Personal Finance

Are you enrolled in Medicare? It’s time to pick a plan

If you’re turning 65 or are already enrolled in Medicare, you have a decision to make about which private coverage you’re going to take to round out traditional Medicare benefits.

People just enrolling in Medicare have to decide that when they sign up. Current Medicare beneficiaries are in the middle of the annual open enrollment period where they can switch carriers or coverage. The deadline for that is Dec. 7, less than a month away.

So, this is a good time for you to weigh all your options, specifically whether a Medicare Supplement or Advantage plan is better for you.

A Medicare Supplement plan, also known as Medigap, fills the gap where Medicare doesn’t pay 100% of the costs of visits or procedures. A Medicare Advantage plan outsources your medical care to a private health insurance company which runs it like a health maintenance organization (HMO) or preferred provider organization (PPO).

Advantage plans are generally cheaper and offer more services but a limited provider network. Supplement plans let you keep your doctors (if they take Medicare) and usually cost more, though you’ll pay lower out- of-pocket costs.

But to decide, you’ll need a basic understanding of how Medicare works. At 65, almost everyone is required to sign up for Medicare (those still working and covered by employers’ health plans must sign up but can get a delay), automatically enrolling you in Part A (inpatient or hospital coverage) and Part B (outpatient and medical coverage). Part D covers the cost of prescription drugs.

People pay $144.60 a month for Parts A & B, or traditional Medicare, although you can pay much more—close to $500 a month if you’re earning $500,000 as a single individual or $750,000 as a couple. Once you start collecting Social Security, the Medicare premium is withheld from your benefits.

Then you have to decide whether to get Medicare Part C, an Advantage plan, or a supplemental plan to Parts A and B. Both are sold by health insurers, but only Advantage plans include Part D prescription drug coverage. (With a Supplement plan you’ll have to buy separate prescription drug coverage.)

Under a Supplement plan you pay your monthly premium and the insurer picks up almost all of what Medicare won’t pay for approved services, although some plans have higher deductibles than others. As of 2018, average premiums ranged from $100 to $168 a month, depending on the state. Medigap plans are pretty standardized and don’t change much from year to year.

Advantage plans cost less than Medigaps, sometimes even nothing per month. That’s because “most Medicare Advantage companies will collect over $1,000 a month from Medicare itself to take on the risk of that person,” explained Danielle Roberts, co-founder of Boomer Benefits, a Medicare insurance broker based in Fort Worth, Texas, and author of 10 Costly Medicare Mistakes You Can’t Afford to Make. “So, it’s to their advantage to make that plan as cheap as possible to attract the beneficiary to enroll. And then if they can deliver care for less than what they collect from Medicare for you, they come out ahead.”

Advantage plans offer coverage for dental, vision care, and hearing aids that Medigap plans do not, because Medicare doesn’t cover them. But they’re likely to be limited. “So, it might be a dental benefit that pays for two teeth cleanings a year if you use this network of dentists,” said Roberts. “Or it might be a vision benefit where you can get an eye exam for a $30 copay, and then they’re going to give you a $100 credit toward a pair of eyeglasses.”

The limited plans often go hand in hand with limited networks, so if you’re considering an Advantage plan, research whether the doctors or hospitals you want are covered by that specific plan. And since Advantage plans can change from year to year, you must pore over the packets insurers send you annually before you make a decision.

So, who are they good for? “If you like freedom of access and predictability, you’re a good candidate for Medigap,” said Roberts, “because you can see any doctor that takes Medicare anywhere in the nation, and the Medigap plan… is going to pay just like it was supposed to.” It’s particularly suitable for snowbirds, who spend part of the year in, say, Florida, and RV road warriors, as well as for people who have serious illnesses and need assured access to treatment without big deductibles.

But healthy, active seniors might be better off with an Advantage plan. “A lot of times a Medicare Advantage plan really appeals to that person because they don’t want to spend all that money on a Medigap plan” and would rather pay out nominal copays than a big monthly premium, she said. Advantage plans also are good for people living on Social Security and just getting by.

Of course, you know your own situation best, but with the Dec. 7 deadline looming, if you’re thinking about changing your coverage, it’s time to do some serious research and get cracking.

 

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