Is your mailbox overflowing with materials from companies discussing Medicare enrollment, Medicare Advantage plans, and other pharmacy-related plans? All of these letters tell you that you must decide now! The amount of information is overwhelming—how will you possibly sort through it all and figure out what you need to do?
The Financial Planners at Envision Financial Planning are here to help. We don’t sell Medicare supplements or Medicare Advantage Plans, but we have walked through this process with hundreds of clients over the years and thought some tips and insights from our experience might be helpful.
WHEN TO SIGN UP FOR MEDICARE
It depends! The Medicare initial enrollment period starts three months before your 65th birthday and extends for three months after your birthday. For example, if your birthday is March 15th, you can sign-up from December 1 through June 30th. If you’re already receiving Social Security benefits when you turn 65, you will automatically be enrolled in Medicare Part A & Part B.
However, if you OR your spouse is currently working and is covered by an employer sponsored health plan covering 20 employees or more, you will likely want to enroll in Part A only. Part A covers care in a hospital, skilled nursing facility, and hospice. For most people, there is no charge for Part A.
The Medicare Special Enrollment Period applies if you’re currently covered by group insurance through an employer or a spouse’s employer with more than 20 employees. You may sign up for Medicare without penalty while you are covered by a group health plan or during the eight-month period that begins the month after your employment ends or the coverage ends, whichever comes first. Note that COBRA and retiree health plans are not considered “insurance based on current employment” and are not eligible for the special enrollment period when that coverage ends.
ENROLLING IN MEDICARE
The process for enrolling in Medicare is surprisingly easy. But before enrolling, you will make a choice about how you want your Medicare delivered. Unlike with an employer health plan, you have MANY options to choose from.
It’s not a good idea to select a plan based on feedback from friends, neighbors, or family members without doing your own research. The best plan for you will depend on personal factors such as your current medications, your age, and whether you live part of the year in another state.
OVERVIEW OF MEDICARE
How Medicare is delivered:
The first step in selecting a Medicare plan is to understand the various coverage choices.
Medicare Part A. Also called hospital insurance, Medicare Part A covers care in a hospital, skilled nursing facility, and hospice. It provides limited coverage for nursing home and home health services.
Medicare Part B. Medicare Part B, which is optional, covers doctor visits, lab tests, outpatient surgeries, preventative care, and medically necessary services and equipment. Together, Medicare Part A and Part B are often referred to as traditional or original Medicare.
Medicare Part C. Commonly known as Medicare Advantage, Medicare Part C is offered by private insurance companies and health providers such as Blue Cross. Medicare Advantage plans must cover the same services provided by traditional Medicare and may cover other services such as prescription drugs, dental, hearing, and vision care. This alternative to traditional Medicare usually takes the form of a health maintenance organization (HMO) plan or a preferred provider organization (PPO) plan. With an HMO plan, you will select a primary care doctor. Except for emergencies, that doctor will refer you only to health providers within the HMO network. With a PPO, you have the option of getting care outside the network, but your copay will be higher than for visits to in-network providers.
Medicare Part D. Medicare Part D is a standalone plan that covers prescription drug costs. This coverage option is offered by private insurance companies and health providers.
MEDIGAP
Medigap, also called Medicare Supplement Insurance, is another type of optional coverage offered by private insurance companies. It is designed to pay some or all of your Medicare Part A and B coinsurance and deductibles.
The 10 available plan options are standardized according to federal and state regulations. For example, all Plan A Medigap plans cover the same things. All Plan G Medigap plans cover the same things. Premiums vary between carriers, so it pays to shop around. You cannot buy a Medigap plan if you enroll in a Medicare Advantage plan, because Medicare Advantage plans offer their own schedule of deductibles, coinsurance, and/or copays.
PAYING FOR MEDICARE
Medicare is not free. Most people do not pay a premium for Medicare Part A, but they are responsible for deductibles and coinsurance unless enrolled in a Medigap or Medicare Advantage plan.
In addition, most people pay a Medicare Part B premium of $164.90 per month and an average of $40 per month for the Part D premium. Part B has an annual deductible of $226 in 2023. Those not currently collecting social security benefits or those with higher income levels may pay a higher rate for their Part B coverage. If you receive social security benefits, your Part B premium will be automatically deducted from your monthly benefit checks. If not, Medicare will bill you quarterly for your premiums.
