Open Enrollment is here, along with the usual ad barrage
Every year at this time Medicare offers “open enrollment” – basically a chance to revisit your Medicare coverage and select an alternative. Choosing a plan can also be mind bogglingly complicated – so if you need help thinking through it, you can consult with your trusted financial planner, an elder care attorney, or an independent insurance consultant. While we are not experts in all the myriad of plans available, we can help you ask the right questions and think through the alternatives. Be careful of accepting the advice of an agent who is paid on commission, or a seller who only represents a single company.
The biggest choice is between traditional Medicare and Medicare Advantage plans. Here is the quick Medicare primer.
Traditional Medicare is provided by the government. It covers most hospitalization costs (Part A), but requires copays for most outpatient and doctor visits (covered under Part B). Drug coverage is provided under part D, but again, there are copays and deductibles which can get quite expensive. Most people wind up buying so-called Medigap policies to pay for the copays and deductibles, and a drug plan to supplement Medicare Part D. Yeah, it’s a veritable alphabet soup of government created complexity. Your old employer based plan looks pretty simple in comparison. Most people pay between $250 and $300 a month for the supplemental plans, and another $120 or so for Medicare Part B premiums, which are usually withheld from Social Security checks (if you are collecting).
The good news is that once you get good supplemental plans in place, most of your medical costs are paid for. The bad news is that all of those premiums can run into some serious dollars for a couple – almost 600-700 per month.
Medicare Advantage is different. It is a partnership between the government and private health insurance. Private insurers are paid by the government to take care of providing medical care for enrolled seniors. The advantage to seniors on a tight budget is that the premiums for advantage plans tend to be much lower than the combined costs of Part B, Medigap, and drug coverage under traditional Medicare. Another advantage is that some plans offer additional benefits to entice subscribers to join (dental, vision, health club discounts, etc.). The downside is that the plans usually require you to get your coverage through a network – just like your employer plan probably did. For instance, if you have a United Health Care plan, you need to get care from someone in the UHC network, same with Aetna. For patients who want the broadest pick of doctors, this can be a problem. But for someone on a tight budget who doesn’t mind working within the boundaries of a provider network, Medicare Advantage may be worth looking into. If selecting a plan, it is important to choose a plan with broad acceptance by the medical community. You don’t want to be told you need to travel 100 miles to get a certain procedure! If you frequently travel out of state, make sure the plan provides national coverage.
It is also important to note that although monthly premiums are generally low, with most plans doctor visits require some kind of copay. This would also be true of medications - so be sure to consider whether your medications are covered, and how much your co-pay will be. Compare that to costs under traditional medicare part D. While the copay might not seem like much for each visit, they can add up for patients who use a lot of care. Traditional Medicare might be cheaper in the long run if you are a heavy user of medical care. Advantage plans might be a good choice if you are a lighter user and flexible regarding providers.
Switching TO Medicare Advantage is Easy. Switching BACK can be challenging. You should be able to switch from traditional Medicare to Medicare Advantage at any time, regardless of your health history or age. You should also be able to switch BETWEEN different Advantage plans. However, it is POSSIBLE that there may be issues switching BACK to regular Medicare should you wish to in the future. Not that Medicare won’t take you back – they must accept you during open enrollment. But there could possibly be issues with obtaining a Medigap (supplement) policy. If you have health problems, providers of supplemental insurance can refuse your coverage, or charge you higher premiums if you are switching in from Medicare Advantage.
This is an Important Decision! Look beyond the low monthly premiums when deciding on an Advantage plan and consider the big picture. As financial planners we know that it is one of our clients most significant expenditures. And of course, as you age, the quality of care available to you will become increasingly important. You don’t want to make a mistake when choosing a Medicare plan!