
- Part C is also known as a Medicare Advantage plan. It substitutes for parts A and B and, in most cases, Part D, the drug plan. Premiums range from zero dollars to more than $100 a month, varying by location and coverage. According to the Centers for Medicare & Medicaid Services, the average premium in 2017 will be $31.40, down slightly from 2016.
- Part D covers prescription drugs. Premiums are about $15 to $50 per month, with the average in 2017 expected to be $34 per month, up about $1.50 from the previous year.
About 32 percent of Americans are expected to choose Medicare Advantage plans next year, according to the Centers for Medicare & Medicaid Services. Those plans, a combination of HMOs and PPOs, have an out-of-pocket limit, and the average out-of-pocket limit was $5,223 in 2016, according to the Kaiser Family Foundation. Customers tend to pay more in copays and coinsurance than they do with traditional Medicare, plus have access to fewer doctors and hospitals. Some of the plans include vision, dental and hearing coverage, which is not covered by traditional Medicare, but those services are offered from a limited network of providers. “If you’re healthy and you’re younger … it can be cheaper,” Epstein says. “If you absolutely can’t afford to take a Medigap supplement, a Medicare Advantage plan is going to be the best option.”
Her advice to those who can afford it, however, is to choose traditional Medicare with a supplement because that option offers greater access to top specialists and doesn’t require the insurance company to approve specific treatments. “Managed health care is going to be managed by the insurance company,” she says.
“It’s very, very important that you look at those copays and compare them,” Epstein says. “By the time you figure in one hospitalization, it’s about the same,” she says of the total cost of traditional Medicare and Medicare Advantage plans.
No matter what your retirement age, you become eligible for Medicare when you turn 65and you can sign up the three months before your birthday, your birth month and the three months after. If you don’t sign up during this seven-month period, even if you’re still working, you may face a long-term penalty. “They cannot wait until the last minute because of the backlog at Social Security,” Omdahl says.
She warns those signing up for Medicare to pay attention or they may be enrolled in a plan they don’t want. Insurance companies are allowed to sign current customers up for their Medicare Advantage plan unless they specifically say they don’t want the plan. To opt out, they have to respond to a letter from their current carrier, which can easily get lost in all the ads for new Medicare members.
“Anybody turning 65 will tell you that your mailbox is not big enough for all the insurance mail that you get,” Omdahl says. This practice, called “seamless conversion,” has existed for a while, but more insurance companies appear to be using it, she says.
If you start with traditional Medicare and a Medigap supplement, your supplement rate is not based on your health record. But if you start with a Medicare Advantage plan and then switch to traditional Medicare later, the company offering the supplemental coverage will base your premium on your health history and may even deny coverage. “It’s a real risk because everybody’s going to get something as they get older,” Epstein says.
Americans who are very low income may be eligible for extra help with Medicare premiums and health care costs. Beneficiaries in this financial situation can find additional guidance from Medicare.gov.
The system is complex, and most people should seek help when choosing a plan. The U.S. News Best Medicare Plans site can help you navigate the options and get the right medical coverage, and you can also find information at Medicare.gov and AARP.org. If you’re considering several Medicare Advantage plans, call the company that offers each one to verify that the coverage is what you think it is.
You can find ratings of Medicare Advantage plans from the National Committee for Quality Assurance. You can also get phone or in-person help from your State Health Insurance Assistance Programs. Those agencies often maintain office hours at senior centers or other locations. U.S. News also highlights the Best Medicare Advantage Plansand Best Medicare Part D Plans.