Heading into retirement brings a slew of new topics to grapple with, and one of the most confusing may be Medicare. Figuring out when to enroll in Medicare and which parts to enroll in can be daunting even for the savviest retirees. There’s Part A, Part B, Part D, Medigap plans, Medicare Advantage plans, and so on. And what is a doughnut hole, anyway? To help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 11 essential things you must know about Medicare.
Medicare Comes With a Cost
Medicare is divided into parts. Part A, which pays for hospital services, is free if either you or your spouse paid Medicare payroll taxes for at least 10 years. (People who aren’t eligible for free Part A can pay a monthly premium of several hundred dollars.) Part B covers doctor visits and outpatient services, and it comes with a monthly price tag—the standard premium in 2020 is $144.60 per month and is projected to rise to $148.50 in 2021. Part D, which covers prescription-drug costs, also has a monthly charge that varies depending on which plan you choose; the average Part D basic premium in 2021 will be about $30 a month, roughly the same as this year. In addition to premium costs, you’ll also be subject to co-payments, deductibles, and other out-of-pocket costs.
Fill Medicare’s Coverage Gaps With a Medigap Plan
Beneficiaries of traditional Medicare will likely want to sign up for a medigap supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments and other gaps. You can switch medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the cost. Plan F is the most popular policy because of its comprehensive coverage, but as of 2020, Plan F (along with Plan C) is unavailable for new enrollees.
Consider Medicare Advantage for All-in-One Plans
You can choose to sign up for traditional Medicare: Parts A, B and D, and a supplemental medigap policy. Or, you can go an alternative route by signing up for Medicare Advantage, which provides medical and prescription drug coverage through private insurance companies. Also called Part C, Medicare Advantage has a monthly cost, in addition to the Part B premium, that varies depending on which plan you choose. With Medicare Advantage, you don’t need to sign up for Part D or buy a medigap policy. Like traditional Medicare, you’ll also be subject to co-payments, deductibles and other out-of-pocket costs. In many cases, Advantage policies charge lower premiums than medigap plans but have higher cost-sharing. Your choice of providers may be more limited with Medicare Advantage than with traditional Medicare, and recent research has found that sicker enrollees often dump Medicare Advantage in favor of original Medicare.
Medicare Enrollment Periods
There are several enrollment periods, in addition to the seven-month initial enrollment period. If you missed signing up for Part B during that initial enrollment period and you aren’t working (or aren’t covered by your spouse’s employer coverage), you can sign up for Part B during the general enrollment period that runs from Jan. 1 to March 31. Coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B. Those who are covered by a current employer’s plan, though, can sign up later without penalty during a special enrollment period, which lasts for eight months after you lose that employer coverage. If you miss your special enrollment period, you will need to wait until the general enrollment period to sign up.
Open enrollment runs from Oct. 15 to Dec. 7 every year during which you can change Part D plans or Medicare Advantage plans for the following year, or switch between Medicare Advantage and Original Medicare. Advantage enrollees also can switch to a new Advantage plan or original Medicare between Jan. 1 and March 31. And if a Medicare Advantage plan or Part D plan available in your area has a five-star quality rating, you can switch to that plan outside of the open enrollment period.
A Filled Doughnut Hole for Medicare Part D
In 2020 the dreaded Part D “doughnut hole” has been filled. That hole is a coverage gap in which you used to face much higher out-of-pocket costs for your drugs, but that is no longer the case. For 2021, the coverage gap begins when the total amount your plan has paid for your drugs reaches $4,130 (up from $4,020 in 2020). At that point, you’re in the doughnut hole, where you’ll now receive a 75% discount on both brand-name and generic drugs. Prescription drug manufacturers pick up 70% of that tab and insurers 5%. You pay the remaining 25%. Catastrophic coverage, with the government picking up most costs, begins when a patient’s out-of-pocket costs reach $6,550, the maximum spending limit for beneficiaries in 2021, which is $200 higher than 2020’s cap. Any deductible paid before you entered the doughnut hole counts toward that annual maximum as does the 25% you contributed while in the doughnut hole and the 70% that pharmaceutical companies paid on your behalf.
Medicare Offers More Free Preventive Services
Medicare beneficiaries can receive a number of free preventive services. You get an annual free “wellness” visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shots, and screenings for cervical, prostate, and colorectal cancers.
Have Questions About Medicare?
We want you to take advantage of this open enrollment period before it ends on December 7th. If you have even just one question, please contact our licensed agent Floyd at (561) 901-8198. Floyd will be at our office every Monday and Thursday from 9 AM-4 PM until the end of open enrollment. You can also make an appointment for a time that works best for your schedule. He can walk you through every step including:
- Help you apply for your Medicare card
- Teach you how Medicare works
- Explain which plans are relevant to your unique needs
- Educate you when comparing specific plans
- Check additional coverage
- And so much more
We recommend personalized health insurance counseling where all your questions can be answered. You can reach Floyd on his cell phone at (561) 901-8198 or email him to request an appointment at [email protected].