Navigating Medicare: What You Need to Know and How to Prepare
During our transition, Kim and I were both faced with the challenging task of navigating Medicare. And let me tell you, it was truly daunting! We each elected to work with Medicare insurance agents and we strongly recommend others do the same. Agents make their money from Medicare so there are no costs incurred by you. As soon as you are approaching Medicare eligibility, your mailbox will be jammed full of solicitations from insurers trying to sell you Medicare Supplements and Medicare Advantage Plans, and it's difficult to know what to trust or believe. Find an agent who can speak about multiple different insurers in your state for your Medicare Supplement options, someone who will not try to force you into any one specific plan. (Yes, Medicare supplement plans vary by state)
While electing to work with two different agents, we were able to compare the pros and cons of each recommendation, and ended up arriving at the same coverages with the same providers. So far, it has worked out well. But before we go too far let’s define and familiarize you with Medicare and its components.
What is Medicare?
Medicare is a federal health insurance program for people who are 65 or older, people with certain disabilities, and people with End-Stage Renal Disease (ESRD). Medicare has four (4) parts:
Part A covers hospital stays, skilled nursing facility stays, home health care, and hospice care.
Part B covers doctor visits, outpatient care, and some preventive services.
Part C (also known as Medicare Advantage) offers private health insurance plans that must provide all of the benefits of Part A and Part B, but the plan becomes the administrator of your benefits instead of Medicare.
Part D covers prescription drugs. NOTE: Medicare Advantage plans include drug coverage, so if you choose Part C, you may not need to choose Part D.
If you are 65 or older, you can enroll online for Parts A and B, or Part A only. You can delay Part B if you’re already covered through an employer group health plan. You can begin the sign-up process 90 days before your 65th birthday. If you are covered on an employer plan, you can defer signing up for Part B until you separate from employment. At that time, there is a Special Enrollment Period ("SEP") during which you can apply for Medicare Part B. Typically, the SEP is within a set number of months after you separate from employment. Be careful to adhere to the guidelines so you don't incur penalties for failing to sign up in time, or for having a gap in coverage. NOTE: even if you don't take Medicare Part B, once you are 65, Medicare becomes your "primary" insurer and your plan becomes secondary, even for doctor's visits. This merely means your providers will bill Medicare first, and Medicare will bill your insurer.
Understanding Medicare Part A
Medicare Part A is premium-free for most people. You pay a deductible of $1,556 in 2023 for each benefit period, which is a period of time that begins when you first enter a hospital and ends after 60 days. After you meet your deductible, you pay a coinsurance of 20% for most services.
Medicare Part A covers:
Hospital stays
Skilled nursing facility stays
Home health care
Hospice care
Understanding Medicare Part B
Medicare Part B is not premium-free. In 2023, the standard monthly premium for Part B is $164.90. You also pay a 20% coinsurance for most services, and you may have to pay a yearly deductible, which varies depending on whether you select a Medicare Advantage Plan or a Medicare Supplement (essentially, a Fee for Service Insurance Provider that supplements what Medicare Part B covers):
Doctor visits
Outpatient care
Some preventive services
Understanding Medicare Part C
Medicare Part C is also known as Medicare Advantage and offers private health insurance plans that must provide all of the benefits of Part A and Part B. Part C plans may also offer additional benefits, such as dental, vision, and hearing coverage.
Part C plans are offered by private insurance companies, and each plan has its own set of benefits, costs, and rules. You can choose a Part C plan that works best for you by comparing plans and considering your needs and budget.
You can choose this plan which limits you to certain providers and health systems and usually means zero out of pocket costs (Also known as In-Network). If you go Out-of-Network and need services that aren’t covered, be prepared to pay a hefty fee. You will typically have a co-pay for doctor visits. Medicare Advantage is generally less expensive than a Medicare Supplement, but could result in higher deductibles and out of pocket expenses, so study this carefully.
You also have the option of foregoing Part C and selecting Medigap coverage (see below).
Understanding Medicare Part D
Medicare Part D covers prescription drugs. You can choose a Part D plan from a variety of private insurance companies. Part D plans have different premiums, copays, and deductibles.
You are not required to have a Part D plan but, if you don't have one, you may have to pay more for your prescription drugs. You should check to ensure your medications are covered by your selected private insurance company.
Understanding Medicare Supplement Insurance (aka, Medigap)
Medigap is private health insurance that can help pay for some of the costs that Medicare doesn't cover, such as copays, deductibles, and coinsurance. There are numerous Medigap plans, each with its own set of benefits.
You can buy a Medigap plan from a private insurance company. When you choose a Medigap plan (also known as a “Medicare Supplement”), it's important to compare plans and consider your needs and budget. The advantage of these plans is that you can chose any provider or hospital system, however, you will likely have a higher premium and co-pay for services. For example, if you wanted to select a favorite provider or hospital system, you would have that option with a lower deductible than that of Medicare Advantage.
Medigap plans usually have higher monthly costs than Medicare Advantage plans, but lower deductibles. (Get out your calculator on this. If you anticipate high medical expenses, the much lower deductible of a Medigap plan may override the greater premium cost)
One More Thing… IRMA
Depending on your income, higher income earners will pay a monthly adjusted premium on Medicare Part B and/or Part D costs, called IRMA (Income Related Medicare Adjustment). For 2023, those individuals who earn over $97K per year would pay this premium. For those who file joint returns, they would pay this premium over $194K. (IRMA is calculated on a sliding scale. The more you earned two years prior to the year in which you are applying for Medicare, the more IRMA you will be required to pay). If your income changed significantly from prior years, because you retired or ceased employment, paying IRMA may seem excessive. Speak to your Medicare advisor. It is possible to appeal this IRMA expense, if you anticipate your income to continue to be lower than $97k/year. Pension and Social Security income are factored into the calculation. In short, it’s complicated. Speak to your independent Medicare Advisor (have we said that enough?)
Also, if you need dental coverage, that would be an additional monthly cost.
Conclusion
Medicare is a complex program, but it's important to understand it so you can get the most out of it. By understanding the different parts of Medicare, you can choose the right plan for you and get the coverage you need.
Here are some additional resources that you may find helpful:
Medicare.gov: https://www.medicare.gov/
I hope this helps!
Alex