If you already receive social security or Railroad Retirement Board benefits, you will be enrolled automatically in Medicare Parts A and B at age 65. If not, you will need to sign up by your enrollment deadline—typically, three months after the month you turn age 65.
It’s not a good idea to select a plan based on feedback from friends, neighbors, or family members without doing your own research. The best plan for you will depend on personal factors, such as your current medications, your age, and whether you live part of the year in another state.
How Medicare Is Delivered
The first step in selecting a Medicare plan is to understand the various coverage choices.
Medicare Part A. Also called hospital insurance, Medicare Part A covers care in a hospital, skilled nursing facility, and hospice. It provides limited coverage for nursing home and home health services.
Medicare Part B. Medicare Part B covers doctor visits, lab tests, outpatient surgeries, preventative care, and medically necessary services and equipment. Together, Medicare Part A and Part B are often referred to as Original or traditional Medicare.
Medicare Part C. Commonly known as Medicare Advantage, Medicare Part C is the managed care alternative to Original Medicare that private insurance companies and health providers such as Blue Cross Blue Shield offer through Part C plans. The benefits and services provided by Medicare Parts A and B are included in Part C plans. Part C plans may cover other services such as dental, hearing, and vision care. Also, since the start of 2019, health insurance companies that offer Part C plans can create managed care plans that target specific types of illnesses, such as diabetes. Part C plans are usually a health maintenance organization (HMO) plan or a preferred provider organization (PPO) plan. With an HMO plan, you will select a primary care doctor; except for emergencies, that doctor will refer you only to health providers within the HMO network. With a PPO, you have the option of getting care outside the network, but your copay will be higher than for visits to in-network providers.
Medicare Part D. Medicare’s prescription drug benefit, Part D is the newest part of Medicare. Private health insurance companies offer stand-alone Part D plans for individuals who have Original Medicare. Most Part C plans include a prescription drug benefit.
Medigap. Medigap is also called Medicare supplement insurance. It is not a separate part of Medicare. Medigap plans fill the cost sharing associated with the coinsurance and deductibles in Original Medicare. Private health insurance companies offer Medigap plans, and each type of plan is identified by an alphabet letter. Currently, there are 10 types of Medigap plans available to new Medicare enrollees. Medigap Plan F is no longer available to new enrollees as of December 31, 2019. Premiums vary among carriers, so it pays to shop around. You cannot buy a Medigap plan if you enroll in a Medicare Advantage plan because Medicare Advantage plans offer their own schedule of deductibles, coinsurance, and/or copays.
Paying for Medicare
Medicare is not free. To determine your estimated cost of Medicare coverage, you can review the information available at www.medicare.gov/your-medicare-costs. Most people do not pay a premium for Medicare Part A because they paid payroll taxes while they were working. There are premiums for Medicare Part B, Part D, Medicare Advantage plans, and Medigap plans. If you are already receiving social security benefits, Part B and Part D premiums may be deducted automatically from your monthly payment. The premium for Medicare Advantage, which includes both Part A and Part B, will depend upon the plan. Remember, you are still enrolled in Medicare even if you choose to have your benefits delivered through Part C. This means your Part C premium will include the Part B premium (and a Part A premium if you or your spouse do not have a sufficient work history). You are also responsible for deductibles, copayments, and/or coinsurance charged by Part D, Medicare Advantage, and Medigap plans.
To compare the costs and ratings of various Medicare Advantage and drug prescription plans, visit the Medicare website at www.medicare.gov/plan-compare. You can compare the costs of Medigap plans at www.medicare.gov/supplements-other-insurance/how-to-compare-medigap-policies. Once you’ve narrowed down your choices, contact the providers for more information on the differences between plans.
Additional income-based factors.
