How to figure out Medicare and choose the right plan

By Sally Squires

October 20, 2018

For those approaching Medicare or already covered by it, now is a critical time of year to review health benefits.

Philip Moeller — author of a popular Medicare book, “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs,” and a blogger on Medicare for the “PBS NewsHour” website — knows well about the program’s fine print that has ensnared many in what he dubs the “no one told me” syndrome.

Last year, Moeller almost made a costly mistake himself. He didn’t get a chance to check his Medicare Part D drug coverage plan until one day before Medicare open season ended. He discovered that a key medication he needed had been dropped from his drug plan’s list of covered drugs.

“It would have cost me $20,000 a year to buy the drug on my own,” said Moeller, who scrambled to find another plan to cover this drug and signed up just in time.

Such are the complexities of Medicare that almost anyone can get snared in the fine print. Each day, about 10,000 baby boomers turn 65, making them eligible to join the 58.5 million Americans already enrolled in the national health insurance program for older Americans. Medicare now accounts for 15 percent of all federal spending, according to the Congressional Budget Office. Costs are projected to grow nearly 5 percent a year over the next decade, according to the Henry J. Kaiser Family Foundation.

At this rate, Medicare Part A, which covers inpatient hospital care, short-term care in a skilled nursing facility, hospice care and some in-home care, will exceed its trust fund in 2026. For that reason, controlling Medicare costs is a big priority. In 2018, new enrollees began paying premiums based on income for Medicare Part B,which covers doctor visits, lab work, outpatient surgeries and preventive care and screenings.

Several changes are coming in 2019, including to Medicare Part D drug coverage insurance and to some Medicare Advantage plans, which are offered by private insurance companies and are known as Medicare Part C. (See “Get ready for changes next year” below. )

That is why it is more important than ever for Medicare recipients — and anyone approaching age 65 — to begin looking at all the details right now, during Medicare’s open enrollment period, which began Oct. 15 and ends Dec. 7. This is the prime time of year when changes can be made in a plan without penalty. There are a lot of different plans that can work better or worse depending on your health status and finances. Experts say you should choose a plan that will not just take care of your health needs today but also what they could be in 10 years.

Here are some other important elements of Medicare:

1. Most people qualify for “premium-free” Part A by having paid Medicare taxes through payroll deductions for 10 years or more. Part B premiums range from about $134 per person per month to $429 per month for those earning about $160,000 as an individual or more than $320,000 for a joint tax return. The cost of Part C Medicare Advantage plans varies by the company offering the plans and benefits covered. One other thing to know: Medicare covers most, but not all, costs. For 2018, the Part A deductible that a patient must cover is $1,340 for each hospital admission during the year. For extended hospitals stays beyond 61 days, there are additional costs of at least $335 per day that recipients pay.

2. You must sign up for Medicare when you turn 65 through the Social Security Administration, unless you are already drawing Social Security or receiving Railroad Retirement benefits, in which case enrollment may have been done for you. The clock actually starts ticking three months before your 65th birthday and ends three months after the month you were born. Enroll online or by mail, but many experts advise signing up in person at a Social Security office. Drop-ins are allowed, but it will be faster to schedule an appointment either in person or via phone by calling 800-772-1213.

Delayed enrollment can result in costly penalties. How much? Up to 10 percent more per year for each year missed. You could also face a delay in the start of coverage, leaving you with a health insurance gap. One ­caveat: If you work at a large employer and plan to keep working, you do not have to immediately sign up for Parts B, C or D as long as you can keep an insurance plan through work. You’ll have eight months after you retire to enroll. Check with your employer and with the SSA before you turn 65.

3. Given the possibility of penalties or delayed coverage, experts say you shouldn’t wait until the last minute to sign up. A few months before retirement, ask your Human Resources department when your employer health coverage ends. Some insurance plans stop at midnight on the last day of employment, which could leave you without coverage. As you prepare to retire, ask your employer to fill out a federal form , which will verify that you have had uninterrupted, creditable health insurance coverage.

