The annual election period for Medicare begins October 15th and runs through December 7th. If you are age 65 or older you should consider your options during this time. In this interview with Lance Otey, a health insurance expert in the Dallas-Ft. Worth area, we discuss common considerations when signing up for Medicare or reviewing your Medicare coverage, and some pitfalls you may want to avoid.
One of the first things you should do when turning age 65 is to confirm you are signed up for Medicare. This sign up process is generally automatic if you are filing for Social Security or are currently receiving benefits. If you are not filing for benefits, then you have a 7-month window which begins three months before the month of your 65th birthday and continues three months after the month you turn 65.
Trying to sort through the various parts of Medicare can seem daunting. Parts A, B, C, D, G, N can seem like a bunch of letters with little to no importance. However, you should know what each part covers, how much they will cost, and if you even need certain policies.
Part A covers hospital visits and inpatient care. Most people get “premium-free Part A”, so there is usually no additional cost. Part B covers doctors’ visits and outpatient services. Parts A and B are designed to work together and will cover approximately 80% of your medical expenses.
The premium for Part B will depend on your recent income history. This is where a good financial planner or advisor can come in handy because withdrawing from your IRA or 401(k) account increase your taxable income which can in turn increase your premium. Having a comprehensive financial plan and distribution strategy in retirement can help you manage parts of your healthcare costs while on Medicare.
Medicare Part C, or Medicare Advantage Plans, can help address the remaining 20% that Parts A & B do not cover. These policies are like traditional medical plans that have deductibles, coinsurance, and max out of pocket amounts. Part D covers prescription drugs and is often included as part of a Medicare Advantage plan. Another option to address the “other 20%” is a Medicare Supplement plan (a.k.a. Medigap plan). One thing to keep in mind is that you cannot have both a Medicare Advantage Plan (Part C) and a Medicare Supplement (Medigap policy).
Even though you may have purchased a Medigap Policy or Part C last year, you still should review your coverage during the annual election period. Coverages can change from year to year, doctors move in and out of networks, and prescription plans often change as well. Changes will not necessarily be needed each year, but it is important to reevaluate your coverage and needs to avoid unnecessary costs in the long run.
One of the key pitfalls to avoid when purchasing a Medicare supplement or Part C plan is trying to select the cheapest possible plan. Just because you might rarely go to the doctor now, it does not mean that it will always be that way. You should not sacrifice a level of coverage to save very little in premiums.
Medicare may seem complex. You have multiple “parts” to Medicare with each having different benefits, cost-sharing arrangements, and premiums. Speaking with a qualified financial planner can help you work through this decision and evaluate your options. If you have any questions on how Medicare fits into your overall retirement plan, please contact us today.