Turning 65 and entering Medicare eligibility can be confusing for many people. Most of us have had our insurance options provided to us by our employers for decades. Suddenly we find ourselves faced with 4 Parts of Medicare, scores of Medicare supplemental options, and at least two dozen Part D plan choices.
To complicate matters, many are still working at age 65. It’s normal to feel uncertain about when you should enroll in Medicare and how that coverage will coordinate with our current insurance.
Here are some basic tips for navigating your entry into Medicare:
Sign Up for Original Medicare During Your Initial Enrollment Period
Original Medicare consists of Part A hospital benefits and Part B Outpatient Benefits. You can enroll in these at your local Social Security or Railroad Retirement office, or you can apply online at www.ssa.gov.
Your initial enrollment period for these two parts begins 3 months before your 65th birthday month and end 3 months after your birthday month. If you enroll during this 7-month window, you will avoid any late penalties. People who are already taking Social Security income benefits will be automatically enrolled in both Medicare Parts A and B.
If you are still working and have coverage through a large employer (more than 20 employees) then you can keep your work coverage. It will be primary and Medicare will be secondary. Most people enroll in Part A at this time. Part A usually costs nothing because you paid taxes during your working years to pre-pay this coverage.
Having Part A coordinate with your group insurance can reduce costs if you have an inpatient stay.
Part B is your outpatient coverage, and you need it if Medicare will be your only coverage or if you work for a small employer (less than 20 employees) where Medicare will be primary.
Employees of large employees often delay enrollment into Part B until they retire because their group coverage already provides outpatient benefits. Part B has a monthly premium that starts at $134/month for most new enrollees. People with higher incomes may pay more.
Explore Your Supplemental Options
Medicare does not cover 100% of all your healthcare costs. Just like with other coverage you have had in the past, there are deductibles for hospital and outpatient services and also copays and coinsurance as you go along. This is your cost-sharing that you are responsible for.
Medicare Part B only covers 80% of your outpatient care, and that includes some expensive items like surgery, ambulance rides and chemotherapy. There is no cap on the 20% that you owe, so your healthcare costs can quickly spiral out of control if you don’t have supplemental coverage.
There are two main types of supplemental coverage: Medigap or Medicare Advantage.
Medigap plans pay after Medicare and will help to cover certain parts of your cost-sharing. There are ten standardized Medigap options in most states plus one high-deductible plan. You can choose a plan with first dollar coverage like Medigap Plan F, where you will have no out-of-pocket expenses at all.
You could also choose a plan where you share in some cost-sharing and the plan pays most of the other cost-sharing items. Plan N is an example of this. You pay lower premiums but you agree to pay the Part B deductible and some cost-sharing on a few other items.
Medigap plans allow you to see any healthcare provider in the nation that takes Medicare. You don’t need to get referrals, and it doesn’t matter which insurance company you buy your Medigap plan from. Medicare plans do not include Part D though, so you will need to add a standalone Part D card so that you can get your prescriptions at reduced prices at the pharmacy.
Medicare Advantage Plans (Part C)
Not everyone can afford a Medigap plan. There are also some people who would prefer lower premiums up front and instead pay more for their services as they go along. Medicare Advantage plans are a good fit for these people.
Advantage plans are private plans which pay instead of Medicare. You must be enrolled in both Parts A and B and live in the plan service area to be eligible.
You agree to use the plan’s network providers for your care instead of Medicare’s larger network. Some plans are HMO style where you choose a primary care doctor who coordinates your care and provides referrals when specialists are needed. PPO plans have more flexibility because you can see doctors out of network for a higher cost-share.
As you seek care you will pay copays at the time of service. You can expect to have copays for doctor visits, lab-work, hospital stays, surgeries and most other items.
Many Advantage plans include Part D coverage rolled right into the plan. This is convenient because you can use just the one ID card at both doctor and pharmacy. However, you are locked into these plans for the rest of the calendar year, so choose carefully.
Review Part D Options
Part D drug plans are offered by private insurance companies. There are many plans to choose from and often some that cost less than $20/month. People with Medigap need Part D since their coverage does not include medications.
Medicare Part D gives you access to drug coverage at much lower costs than if you bought them without coverage. You also have catastrophic drug coverage built in to protect from medical bankruptcy if you need very expensive medications.
While Medicare can initially be overwhelming, you can see that once you have your Original Medicare in place, there are really just two main types of supplemental coverage. Understanding these options is half the battle. A licensed Medicare insurance-broker can help you compare costs and coverage for plans in your area.
Danielle Kunkle is the co-founder of Boomer Benefits, an insurance agency specializing in Medicare-related insurance products. They help baby boomers New to Medicare learn about their benefits and coverage options across 47 states.