Medicare Enrollment Guide
Posted Oct 26, 2020
Considering Medicare Plans within a Comprehensive Financial Plan
As you retire, health insurance will be an important factor to consider as part of your comprehensive financial plan. As you likely know, Medicare is the federal health insurance plan for U.S. citizens and permanent legal residents (of at least five years) aged 65 and older.1 A strategic Medicare decision is critical to managing your health care costs well into the future, and your selection should fit into the larger financial picture to make the most of your retirement earnings. First, learn about the ins and outs of Medicare from financial advisors so you can either join a plan that fits your goals or change your current plan to better suit your needs. You first become eligible during the Initial Enrollment Period three months before the month you turn 65 through three months after your birthday. After enrolling, changes to your plan can be made during the annual Open Enrollment Period from October 15 to December 7.
When it is time for you to initially enroll, you will choose either Original Medicare or a Medicare Advantage Plan. Original Medicare comprises the first two letters of the Medicare “alphabet”: Part A, which covers Hospital Insurance, and Part B, covering your Medical Insurance. With Original Medicare, you will be able to visit any U.S. doctor or hospital that takes Medicare. There is no out-of-pocket limit, however, and few prescriptions are covered in this base plan. To expand your coverage from Original Medicare, you can purchase Medicare Part D for prescription drug coverage or a Medigap plan from a private insurance company.
The other option, the Medicare Advantage Plan, follows as the next letter in the “alphabet”: Part C. If you do not plan on traveling internationally and you visit doctors who participate in the Medicare Advantage network, consider the Medicare Advantage Plan—usually a combination of Part D prescription drug coverage and Parts A and B of Original Medicare. Compared to Original Medicare, you often receive more benefits (like dental, hearing, and vision coverage) and lower costs out-of-pocket, but at the tradeoff of a smaller selection of doctors and providers who are “in-network”.
Whether you choose Medicare Part D or an alternative plan with a private group, it is essential to enroll in a creditable prescription drug coverage as soon as you become eligible.2 If you decide to join a plan later, the plan often charges a recurring late enrollment penalty. If you already have drug coverage independent of Medicare, you will want to find out it is affected by Medicare prescription drug coverage. Joining a separate drug plan along with an HMO or PPO plan will disenroll you from the Advantage Plan.
Medicare Supplement Insurance, also known as “Medigap”, are plans that insurance agents offer to help you fill in the gaps left by Original Medicare.3 Instead of offering specific benefits as Medicare Advantage Plans do, Medigap pays for health care costs that Original Medicare doesn’t cover, like your copayments, coinsurance, and deductibles. The monthly premium for Medigap will be a separate payment to the insurance company, and if you have a spouse who wants coverage, they will need their own policy. Medigap offers stability in exchange for the inconvenience. Even if you have health problems, Medigap plans are guaranteed to renew as long as you pay the premium and your health care costs are locked in. If you plan to travel internationally in retirement, you should consider choosing one of the Medigap policies that cover medical care outside the U.S. The downside to Medigap? Private supplement plans and Medicare Advantage do not work together. Know that you cannot use Medigap to pay Advantage Plan copayments, deductibles, or premiums.
Despite complex tradeoffs, costs can be minimized when viewing the big picture of your financial plan. In a previous blog post, we explained how Social Security and Medicare integrate. If you are already receiving Social Security benefits, you will be automatically enrolled in Medicare Parts A and B when you turn 65.4 The Part B premium is withheld from the Social Security payment each month; optionally, the Part D premium can be withheld from the monthly payment. Seniors not drawing Social Security at the time will pay their Part B premium quarterly, separate from a future Social Security check.
Medicare decisions are an integral part of any comprehensive retirement plan. Thayer Financial can help you align health care costs with your long term retirement goals. As financial advisors in Hickory, Thayer is your dedicated resource for fee-only, fiduciary advice. Schedule an appointment or call with us today.
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