The Basics of Medicare: How to Choose the Right Plan for You

The Basics of Medicare: How to Choose the Right Plan for You

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.

4 Ways to Protect Yourself From Financial Disasters

4 Ways to Protect Yourself From Financial Disasters

Here’s how to prepare for unexpected bills and survive financial disasters.

Woman worried about financial problems.

Don’t let unanticipated expenses derail your financial plans.

 When it comes to unexpected bills, such as car repair or medical bills, most of us are not prepared. And as financial disasters, such as a job loss or a debilitating medical condition, get more serious, the less prepared we are. A 2015 study from the Pew Charitable Trusts found that more than half of Americans are not prepared for unexpected bills. Another Pew study from 2015 found that 55 percent of American households did not have the cash savings to replace one month of income. While worrying about the unexpected will keep you up at night, there are some simple steps you can take to prepare your finances and ease your mind.

Understand your current finances: You can’t prepare your finances unless you have a clear picture of your income and spending. First, determine your average monthly income, including salary and any other money you bring in. Then list your average monthly spending, including everything from your student loan debt or car payment to what you spend on hobbies or entertainment. Add up all your spending and that is your total expenses for the month. If your income is higher than your expenses, then the difference is what you can apply to saving for the unexpected. If your expenses are higher than your income, then you need to evaluate your finances and find ways to reduce your spending.

Make an emergency budget: Once you have a clear picture of your finances, you need to calculate the minimum you need every month to cover your expenses. Start by prioritizing your bills. Look at your expenses and list just your monthly necessities. These are expenses you couldn’t live without or need to pay every month, such as rent, mortgage, car payment, groceries and utilities. Now list your optional spending, such as a gym membership, cable TV, eating out and Netflix. The total of your necessities is what you need on hand every month.

Examine your optional spending and see if there is anything you can drop or reduce. Instead of going out to lunch every day, go out every other day. Instead of the full cable package, go for the basic channels. Whatever is left on the list is now your emergency budget. If something unexpected does happen, the emergency budget is the first place you can go to drop the spending you can live without and lower your expenses.

Get your finances in order: With all your information in front of you, now is the time to evaluate your finances. If you have credit card debt, look to pay off or pay down your credit card balances. Keeping your credit card balances down gives you more available credit for emergencies. Is the interest rate on your mortgage high? You might be able to refinance at a lower rate. Make sure you’re contributing the full amount to your retirement fund or 401(k).

You should also check whether you are adequately covered with insurance. Check your health insurance to see whether you and your family have the right coverage in case of a medical emergency. Check your homeowners or rental insurance to make sure you are covered in the event of a natural disaster. Consider getting optional coverage such as life insurance or disability insurance to make sure you and your family are taken care of if the worst happens.

Build an emergency fund: One of the most important tools you can have to prepare for financial disasters is an emergency fund. Usually kept in a savings account, so you can easily access it when you need to, an emergency fund is money you set aside to cover your essential bills. The goal is to have at least enough money to cover you for three months. This money would go to living expenses such as food and rent. Most households don’t have that much, so don’t panic.

 Even if you are starting from zero, having that total of your essential expenses gives you the number you need to reach. Contributing what you can afford each month will still give you that much more of a cushion in case of an emergency. Once you reach your three-month number, don’t stop contributing. Financial disasters can come in unexpected ways, so the more you have, the better your chances to make it through.
4 Simple Ways to Keep an Eye on Your Credit

4 Simple Ways to Keep an Eye on Your Credit

In the wake of the Equifax data breach, many Americans are rightfully concerned about their credit. Will someone be using their identities to take out loans? The fact that there’s wildly different advice from different sources makes things even more confusing.

In any situation where you feel uncertain about your credit and your identity, it’s a good idea to step back, take a breather and get back to the basics of simply keeping an eye on your credit. Not only is managing your credit a really good way to make sure that identity thieves stay away, it also helps ensure that you’re going to be able to get loans when you need them, be eligible for lower insurance rates and qualify for the other little perks that come with good credit.

Here are four steps you can take to always keep an eye on your credit and ensure that it’s healthy.

 

Keep your bills paid and don’t let your credit card balances grow. Believe it or not, your ordinary bills are one of your most powerful windows into your credit. Simply having your bills up-to-date and not carrying a large balance on your credit cards (small balances are OK) is enough to ensure that your credit is in pretty good shape, as those two factors are crucial elements in determining your credit score.

This part is as simple as can be. Just keep your bills paid. Don’t fall behind on them. If you can’t pay off your credit cards in full, at least make sure to make minimum payments on them and keep the balance well below your credit limit.

If you can do that, you’re guaranteed to have a strong credit foundation, regardless of any mishaps or anything else that happens, as those things are generally fixable. Having strong credit to begin with makes it easier to identify actual credit problems, fix those problems and recover from them.

 

Get your free annual credit report each year and review it. The Fair Credit Reporting Act requires each of the three major credit bureaus to provide a free copy of your credit report each year upon your request. These credit reports provide a direct look at your credit and can quickly help you identify whether or not you’ve got incorrect marks on your credit report that are dragging down your score.

Here’s the catch: A bunch of businesses have jumped onto that bandwagon and bundle your actual free credit report with a bunch of their own paid services that you don’t need and likely don’t even want.

The only place that the Federal Trade Commission has sanctioned to give you your credit report directly for free is annualcreditreport.com. At that site, you can access your credit report from each of the three credit-reporting bureaus every year and see for yourself what information is on them.

It’s a good idea to not access all three at once. Instead, examine your report from one bureau, then return in four months to examine your report from a second bureau, then return four months later to examine your report from a third bureau. After that, you can cycle back to the beginning. All of these reports are free – they’re your right as a citizen, so take advantage of them.

If you do find something incorrect in your credit report, track it down. Contact the company or organization that placed that incorrect information and see what needs to be done to have it fixed.

 

Review your bank statements and credit card transactions. Another nefarious way that your credit can be tainted via identity theft is if a hacker gains access to your credit card or to your bank account (often via a debit card). Often, the hacker will run small transactions through that account that won’t set off any red flags and won’t get noticed unless you pay attention.

The best way to detect this is to sit down with your monthly credit card and bank statements and review them transaction by transaction. If you see transactions you can’t identify, spend some time figuring out what they are. Contact the credit card company or your bank and ask about that transaction in detail.

If you find transactions that you didn’t authorize, cancel your card and have a new one issued for the account. It’s likely that someone has unauthorized access to the account through your card. If it’s a bank account, talk to your bank about sensible next steps to take, as the breach may be affecting other accounts and may not necessarily involve your card.

 

Ask for your credit score when you’re actually using your credit. Many people want to know their credit score, as it is a good description of the relative health of one’s credit. Unfortunately, many services that allow you to see your credit score show estimates or bundle them with expensive packages.

One way to get around that is to simply ask to see your credit score when you’re in a situation where your credit score might be accessed or calculated, such as when you’re applying for a loan at a bank or credit union. Quite often, the financial institution will share that information with you at the end of the process of evaluating your application.

 Credit scores aren’t necessary information, but they do provide a useful summary of your credit history. If your score is lower than you expect, then you know it’s time to start doing some financial detective work.

Keeping an eye on your credit doesn’t have to be a full-time job, nor does it have to be an expensive process. Most of the tools you need are free and easily available. The key part of the equation is you – you have to sit down, go through those reports and see whether anything is amiss. Good luck