Signing up for Medicare isn’t as simple as checking a box on your 65th birthday. Seniors who want to maximize their health coverage and avoid late enrollment penalties need to do their research before enrolling in Medicare. If you’ve read all the brochures and still feel bewildered by your Medicare options, this guide is for you.
Medicare Basics: Choosing a Plan
The first decision to make is whether you'll enroll in Original Medicare or a Medicare Advantage plan.
Original Medicare includes Medicare Part A and Medicare Part B. Original Medicare operates as a fee-for-service plan, which means subscribers can see any doctor that accepts Medicare.
Part A is considered hospital insurance. It covers:
Inpatient hospital care
Skilled nursing facility care (not long-term care)
Home health care
Part B is medical insurance. Part B covers:
Outpatient medical care
Durable medical equipment
If you or your spouse worked and paid Medicare taxes for at least 10 years, Part A premiums are $0. However, you must meet a $1,364 inpatient hospital deductible before Medicare coverage starts. This deductible covers the first 60 days of inpatient hospital care. After the 60th day, you're responsible for $341 per day while hospitalized or $170.50 per day for skilled nursing care.
For Medicare Part B, most seniors pay $135.50 a month in 2019. Seniors earning over $85K for an individual or $170K for a couple filing jointly pay more for Medicare Part B.
In addition to monthly premiums, Medicare Part B requires you to meet a $185 deductible before coverage starts and pay 20 percent coinsurance on covered services after reaching the deductible.
You can see the 2019 fee schedule for Original Medicare at the Centers for Medicare and Medicaid Services.
Also known as Part C, Medicare Advantage is an alternative to Original Medicare. Unlike Original Medicare, which is managed by the government, Medicare Advantage plans are managed by private companies and require you to visit in-network providers to receive full coverage.
Medicare Advantage plans provide the same coverage as Original Medicare. Many also offer additional benefits like prescription drug coverage and dental, vision, and hearing care. Access to preventive care benefits while healthy can reduce the health problems seniors experience later on.
Costs and coverage options for Medicare Advantage plans vary by location. Use a Medicare plan finder or talk to a licensed insurance agent for help comparing plans in your state. Know that if you select a Medicare Advantage plan you're still responsible for paying Part B premiums.
Supplemental Medicare Coverage
Many seniors choose to purchase supplemental Medicare coverage. Supplemental coverage reduces out-of-pocket costs but increases monthly premiums.
Prescription Drug Coverage
Medicare Part D offers prescription drug coverage. Most Medicare Advantage plans already include Part D coverage.
In 2018, the average Part D premium was $34. However, costs and coverage vary by plan. Seniors should review available Part D plans to find one that best fits their prescription drug needs.
One in four seniors with Original Medicare also buy Medigap coverage, according to the Kaiser Family Foundation. Medigap reduces out-of-pocket spending by covering the deductibles and coinsurance required by Original Medicare.
Ten standardized Medigap plans exist, but plan availability varies by state. Prices, too, can vary widely. Federal law prohibits insurers from denying coverage or raising rates for seniors with health conditions during mandated “guaranteed issue” periods, but outside those periods seniors are subject to medical underwriting that can raise premiums.
Now that you know the basics, you’re ready to search for and compare Medicare plans. Choosing Medicare coverage is one of the most important decisions you’ll make in retirement, so consider your options carefully. While you can always change your Medicare coverage during the annual open enrollment period, choosing the right plan from the start saves money and worry.