From the Desk of Wes Clark
Medicare can be confusing.
There are different parts, different plans, different costs, and several enrollment periods. Even people who have been on Medicare for years may not fully understand how all the pieces work.
The good news is that you do not need to become a Medicare expert.
You simply need to know what questions to ask and when to ask them.
Medicare Open Enrollment begins October 15 and ends December 7. During this period, people can make certain changes to Medicare Advantage and prescription drug coverage. Changes made during Open Enrollment generally begin January 1.
You do not have to change your coverage every year. But you should review it before deciding to stay where you are.
This month, we explain what to look for and why preparing early can help.
Why Your Medicare Plan Deserves an Annual Review
Think about a phone plan you signed up for two years ago.
It may have been the best choice at the time. But prices, features, and your own needs may have changed since then.
Medicare plans can change too.
A prescription may cost more next year. A doctor may leave a plan’s network. A hospital copayment may increase. A plan may also change its deductible or rules for approving certain services.
That does not mean your current plan is wrong.
It means you should make an informed choice rather than allowing your coverage to renew without reviewing it.
Here are five questions to ask.
1. Are your medicines still covered at a reasonable cost?
Begin by making a list of every prescription you take.
Include:
The exact name
The dose
How often you take it
The pharmacy you use
Prescription drug plans place covered medicines into groups called “tiers.” Medicines in lower tiers usually cost less than medicines in higher tiers. Each plan has its own list of covered drugs, called a formulary.
A medicine that was affordable this year could move to a more expensive tier next year. A plan may also require you to use a preferred pharmacy or receive approval before it covers a medicine.
Do not compare drug plans by their monthly premiums alone.
Your total cost can include:
The monthly premium
The deductible
Copayments
Coinsurance
The cost of your specific medicines
Your total drug costs depend on the plan you choose and the prescriptions you use.
2. Are your doctors and hospitals still available?
Make a list of the doctors, specialists, clinics, and hospitals you want to continue using.
People with Original Medicare can generally see any doctor or hospital in the United States that accepts Medicare.
Medicare Advantage plans are offered by private insurance companies. In many cases, members must use doctors and hospitals within the plan’s network.
Do not assume that a doctor who accepts your plan today will accept it next year.
Check the plan’s provider directory, but also call the doctor’s office. Ask whether it expects to accept your exact plan during the coming year.
3. What could you pay during a difficult year?
A plan with a low monthly premium is not always the least expensive plan.
Look at the whole picture:
Monthly premiums
Deductibles
Primary-care copayments
Specialist copayments
Hospital costs
Prescription costs
The yearly out-of-pocket limit
Medicare Advantage plans have a yearly limit on what members pay for covered Part A and Part B services.
Original Medicare by itself does not have a yearly out-of-pocket limit. A Medicare Supplement policy, also called Medigap, can help pay some of the costs that Original Medicare leaves to the patient.
The goal is not simply to find the lowest monthly bill.
The goal is to understand what you may pay during an ordinary year—and what you could pay if your health changes.
4. Do you travel or live in more than one state?
Your travel habits can affect which type of coverage fits you.
Original Medicare can generally be used with any doctor or hospital in the United States that accepts Medicare.
Medicare Advantage plans may use local or regional provider networks. The rules for receiving care outside the network depend on the type of plan.
Ask yourself:
Do I spend part of the year in another state?
Do I travel often?
Do I want access to specialists outside my local area?
What happens if I need care while away from home?
Emergency and urgent care are important, but so is access to routine follow-up care when you travel.
5. Does the plan fit more than your current health?
A plan should not be judged only by the care you need today.
Consider what might happen if you later need:
Regular specialist visits
Physical therapy
A major procedure
Cancer treatment
Skilled nursing care
An expensive prescription
No one can predict future health needs.
But you can choose coverage after thinking about more than annual checkups and today’s prescriptions.
The Two Main Ways to Receive Medicare
There are two main ways to receive Medicare coverage: Original Medicare and Medicare Advantage.
Original Medicare
Original Medicare includes:
Part A for hospital insurance
Part B for medical insurance
You may also purchase:
A separate Part D prescription drug plan
A Medicare Supplement policy, also called Medigap
Original Medicare generally allows you to use any doctor or hospital in the United States that accepts Medicare.
Medigap can help pay some of the deductibles, copayments, and coinsurance left by Original Medicare.
Medigap generally does not cover:
Prescription drugs
Routine dental care
Routine vision care
Hearing aids
Private-duty nursing
Long-term custodial care
This path may have higher monthly premiums, but it can provide broader access to doctors and more predictable medical costs.
Medicare Advantage
Medicare Advantage plans are offered by private insurance companies approved by Medicare.
They include Part A and Part B. Most also include prescription drug coverage, and many offer benefits such as dental, vision, or hearing coverage.
Medicare Advantage plans may have:
Lower monthly plan premiums
Provider networks
Copayments when services are used
Rules requiring approval before certain treatments
A yearly limit on covered Part A and Part B out-of-pocket costs
The cost and convenience of the plan depend on the care you need, the doctors you use, and the rules of the specific plan.
Which choice is better?
Neither choice is best for everyone.
The right answer depends on your:
Doctors
Medicines
Health
Budget
Travel
Location
Need for flexibility
Comfort with networks and approval rules
A lower monthly premium can be valuable.
