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.

Why Your 50s Are a Good Time to Begin Thinking About Long-Term Care

Why Your 50s Are a Good Time to Begin Thinking About Long-Term Care

Think about it before you need to think about it.

Middle-aged couple

“The key to purchasing long-term care insurance is to do so when you’re still healthy to qualify.”

Sure, it seems crazy to start thinking about a possible future when you’re infirmed and need long-term health care if you’re only in your 50s. You’re young, or relatively young, and healthy. But that’s the point.

You don’t want to someday be unable to take care of yourself and wish that you had done some pre-planning. If you’re in your 50s, and you’re not thinking about long-term care, these are some reasons you should be considering it.

You have plenty of time. That’s why planning for long-term care now is a good idea. If you wait to plan for long-term care in your 60s, 70s or beyond, you’re going to find that certain strategies aren’t available (or practical) any longer.

There are generally three approaches people take to long-term care, according to Sam Price, an independent broker and agent with Assurance Financial Solutions in Birmingham, Alabama. You can:

Pay for the care yourself. That is, no insurance, no government help – just you. You could research how much you’d likely spend if you became chronically ill, Price says. He also adds that this really isn’t realistic for many people.

“The problem with self-funding is that people may find themselves needing that money10 to 15 years into their retirement just to make it. So people who are intent upon self-funding might find themselves without options later on,” he says.

Let Medicaid pay for it. Not Medicare, which won’t pay for long-term care. “But Medicaid was created to do just that,” Price says. “For persons with typically less than $150,000 to $200,000 in retirement assets, Medicaid may make more sense.”

But he advises talking to an elder-care attorney, who can guide you through the ins and outs of Medicaid.

Let insurance pay for your care. After you pay for the insurance, of course – such as long-term insurance or a hybrid life insurance and long-term care policy.

“Clients who find insurance appealing need a competent broker that can walk them through the myriad of options available,” Price says.

There are other things to consider, too, says Karen Lee, a certified financial planner with her own firm, Karen Lee & Associates, in Atlanta.

Tips for Moving to the Sunbelt for Retirement

Tips for Moving to the Sunbelt for Retirement

Here’s how to find better weather and a lower cost of living in retirement.

Happy senior couple enjoying a bicycle ride in the park together

Retirees can find better year-round weather in the Sunbelt, but they should ensure it’s not too warm in the summer months.

Now that the weather is colder, it’s fun to dream about a retirement in which you will never need to shovel snow or defrost your car again. Many sunny cities also boast a more affordable cost of living and lower tax rates than the rest of the country. But moving to a place with a warmer climate isn’t as simple as tossing out your hat and gloves. Here are some tips for a successful move to the Sunbelt.

Consider year-round weather. Although it’s tempting to move to a place where you can escape winter storms, consider what the weather will be like during the rest of the year. “If they are moving there full time, they need to think about what it’s going to be like in the summer,” says Andrew D. Blechman, author of “Leisureville: Adventures in a World Without Children.” “With a beautiful winter tends to come especially hot summers.” While you may be able to avoid heating bills in the Sunbelt, it might cost just as much for air conditioning in the humid summers. Some retirees solve this problem by maintaining summer and winter residences, but not all retirement budgets allow for this.

Look for lower housing costs. Housing costs are often significantly lower in the Sunbelt than in the Northeast and California, which offers opportunities to improve your retirement finances and boost your standard of living. “If you live in the Northeast, you can cash out of relatively high housing prices there and be able to afford much more house in southern states, and have your retirement money go longer in your retirement years,” says Michael Stoll, a professor of public policy and urban planning at the University of California–Los Angeles. “By cashing out and rebuying in a low-cost southern state, you certainly can take a big chunk of savings out of your house to increase your retirement income.”

Reduce your taxes. Tax rates vary considerably by state, and moving in retirement can provide opportunities to significantly reduce your tax bill. “People are tax shopping, and taxes often tend to be lower in the southern part of the country,” Blechman says. Several states don’t have an income tax, including Florida, Nevada and Texas. But it’s also important to look at sales and property taxes, and any special tax exemptions you may be eligible for as a retiree.

Find amenities for retirees. Retirees no longer need to live close to a job and can move to any place that suits their needs and preferences. “Many communities in those states are built for retirees and are designed for people as they age,” Stoll says. Some retirees choose to move to communities that cater to the needs of older residents, while others prefer a multigenerational environment. “I think Florida is still popular because they are moving to a warmer climate, and they have a lot of universities and colleges there,” says Andrew Carle, founding director of George Mason University’s Senior Housing Administration. “There’s a really nice combination of nice weather and intergenerational environments.” Almost all retirees will need to live near health care, transportation and entertainment options, and it’s a good idea to seek these services before you need them.

Prepare to start over. Relocating to a new community often means moving away from family and friends. You’ll also need to a find a new doctor, mechanic and pursue leads for every other service you use. It can take a lot of effort to set up a social network and build friendships in a new place.

Test it out. The best way to get a feel for a retirement spot is to try it out. Consider renting for the first six months or a year to get a feel for the area without making a big financial commitment. If the first place you try doesn’t fit your needs, then it’s relatively easy to move on to someplace new.