Though most people may not look forward to turning 65, the government has promised at least one nice benefit for you when you do: government-subsidized health insurance. However, Medicare will not cover all your health-care expenses, so you’ll still need to make some key decisions about how to fill in the gaps with a Medicare Supplement Plan. Making the right choice could save you hundreds or even thousands of dollars a year in premiums and out-of-pocket expenses.
Even if you are already eligible for Medicare, it pays to check out your choices each year during the annual open-enrollment period that runs from November 15 to December 31, when you can switch plans. Several new options appear every year, and the prices and coverage can vary greatly. The plan you picked in the past may no longer be your best option.
Below are a few tips you can use to get the most out of your Medicare coverage.
1. Sign up on time
You are eligible for Medicare at 65, even if your normal retirement age for full Social Security benefits is later. The initial enrollment period for Medicare Part B, which covers doctors’ visits and outpatient services, runs for seven months, starting three months before your birthday month and continuing for three months afterward. To make sure your Medicare enrollment runs smoothly, you should contact the Social Security Administration (800-772-1213; www.ssa.gov) three months before you turn 65.
If you miss the initial seven-month sign-up window, you’ll have to wait until the next general-enrollment period, which runs from January 1 to March 31 each year, for benefits beginning the following July 1. For each year you wait beyond your initial enrollment period, you’ll also incur a 10% penalty, which will be added to your monthly Part B premium (Part B premiums are deducted from your Social Security checks). You can sign up for premium-free Part A, which covers hospital services, at any time.
Special enrollment rules apply if you’re eligible for Medicare and still on the job. If you have health insurance through your employer or your spouse’s employer, you aren’t subject to the 10% late-enrollment penalty if you sign up for Part B within eight months of losing that coverage. Similarly, if you have employer-provided prescription-drug coverage, you can avoid the late-enrollment penalty for the Medicare Part D drug plan. If you miss the initial seven-month enrollment period, you can sign up for prescription-drug coverage during the last six weeks of any year, for benefits beginning the following January 1.
2. Review your choices
When it comes to filling the gaps in your health-care coverage, you may have several choices, the most popular being 1 of 12 Medicare Supplements, also known as Medigap plans. Look at the big picture, and compare coverage for medical care and prescription drugs, as well as out-of-pocket costs and any restrictions on health-care providers.
Medicare Supplement plans, also known as Medigap, pay for many of the co-payments, deductibles and other expenses that Medicare doesn’t cover. If you buy a policy within six months of signing up for Medicare Part B, insurers can’t reject you or charge higher rates because of your health.
Medicare Supplement policies no longer cover prescription-drug costs. For that type of coverage, you will also need to consider a Medicare prescription-drug plan, known as Part D.
New pricing and options for Part D for the following year are unveiled each fall, and you have from November 15 to December 31 to switch policies. Premiums rose to an average of 13.6% for the largest plans from 2007 to 2008 — to $25 per month, according to the Centers for Medicare and Medicaid Services. Beneficiaries in the most-popular plans faced the biggest monthly hikes. For example, the average monthly cost of the Humana Medicare Supplement standard plan jumped nearly 69%, from $15.34 in 2007 to $25.88 in 2008. Because of major changes like these, it’s a good idea to investigate your options during the open-enrollment season every year, even if you’ve been happy with your plan.
Premiums are only one cost to consider. You’ll also need to calculate total out-of-pocket costs for the drugs you take. When you add up premiums, deductibles and co-payments, a higher-premium plan could end up costing less than a lower-premium plan that has hefty co-payments.
There’s a great tool that makes it easy to compare total costs. The Medicare Prescription Drug Plan Finder (www.medicare.gov/mpdpf) can help you compare total costs for your medications under each plan available in your area. Just type in your zip code and your drugs and dosages, and you’ll see how much each plan would cost you for the year, including premiums and out-of-pocket costs.
The most popular choice is a Medicare Supplement Plan F, which tends to have the best balance of coverage and price. In 2008, it covers Medicare’s $256 daily co-payment for days 61 to 90 in a hospital. (Basic Medicare covers the first 60 days of a hospital stay.) Plan F also covers the $512 daily co-payment for days 91 to 150, and payment in full for 365 additional hospital days during your lifetime. It also covers the 20% co-payment for doctors’ services and the cost of three pints of blood, as well as the $1,024 hospital deductible, the $128-a-day co-insurance for a skilled-nursing facility, the $135 Part B deductible, Part B excess charges, and emergency care outside the U.S.
Because each plan with the same letter has exactly the same coverage, you can actually shop based on price. You should also consider what pricing method the companies you are considering use. Attained-age policies increase in price as you get older. Issue-age policies only increase prices because of health-care inflation, not because of your age. An issue-age policy may start out a little more expensive, but it will have fewer rate increases over time.
Community-rated policies are similar to issue-age policies, but everyone in the area pays the same price regardless of age. Pick the lowest-cost issue-age or community-rated policy to help keep your rates as low as possible.
Learn more about Medicare Supplement Plans and Medigap at MedigapAdvisors.com.
Jim McFadden has over 11 years of executive-level experience in the health insurance industry, is a youth baseball, softball and football coach, and has one of the worst fantasy football records in the world.