If your income is above a certain threshold, you will be assessed an income-related monthly adjustment amount (IRMAA) on your Part B and Part D premiums. IRMAA has six income-based tiers. For single income tax filers, IRMAA assessments begin if your modified adjusted gross income (MAGI) is greater than $87,000. For married joint income tax filers, IRMAA assessments begin if your MAGI is greater than $174,000. IRMAA is based on your MAGI from your tax return filed two years prior to the current year. The timing of tax return filings causes the delay. For example, when the IRMAA assessments were done at the end of 2019 to determine which Medicare beneficiaries would pay the surcharge on their 2020 premiums, the most recently filed income tax return was from 2018. If your MAGI will be reduced because of a change in your life circumstances, you may file Social Security Form SSA-44 to request that the surcharge be removed.
If you have limited income and resources, you may qualify for help paying premiums through federal and state programs. Those who automatically qualify for assistance will be contacted by the Social Security Administration. You may also contact your local social security office to discuss your circumstances.
Medicare Enrollment Dates
A word of caution: Don’t confuse Medicare open enrollment dates with your required enrollment period. Open enrollment, which runs between October 15 and December 7, applies to those who are already enrolled in Medicare and want to make changes to their plans or plan provider. Your initial enrollment period is based on your age or when you leave your or your spouse’s employer’s group health insurance plan. You must enroll in Medicare within the seven-month period starting three months prior to the month you reach age 65 and ending three months after the month you reach age 65. You can delay enrollment if you are covered by your or your spouse’s employer’s group health insurance plan, but only if the employer has 20 or more employees. If you miss your Medicare enrollment deadline, your premiums will be increased permanently, and you may face a gap in health care coverage. COBRA is not treated as a group health insurance plan for purposes of avoiding the late enrollment penalty.
If you are enrolled in your former employer’s retiree health insurance plan, check with your provider to see if enrollment in Medicare Part B is required and how your plan coordinates with Medicare. If you are required to enroll in Part B and fail to do so, you may find that your retiree plan will not pay for services Medicare would have covered if you had enrolled.
Comparing the Options
|
|
Original Medicare |
Medicare Advantage |
Medigap |
|
Choice of Health Care Provider |
Any doctor or provider in the U.S. who accepts Medicare (AARP reports that 90 percent of all doctors accept Medicare patients.) |
Usually through a managed care program such as an HMO or |
Any doctor or provider in the U.S. who accepts Medicare (In some states, Medigap Select plans limit care to a network of providers.) |
|
Out-of-Pocket Limits |
No cap on |
Annual cap set by plan provider; provider also sets copays and deductibles, which may be lower than Original Medicare’s deductible and coinsurance |
Can help cap the out-of-pocket costs of Original Medicare |
|
Travel |
Coverage limited to U.S. doctors who accept Medicare |
Coverage limited geographically, except for emergencies; may provide access outside of network at higher copay |
May provide coverage for medical emergencies outside the U.S. |
|
Part D Drug Coverage |
Separate policy with additional premium |
May be included in plan |
No longer offers drug coverage (except for current policyholders) |
|
Advantages |
Allows for second opinions from a doctor anywhere in the U.S. who accepts Medicare |
All-in-one plan; may be |
More predictable out-of-pocket costs |
|
Disadvantages |
Provider must accept Medicare assignment; otherwise, you may have to pay the bill in full, and your costs may exceed your Medicare coinsurance and deductible |
Limits health care options for those who live part of the year outside the geographic area served by the plan |
May be more costly than a bundled plan through Medicare Advantage |
Once You’ve Enrolled
It’s up to you to understand how the Medicare option you choose covers a test, treatment, or medical equipment. Keep in mind that Original Medicare does not cover most hearing, dental, vision, or long-term care costs.
Every year between October 15 and December 7, you can elect to make changes to your Medicare coverage. The changes become effective on January 1 of the following year. If you don’t wish to make changes, you do not need to do anything during open enrollment. If you opt for a Medicare Advantage plan, your Medicare Advantage provider will send a letter in September of each year outlining changes in premium and coverage for the upcoming plan year. This is a good time to ensure that the plan still meets your needs.
For more information about Medicare and your choices, download the easy-to-understand Medicare & You handbook from www.medicare.gov/medicare-and-you.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
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