Why does Medicare remind us of Swiss cheese? Because it has many, many holes. Especially for those who have not properly researched their healthcare options before signing up for a program.
Jokes aside, Medicare planning for retirement is a serious matter. It can be confusing and daunting. Our team at SYM Financial has covered the basics of Medicare before, so today’s article will briefly review the structure of the program before diving into the most important thing of all: the importance of reviewing your Medicare options regularly. Missing Medicare deadlines has always been expensive, and the world after COVID has shown us all how important it is to have the right access to the medical system when you need it most.
Let’s dive in!
Review: The Many Parts of Medicare
One of the most confusing aspects of Medicare is that it has many different parts. Most people believe that “standard Medicare” covers nearly all of their costs. That couldn’t be further from the truth. Each person’s coverage can be different depending on the Medicare “parts” they have selected for themselves.
Here is what each Medicare part covers.
Part A: Part A of Medicare includes inpatient stays. These can be hospital visits, skilled nursing facilities, hospice or end-of-life care, and some home health.
Part B: Part B of Medicare includes outpatient needs. This covers your preventive care visits, primary physician visits, medical equipment you may need, and some prescriptions.
Part D: Part D of Medicare provides prescription drug coverage.
Together, Parts A, B, and D are known as “Original Medicare.” With this coverage, you can choose from doctors, hospitals and other providers that accept Medicare, and expect to pay deductibles and coinsurance.
Because those deductibles and coinsurance have the potential to rack up significant bills, some retirees buy an additional Medicare supplemental policy or “Medigap” insurance on top of Medicare Parts A, B, and D. The only way to get a Medigap insurance policy without medical underwriting is when you first sign up for Original Medicare (Parts A and B). You must maintain Parts A and B to remain eligible.
Original Medicare exists side by side with Medicare Advantage plans, or Medicare Part C.
Part C: Medicare Part C, or Medicare Advantage, is a separate plan that is like Part A, B, and D combined. It is usually sold through private insurance companies and is network-specific.
Medicare: Planning for Initial Enrollment
An important part of retirement planning for Medicare is to understand enrollment deadlines. The initial enrollment period for Medicare starts three months before your 65th birthday month and ends three months after. This gives you a seven-month window for initial enrollment.
If you are already receiving Social Security when you become eligible for Medicare, you will get your Medicare card for Original Medicare (Part A and Part B) automatically. If you are not yet drawing Social Security, you will need to sign up for Medicare.
What If I Miss the Original Enrollment Date for Medicare?
If you miss the initial enrollment deadline for Medicare, you may still be eligible for the Medicare Part B Special Enrollment Period (SEP), where you can enroll without penalty at any time within eight months after you lose your job-based insurance or stop working (or your spouse stops working), whichever comes first.
Timing is really important here. Keep in mind that you can have no more than eight consecutive months without coverage. For many people, it makes sense to enroll in Medicare before they risk losing insurance from their job. That strategy can help them avoid gaps in coverage. After all, we are not just worried about late enrollment penalties on the Medicare side. If you have a health event between losing your current work-based coverage and Medicare kicking in, you may be responsible for paying all those bills… And they can add up quickly.
Reassessing Your Medicare Coverage Each Year
The General Enrollment Period for Medicare runs from October 15 to December 7 each year. Your new coverage choices go into effect on January 1 of the following year. Most retirees treat the annual enrollment period as a “check the box” exercise. That is a mistake. Annual enrollment is a valuable opportunity to reassess your coverage and make any changes you feel are needed to your Medicare plan.
What Are Some of the Common Change Options?
If you are currently enrolled in the Original Medicare, you have the option of switching to Part C to get Medicare Advantage.
You can also switch from your current Medicare prescription drug plan (Medicare Part D) to another Medicare prescription drug plan and take advantage of potential discounts through certain drug chains. If you decide to drop Part D, you may be charged a penalty if you decide that you want drug coverage at a later date.
If you are already enrolled in Part C with built-in drug coverage, you can switch from your current plan to another Medicare Advantage plan with or without built-in drug coverage.
Also, if you sign up for Medicare Advantage (Part C), you can switch to another plan or drop your Part C coverage and return to the Original Medicare coverage if you are not happy with the plan you’ve chosen. The window to change or drop your Medicare Advantage coverage is from Jan. 1 to March 31.
Even the most common change options can be hard to decipher alone. Engaging a financial advisor and a Medicare professional that work well together is recommended.
Why You Should Reassess Coverage Every Year
Many people are unfamiliar with how Medicare works when they first enter the system. As a result, it is not uncommon to see retirees choose a plan that isn’t optimal for them the first time around. Annual reassessment and General Enrollment Period can be your chance to get back on track.
Planning ahead and doing your research early can give you a better chance of choosing the right plan for you out of the gate, but even so, your needs will shift over the years. Carefully review your current coverage and your options. You’ll want to look at the cost of premiums, copays, or coinsurance through Medicare to determine which is the right coverage for you given your financial situation and recent health history.
Medicare Planning for Retirement: Talk to a Financial Planner
Choosing the right initial Medicare plan takes careful planning and good timing. Don’t wait until the last minute before you turn 65 to start thinking about Medicare! Know your initial enrollment period so you can avoid late penalty fees. Carefully review your plan every year to avoid missing opportunities to save money and add services you might need. Know when the Open Enrollment Period is and be ready to make any changes in your coverage.
Medicare can be confusing, but you don’t have to go at it alone. SYM financial advisors are here to help you plan and collaborate with trusted Medicare professionals who can provide guidance along the way. Contact a member of the SYM team today to get the conversation started.
Disclosure: The opinions expressed herein are those of SYM Financial Corporation (“SYM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. SYM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. SYM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about SYM including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request.