How to Choose A Medicare Plan21 minute read

21 minute read

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Updated for May, 2019

As you enter your elderly years, Medicare can loom over your healthcare decision making. When can you get it? And once you can acquire it, how do you choose a Medicare plan that’s best for you? There are lots of questions that come with choosing a Medicare plan, but first, let’s get into the most basic question: what exactly is Medicare?

Medicare Plans

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Medicare is a federal healthcare program that focuses on helping the elderly with healthcare costs. According to the Medicare site, the program focuses on assisting these three groups:

  • People over the age of 65
  • People younger than 65 who collect Social Security Disability Insurance
  • People suffering from End Stage Renal Disease (some may be under 65)

Medicare was passed into law in the 1960s under the Social Security Administration. It’s funded partly by a payroll tax, partly by funding from the government, and partly by the people who get Medicare themselves through premiums and other payments.

The program is split up into four parts—A through D—that all cover various healthcare needs like hospital stays, visits to the doctor, prescriptions, and more.

As of 2017, the federal government spent more than $700 billion on Medicare—or about $14,500 on each person over the age of 65 in the United States. And this is just the average cost that is saved per elderly person. Each person then spends a varying amount of money out-of-pocket to cover remaining costs.

Prescription drugs are expensive, even if you’re just taking one drug and getting it filled every month.

Do You Need Prescription Drug Coverage?

Here is the next vital question: do you need prescription drug coverage as a Part of your plan? As an elderly person, the answer is almost always yes.

Prescription drugs are expensive, even if you’re just taking one drug and getting it filled every month. This is especially true for seniors. Despite making up less than 15 percent of the entire United States population, the elderly consume one-third of the prescription drugs taken in the country.

Up to 90 percent of elderly people (over 40 million) use at least one prescription drug a month, and nearly 40 percent of people 65 and older use five prescriptions every month. These costs can add up without some level of prescription drug insurance coverage. This is where Medicare helps immensely.

Medication Pill Box

Medicare’s Part D is all about prescription drugs. This coverage is purchased through a private health insurance company approved by Medicare, and there is a monthly premium to pay, no matter how many prescriptions you use—just like Part B.

The average cost for this premium is $34 as of early 2018. This cost may be a little higher if your income is above $85,000 (this extra cost will be paid directly to Medicare) or if you enroll late in Part D coverage.

You can compare Medicare Part D costs based on your zip code and other Medicare coverage on the Medicare website.

Do You Need Supplemental Medicare Coverage?

As we’ve seen, Medicare comes with varying costs from premiums, deductibles, copayments, and so forth. You can get supplemental coverage to help cover these costs, and it’s known as Medigap.

Medigap comes in many different forms—parts A, B, C, D, F, G, K, L, M, and N—that help varying cover varying levels of copayments, coinsurance, extra hospital costs, pints of blood, deductibles, foreign travel insurance, and more.

The most popular Medigap plan is Part F, and it’s also the most expensive. Two-thirds of people who get a Medigap plan get Part F. Benefits included in this plan include (but aren’t limited to):

  • Deductibles for parts A and B
  • Coinsurances for parts A and B
  • 80 percent of foreign travel insurance costs
  • Three pints of blood

There are premiums on these plans, and you will have to pay this monthly payment on top of your premiums for Part B and D. You may also have a yearly deductible you need to reach before your Medigap plan takes over payments.

Supplemental coverage is great for those who often need to use their Medicare services and may have high out-of-pocket costs due to Part A and B copayments and coinsurances.

If you don’t apply for Part B within this enrollment period, there can be late fees for enrolling at other times.

Remember, you are automatically eligible to receive Medicare the day you turn 65. If you are already receiving Social Security benefits and enrolled in Medicare before you hit 65, you will automatically be enrolled in Part A of Medicare.

Happy senior couple discussing house purchase

However, if you don’t receive retirement benefits yet, elderly people can begin to enroll in Medicare—beyond Part A—three months before they turn 65, the month of your birthday, and three months after it. This seven-month period is called the Initial Enrollment Period. Applying for Medicare Advantage Plans and prescription plans occur during this period as well, and supplemental plans can be added at any time.

If you don’t apply for Part B within this enrollment period, there can be late fees for enrolling at other times.

Just in case you miss the IEP, the General Enrollment Period for Medicare is between January 1 and March 31.

You can apply at a handful of places:

  • Visit SocialSecurity.gov
  • Call the Social Security Administration
  • Visit your local Social Security office

The process for enrolling in Part A takes less than 10 minutes, and adding on other plans won’t take much longer—especially if you’ve done your research beforehand.

Yes, and no.

You can’t add, drop, and change coverage as you please. There are certain times and dates when you can do this. There can also be some confusion as to whether or not there will be fees or penalties for adding certain coverage or dropping it from your plan.

Let’s go through each situation and see if you can drop or add it, if there will be any penalties, and when you can do it.

Can I add Part A later?

No, this is what you start with. If you don’t qualify for Part A but do later down the road, you can add it then.

Can I drop Part A later?

Yes, but you shouldn’t— especially because there are no monthly premiums.

Can I add Part B later?

Yes, but there is a 10 percent late enrollment fee for every 12 months you don’t have Part B after you initially enroll.

Can I drop Part B later?

Yes. This may occur when a spouse or loved one finds a job that covers all the costs that Part B covers. There is no penalty to do this.

Can I change from a Medicare Original plan to a Medicare Advantage Plan after and vice versa?

Yes, you can add the Advantage Plan later, but you can only do so in the open enrollment period (OEP) from October 15 to December 7. You can switch to the Original Medicare plan in the same time.

Can I change from one Medicare Advantage Plan to another?

Yes, during the aforementioned open enrollment period mentioned in the last section.

Can I disenroll from my Advantage Plan?

Yes, there is a period from January 1 to February 14 when you can disenroll.

Can I add Part D later?

Yes, but like Part B, there is a fee for every 12 months you don’t enroll when you first have the opportunity.

Can I drop Part D later?

Yes. If you are canceling because you’re getting coverage through a Medicare Advantage Plan, Medicare will automatically cancel it for you. If you are dropping it just to drop it, you can do so during the open enrollment period.

Can I have Medigap and a Medicare Advantage Plan?

No. You must have one or the other.

Can I add Medigap later?

Yes, as long as you don’t have a Medicare Advantage Plan. You can do so during the open enrollment period. Insurance companies will typically put your medical history to the side if you apply during this time.

Can I drop Medigap later?

You can suspend Medigap if you get similar coverage through a job. You can drop your policy at any time by contacting your insurance company.

If you have any questions regarding how to choose a Medicare plan, contact you local Social Security office or visit the Medicare website.