If you’re new to Medicare or preparing to enroll for the first time and are confused by how it works — including when, where and how to sign up — you’re certainly not alone.
The first thing to understand about this federally run health insurance program is how many health plan choices are actually available, says Patricia Barry, features editor for AARP and author of “Medicare for Dummies.” “And more choices mean more decisions.”
That’s why careful planning is important. “Give yourself some time to explore your different options before your enrollment period begins,” Barry adds.
Know your alphabet
A good place to start: Learning the Medicare ABCs — and D.
Medicare is divided into Parts A, B, C and D. The first choice you’ll need to make is whether you’re going to stick with Original Medicare (Parts A and B), or whether you’re going to consider additional coverage in a Medicare Advantage plan (Part C). Enrollment in Medicare Advantage has increased by nearly 50 percent since 2010, reports the Kaiser Family Foundation, with nearly one in three — or 31 percent of — people on Medicare enrolling in a Medicare Advantage plan in 2015.
If you prefer to stay with Original Medicare (Part A and Part B), your coverage will be provided through the federal government, with additional coverage available through private insurers, such as a Medicare prescription drug plan (Part D) or Medicare supplement insurance (Medigap).
Established in 1965, Original Medicare consists of two parts: A and B. Medicare Part A is hospital insurance. It covers inpatient stays in hospitals or skilled nursing care facilities, hospice care and some home health care. Medicare Part B is medical insurance, covering certain doctors’ services, outpatient care, medical supplies and preventive services. Original Medicare allows participants to see any doctor, specialist or hospital that accepts Medicare patients.
According to Susan Morisato, president of UnitedHealthcare Insurance Solutions, that network flexibility is one of the main advantages of Original Medicare. “It’s portable, so it goes wherever you go,” Morisato says. For this reason, Original Medicare may be the best option for people who travel frequently, she adds.
For the most part, Original Medicare is based on a fee-for-service system.
Under Parts A and B, Medicare covers a wide range of health services, from heart transplants to flu shots. But there are also gaps, says Barry. Medicare does not cover expenses such as routine hearing, vision, dental care or prescription drugs.
To fill the gap in prescription drug coverage, Part D of Medicare was established in 2006. Those who choose Original Medicare can also purchase a stand-alone Medicare Part D plan from a private insurer for an additional monthly premium.
The best way to choose a prescription drug plan may be to consider any specific drugs you take, because Part D plans don’t cover all drugs and copays can differ — even for the same drug, says Barry.
You can also separately purchase Medicare supplement insurance, sometimes called Medigap, which typically covers most of the out-of-pocket costs of Original Medicare, including co-pays and deductibles, says Morisato.
In general, Part B of Original Medicare covers about 80 percent of health care costs, leaving beneficiaries responsible for the remaining 20 percent. Medigap can help cover those remaining costs — although this option comes with an additional monthly premium that can be upwards of $150. Another advantage of Medigap plans is that they typically have very stable benefits that stay the same for as long as you’re enrolled, adds Morisato.
Get to know Medicare Advantage
The Part C of Medicare is Medicare Advantage. Available through private insurance companies, Medicare Advantage offers a variety of managed care plans — like HMOs and PPOs — that are similar to the insurance coverage many people are familiar with from their working days. The federal government approves insurers’ Medicare Advantage plans annually.
Medicare Advantage covers everything in Part A and Part B, but may also include extras like coverage for hearing, vision and dental. Some plans amp up the extras even further to include coverage of gym memberships, hearing aids, disease management programs, and health and wellness programs. And most include prescription drug coverage as well, allowing beneficiaries to wrap all of their coverage together into one plan and to carry a single insurance card.
The premiums for Medicare Advantage plans are typically lower than that of Medicare supplement plans, with some available for no additional premium beyond the Part B premium that all beneficiaries pay.
According to Tim Noel, senior vice president at UnitedHealthcare Medicare & Retirement, these zero-premium plans are possible because the managed care model can often achieve better health outcomes at lower costs. “When that happens, some of the savings of the plan are passed along to beneficiaries in the form of no or lower premiums and enhanced benefits,” he says.
Medicare Advantage plans also provide extra financial predictability through annual out-of-pocket maximums that cap a person’s medical costs at a set amount for the year, which Original Medicare does not offer, Noel adds.
While the extra benefits and features of Medicare Advantage plans are a major draw for many people, they typically require members to receive medical services from certain doctors and hospitals, usually within a certain geographic area.
The structure enables members’ care to be coordinated by their doctors, helping to ensure they receive the most appropriate care based on their health needs and avoiding duplicative services.
If you want to get care from the same doctors and facilities you use now, it’s important to make sure they’re included in the provider network offered by a Medicare Advantage plan you choose, says Noel.
Navigating the options
With so many options to consider, it can be easy to feel overwhelmed. That’s why it’s crucial to give yourself ample time to think through your decisions, and also lean on resources for help with this process.
When choosing a Medicare plan, think about your health status, what drugs you may be taking and how much financial protection is right for your budget, says Noel.
“It’s important for people to recognize that they have an individual set of circumstances, and the decision that they make really has to make sense for them,” he adds.
Once you’ve chosen how you want to get your Medicare coverage, you then have to ensure you enroll on time.
Enrollment for those who are aging into Medicare is a seven-month period that starts three months before the month they turn 65, includes their birthday month and ends three months after the month they turn 65. For other enrollment situations, visit Medicare.gov for details.
If you or your spouse is actively working and has eligible health insurance coverage from an employer, you can usually delay signing up for Medicare, says Barry. The key phrase here is “actively working,” because retiree health benefits and Cobra coverage don’t count in this situation. And your coverage through your employer must be considered “creditable,” meaning just as good as you would get through Medicare.
(Caution: If you miss the initial enrollment period, you may have to pay a penalty that increases your monthly premium for as long as you have Medicare and may have to wait longer to get coverage. “You have to get enrollment right,” says Barry.)
As if the process weren’t complex enough, the initial enrollment opportunity for Medicare supplement plans (Medigap) is slightly different. It lasts six months instead of seven, and it starts when you turn 65 and enroll in Medicare Part B.
(Caution: If you wait until after this open enrollment period, you may be denied enrollment in a Medigap plan, or it may cost more in the form of a higher monthly premium.)
One organization to approach for help is your State Health Insurance Assistance Program (SHIP). With a program in every state, SHIP counselors are trained in all types of Medicare coverage and offer assistance free of charge.
To explore coverage options online, visit UnitedHealthcare’s MedicareMadeClear.com, which provides a comprehensive overview of the Medicare program and guides to help with navigating the program.
You might think your work is done once you decide on a plan and enroll for the first time, but it’s important to review your coverage every year, adds Noel, as Medicare Advantage and Part D plans can change annually. Open Enrollment — every year from Oct. 15 to Dec. 7 — is an opportunity for anyone already enrolled in Medicare to join a Medicare Advantage or standalone Part D plan, or switch to a new plan.
According to Noel, the most important tip for choosing Medicare coverage is to understand that it takes time to sort through all your options. “Start early,” says Noel. “There’s a lot of information out there and you don’t want to get overwhelmed.”