The premium for Medicare Advantage (also known as Part C), which includes both Part A and Part B and Part D, depends on the plan. If you opt for a Medicare Advantage plan, you may pay an extra premium (on top of your Part B premium), although some providers may offer a zero-premium option.
Part D or prescription drug coverage will have a premium set by the insurance company. If your income is over a certain level, your premiums will be higher.
If your income is above certain levels, you may have to pay an Income-Related Monthly Adjustment amount (IRMAA) as part of your Part B and Part D prescription drug premiums. The IRMAA is based on your modified adjusted gross income from your tax return filed two years prior to the current year. If your income for the current year will be substantially lower, contact your local social security office or submit this form https://www.ssa.gov/forms/ssa-44-ext.pdf to ask for an adjustment to your premium. Reducing your work hours, retiring, getting married or divorced, or losing a spouse may result in an adjustment in premiums.
See below for more information on how premiums increase based on income.
ONCE YOU'RE ENROLLED
It’s up to you to understand how the Medicare option you choose covers a test, treatment, or medical equipment. Keep in mind that traditional Medicare does not cover most hearing, dental, vision, or long-term care costs.
Every year between October 15 and December 7, you can elect to make changes to your Medicare coverage. The changes become effective on January 1 of the following year. If you don’t wish to make changes, you do not need to do anything during open enrollment. If you opt for a Medicare Advantage plan, your Medicare Advantage provider will send a letter in September of each year, outlining changes in premium and coverage for the upcoming plan year. This is a good time to ensure that the plan still meets your needs. We recommend shopping your Rx plan every year using the tool at www.Medicare.gov.
For more information about Medicare and your choices, download the easy-to-understand Medicare & You handbook from www.medicare.gov.
OBSERVATIONS FROM ENVISION FINANCIAL PLANNING
If you’re a Tennessee resident and your employer sponsored health plan was through BlueCross, you may find the BlueCross Medicare Advantage Plans appealing. The network of doctors is generally similar to Network S plans. You can get more information on the plans available at www.bcbst.com
If you’re a Florida resident, you may want to explore Medicare Advantage as well. With a large number of retirees, doctors and hospitals compete heavily for patients. Please be sure to check that your primary care doctor, cardiologist and any other specialists are in the network. Also, our clients seem to prefer PPO networks rather than HMO’s due to greater flexibility.
United Healthcare, primarily through their relationship with AARP, is the largest provider of “Medigap” policies. If you’re an AARP member, definitely include them in your search. BlueCross is the second largest provider nationally and is a familiar name to many of our clients.
If you opt for traditional Medicare, your Medicare supplement provider and your prescription drug provider may be different. The “best” prescription drug provider for your situation will depend heavily on the medications you take (brand versus generic) and which pharmacy you prefer. We often see clients realize large savings by evaluating their Rx provider each year based on their current prescriptions. Additionally, a husband and wife may be better off with different providers. www.Medicare.gov has a great tool that can provide information on the lowest cost provider based on your Rx history. We also have another blog post on how to shop your Rx plan!
If you travel quite a bit, traditional Medicare and a supplement may be your best option since you can see any doctor that accepts Medicare.
MONTHLY MEDICARE PREMIUMS FOR 2023
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If your filing status and yearly income in 2021 was |
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File Individual Tax Return |
File joint tax return |
File married & separate tax return |
Premium for each month (in 2023) |
Premium for each month (in 2023) |
Increase in Premiums |
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For Part B |
For Part D/Rx |
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||
|
$97,000 or less |
$194,000 or less |
$97,000 or less |
$164.90 |
your plan premium |
$0 |
|
above $97,000 up to $123,000 |
above $194,000 up to $246,000 |
not applicable |
$230.80 |
$12.20 + your plan premium |
$78.10 |
|
above $123,000 up to $153,000 |
above $246,000 up to $306,000 |
not applicable |
$329.70 |
$31.50 + your plan premium |
$196.30 |
|
above $153,000 up to $183,000 |
above $306,000 up to $366,000 |
not applicable |
$428.60 |
$50.70 + your plan premium |
$314.40 |
|
above $183,000 and less than $500,000 |
above $366,000 and less than $750,000 |
above $97,000 and less than $403,000 |
$527.50 |
$70.00 + your plan premium |
$432.60 |
|
$500,000 or above |
$750,000 and above |
$403,000 and above |
$560.50 |
$76.40 + your plan premium |
$472.00 |
Please keep in mind that these monthly premiums are per person. So a couple will pay double the amounts shown here.
Let us know if you have any additional questions.