4. If you’ve been putting money in a Health Savings Account (HSA), you must stop those payments before Medicare or Social Security benefits begin. HSAs are tax-exempt accounts in which people contribute pretax dollars to through their work. They are used to pay for such medical expenses as a health insurance deductibles. Internal Revenue Service rules prohibit Medicare recipients from contributing to HSAs. If you continue to do so while on Medicare, you could face stiff tax penalties.

But you can draw down any money left in the HSA after enrolling in Medicare or going on Social Security. Know this, however: Premium-free Part A is backdated six months from the date you apply for Medicare or Social Security. That means once it is in place, it covers costs from six months previously. So the Centers for Medicare and Medicaid Services (CMS) advises you to stop contributing to your HSA at least six months before you apply for Medicare to avoid paying tax penalties.

5. If you’ve enrolled in parts A and B, consider buying Medigap supplemental insurance. Medigap plans, which are offered by private insurers, can help cover the annual deductibles for Part A and Part B, as well as additional costs for extended hospital stays and other excess charges beyond what Medicare pays. About 14 million Americans buy a Medigap plan, according to the American Association for Medicare Supplement Insurance. Some of these plans also cover medical expenses that occur when you travel abroad. Medigap coverage can be used at any doctor or hospital accepting Medicare.

6. Medicare Advantage plans — Medicare Part C — may work better for you than signing up for the various parts of Original Medicare, so learn how they work. More than 20 million Americans annually sign up for these private insurance plans. Because they roll Parts A, B and D into one, and also can provide vision and dental coverage, some people find them easier to use and, depending on the plan chosen, less costly. If you are enrolled in a Medicare Advantage plan, you will not need a Medigap plan. Advantage plans generally require you to stay within their network of doctors and hospitals to control costs. Your choice of plans will depend on where you live; some places have 20 or more plans available, others have only one or two.

7. The cost of drugs can be a big part of health-care expenses in retirement. There are many different Part D prescription-drug coverage plans. It pays to examine the list of drugs offered by each. Find one that will match up well with your needs. Be sure to review the drug list every year during open enrollment period. If a prescription drug you need is dropped from your plan, you can switch without penalty then. You can also set up a personalized drug formulary at CMS.gov to compare Part D drug plans.

Beyond the annual premium, Part D coverage requires users to pay a yearly deductible that in 2018 could not exceed $405 per person per year.

8. If this is confusing, you can find more information at ­Medicare.gov, CMS.gov/medicare/medicare.html and AARP.org/health/medicare-insurance.

Get ready for changes next year

Among the changes in Medicare slated to occur in 2019 are:

The Part D yearly deductible will increase by $10 to $415. The coverage gap called the “doughnut hole” will continue to shrink for brand-name prescription drugs covered by Part D insurance. (This change goes into effect for generic drugs in 2020.) The doughnut hole means that, once your drug coverage hits the yearly limit of $3,820 for 2019, you are then responsible for drug costs above that.

What has changed is that you will get a 75 percent “doughnut hole discount” on brand-name drugs until your out-of-pocket costs reach the $5,100 yearly limit. Then, the Part D drug plan will resume paying for your prescription drugs. So if you hit the doughnut hole and need a brand-name medication that costs $100, you will only have to pay $25 and $95 will be applied toward your out-of-pocket spending for 2019.

Starting Jan. 1, new Medicare recipients will also no longer be able to sign up for two Medigap supplemental insurance plans now offered. Medigap Plans C and F require no out-of-pocket costs for recipients. Both plans will continue operating, but since no new members will be added, current members will probably see premiums rise as the pool of people sharing costs in these plans shrinks.

Some Medicare Advantage plans will begin offering coverage of lifestyle-support services, such as meals delivered at home, installation of bathroom grab bars and transportation to medical appointments. Previously, costs for such services had to be paid out of pocket. These services will be covered only if they are prescribed by a health professional.

Squires, a former Washington Post Health writer who now blogs at www.sallysquires.com, expects to begin using Medicare on Jan. 1.

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