So can the freedom to see a wider range of doctors.
The important thing is to understand the trade-off.
One Medicare Rule Many People Learn Too Late
Medicare Open Enrollment happens every year.
Medigap Open Enrollment does not.
Under federal law, your Medigap Open Enrollment Period normally lasts for six months. It begins the first month that you are at least 65 and enrolled in Medicare Part B.
During that six-month period, an insurance company generally cannot deny you a Medigap policy or charge you more because of an existing health condition.
After the period ends, you may have fewer choices. An insurer may be allowed to review your health, charge you more, or deny your application. Certain protected situations and additional state rights may still apply.
This is important for anyone thinking about leaving Medicare Advantage and returning to Original Medicare.
You may be allowed to leave the Medicare Advantage plan, but that does not always mean you will be able to purchase the Medigap policy you want.
Before changing coverage, find out:
Whether you qualify for a Medigap policy.
What the policy will cost.
When the new policy will begin.
Whether you will need a separate Part D drug plan.
Do not cancel your current coverage until you understand how the new coverage will work.
Money and Medicare: What Is IRMAA?
Some people pay an additional amount for Medicare Part B and Part D because of their income.
This added cost is called the Income-Related Monthly Adjustment Amount, or IRMAA.
IRMAA is not a fine or punishment. It is an additional Medicare premium for people whose modified adjusted gross income is above certain limits.
Social Security usually uses income information from a federal tax return filed two years earlier. This means that a large taxable event in one year may affect Medicare premiums two years later.
Examples may include:
A large taxable retirement-account withdrawal
A Roth conversion
A large capital gain
The sale of an investment
A large amount of taxable income received in one year
A single high-income year will generally affect one Medicare premium year. The “two years” refers to the normal lookback period, not to automatically paying the added amount for two years.
What if your income has gone down?
Sometimes the income used to calculate IRMAA no longer reflects a person’s current life.
Social Security may lower IRMAA after certain life-changing events that reduce household income.
Examples include:
Retirement or a reduction in work
Marriage
Divorce
The death of a spouse
Loss of income-producing property
Loss of certain pension income
Social Security may require proof of the event and updated income information.
This is one reason Medicare planning and tax planning should not be treated as completely separate subjects.
A financial advisor can help you understand how a withdrawal or Roth conversion may affect your taxable income. A tax professional can help estimate the tax consequences. Medicare or Social Security makes the final decision about Medicare premiums.
Your August Medicare Checklist
You do not need to choose a new plan in August.
This is the month to get organized.
Gather these items
Your Medicare card
Your current insurance plan card
A complete prescription list
The names of your doctors and specialists
Your preferred hospitals and clinics
Recent medical and prescription statements
A list of the care you expect to need next year
Review every notice from your plan
Your plan will send information explaining changes to its costs, benefits, drug coverage, and rules for the coming year.
Do not throw these notices away.
Read them even if you have been happy with your current coverage.
Compare before deciding
Medicare’s Plan Compare tool allows people to review available Medicare Advantage and Part D plans in their area.
When comparing plans, review:
Medicines
Pharmacies
Doctors
Hospitals
Premiums
Deductibles
Copayments
Yearly out-of-pocket limits
Ask for qualified help
Medicare choices can be complicated.
Sources of assistance include:
Medicare at 1-800-MEDICARE
A licensed Medicare insurance professional
Your State Health Insurance Assistance Program, known as SHIP
SHIP provides free, personalized Medicare counseling and is not connected to an insurance company or health plan. citeturn621356view0
Dates to Remember
October 15
Medicare Open Enrollment begins.
December 7
Medicare Open Enrollment ends.
January 1
Changes made during Open Enrollment generally take effect.
From Our Desk
Before Open Enrollment begins, watch for your updated Medicare & You handbook and any notices from your current Medicare Advantage or prescription drug plan.
If you receive an Annual Notice of Change, review it carefully. It explains how your plan’s costs, benefits, drug coverage, and other rules may change next year.
Before comparing your options, gather a current list of your medicines, doctors, preferred hospitals, and pharmacies. You can then use Medicare’s Plan Compare tool or speak with Medicare, your State Health Insurance Assistance Program, or a licensed Medicare professional.
Keep these materials together so they are easy to find when Open Enrollment begins.
The Bottom Line
The best Medicare decision is not always the plan with the lowest premium.
It is the coverage you understand and the coverage that fits your doctors, medicines, health needs, travel, and budget.
You may review everything and decide that your current coverage is still the right choice.
But make that decision after reviewing it, not simply because another year has passed.
Wes Clark
Byzantium Wealth Management Strategies
Important Information
This blog post is published by Byzantium Wealth Management Strategies for general educational purposes. It is not investment, tax, legal, medical, or insurance advice.
Byzantium Wealth Management Strategies does not recommend, sell, or compare Medicare insurance plans. Medicare rules, costs, benefits, provider networks, formularies, and plan availability may change. Verify current information with Medicare, Social Security, a tax professional, a licensed Medicare insurance professional, or your State Health Insurance Assistance Program before making a decision.
Byzantium Wealth Management Strategies is not affiliated with or endorsed by Medicare, the Centers for Medicare & Medicaid Services, or the Social Security Administration.