PUBLISHED FRI, OCT 23 20208:00 AM EDTUPDATED FRI, OCT 23 20201:51 PM EDT Sarah O’Brien@SARAHTGOBRIEN
KEY POINTS
·
Whether you’re
reviewing your coverage during open enrollment through Dec. 7 or are signing up
for the first time, there are some key considerations to factor into your
decision-making, advisors say.
·
Although Advantage
Plans often come with low or no premiums, the out-of-pocket maximums for
in-network coverage can be as much as $7,550 in 2021.
·
So-called Medigap
plans, whose monthly premiums can be pricey, provide more flexibility.
For
the nation’s older residents, the stakes can’t be higher when it comes to
choosing health-care coverage.
That’s
partly because under Medicare — you’re eligible at age 65 — changing plans can
be challenging in some circumstances and costly if you get your choices wrong.
So whether you’re giving your coverage an annual checkup during open enrollment
(Oct. 15 through Dec. 7) or signing up for the first time, financial advisors
say there are some key considerations to factor into your
decision-making.
“I
encourage people to get the best plan they can, because you don’t know what
will happen with your health,” said certified financial planner Carolyn
McClanahan, a physician and founder of Life Planning Partners in Jacksonville,
Florida.
“The
most important thing when it comes to health-care costs is to be adequately
insured,” McClanahan said.
Roughly
62.8 million individuals are enrolled in Medicare, the majority of whom are age
65 or older (the remainder are younger with disabilities or individuals with
end-stage renal disease).
About
a third choose to get their benefits delivered through Advantage Plans, which
are offered by private insurers and typically include Part D prescription drug
coverage. The remainder stick with original Medicare: Part A (hospital
coverage) and Part B (outpatient care). Those beneficiaries often pair that
with a stand-alone Part D plan and a Medicare supplemental plan (aka Medigap),
both of which also are offered by private insurance companies.
The most important thing
when it comes to health-care costs is to be adequately insured.
Dr. Carolyn McClanahan
FOUNDER OF LIFE PLANNING PARTNERS
The
current open enrollment period is for making changes related to those
stand-alone drug plans and Advantage Plans: You can switch, drop or add them.
This
window is different from your initial sign-up for Medicare, when you get a
seven-month period that starts three months before the month in which you turn
65 and ends three months after it. During that time, unless you meet an exception
— i.e., you have acceptable coverage elsewhere — you generally must sign up for
Parts A and B.
When
deciding on your coverage, it’s important to consider all associated costs. In
addition to things like premiums, copays or coinsurance through Medicare, be
sure to consider aspects of your care that may not be covered. For example,
dental, vision and hearing generally are not covered under original Medicare,
which also comes with no out-of-pocket maximums.
Additionally,
higher-income beneficiaries pay extra each month for their Part B and Part D
premiums through so-called income-related monthly adjustment amounts, or
IRMAAs. Your tax return from two years prior to the coverage year is generally
relied on to determine whether you’re subject to the extra charges. However, if
your financial situation has changed, you can appeal the decision. The charts
farther below show the 2020 amounts to give you a sense of how the IRMAAs are
applied (income thresholds and monthly charges for 2021 have not been released
yet).
Here
are some tips from financial advisors when it comes to determining which type
of coverage is most suitable for you.
Advantage Plan considerations
Enrollment
in Advantage Plans has more than doubled over the last decade, to 24.1 million
beneficiaries in 2020 from 11.1 million in 2010, according to the Kaiser Family
Foundation.
These
plans often come with low or no monthly premiums (although you usually still
pay your Part B premium). As mentioned, they also typically include
prescription drug coverage, as well as extras such as dental or vision.
However,
“just know that it might look good on the surface at first, but it can be very
limiting,” McClanahan said.
For
example, you may have to see a doctor or other provider in the plan’s network.
This means if you have a health crisis, you might be unable to see the
specialist you want. And while Advantage Plans also come with out-of-pocket
maximums, they can be as high as $7,550 (in 2021) for in-network coverage
before the plan pays 100% of covered services.
Nevertheless,
one of these plans may be suitable, depending on how much you use the
health-care system. Keep in mind that generally speaking, the lower the
premium, the more you’ll pay in copays or other cost-sharing.
If
you’re already enrolled in an Advantage Plan, you can switch to another during
this open enrollment if you find one that’s more suitable. If you take no
action, your current coverage will continue next year.
“Just
make sure your prescriptions and doctors are still being covered under your
current plan,” said CFP Joe Boden, senior wealth advisor and partner at EP Wealth
Advisors in Seattle.
If
you want to drop your Advantage Plan during this enrollment period and are
planning to pair original Medicare with a Part D plan and Medigap, be aware
that getting the latter may involve medical underwriting. And if you have
underlying health issues, you may be charged more or denied coverage altogether
(more on that below).
Also,
if you discover after open enrollment ends that you aren’t happy with the
Advantage Plan you chose, you can switch to another, or drop it and return to
original Medicare, during a separate window that runs from Jan. 1 to March 31.
Medigap considerations
So-called Medigap policies either fully or
partially cover some cost-sharing aspects of Parts A and B, including copays
and coinsurance and, perhaps, deductibles.
Each
is simply assigned a letter: A, B, C, D, F, G, K, L, M and N.
Some states also offer high-deductible versions of Plan F and G. While they are standardized from
state to state, coverage between each plan varies. And the premiums can vary
widely among locations and insurers.
For
instance, the difference among the highest- and lowest-cost Plan G
policies in various markets can be stark, according to the
American Association for Medicare Supplement Insurance. In one Dallas ZIP code,
the lowest cost is $99 per month for a 65-year-old female and the highest was
$381 monthly for that same consumer. So yearly, that would be $1,188 vs.
$4,572.
Nevertheless,
many Medicare beneficiaries like the lower out-of-pocket predictability that
can come with a Medigap plan. For example, if you get Plan D, you know that all
of your Part B copays (usually 20% of covered services) would be picked up by
Medigap. Same goes for the Part A deductible charged per benefit period (in
2020, that amount is $1,408).
Sticking
with original Medicare also comes with flexibility in choosing where to get
care. For example, if you’re vacationing far from your home state, most
providers accept original Medicare. Some Medigap plans will even partially
cover care if you’re traveling overseas.
“If
you want to make sure you’re covered no matter where you are, a Medigap plan
may be more advantageous than an Advantage Plan,” Boden said.
If you want to make sure
you’re covered no matter where you are, a Medigap plan may be more advantageous
than an Advantage Plan. Joe
Boden SENIOR WEALTH ADVISOR AND PARTNER AT EP WEALTH ADVISORS
It’s
important to know that if you don’t get a Medigap plan during your six-month
“guaranteed issue” period — which starts when you sign up for Part B — it could
be hard to get one down the road.
After
that window, unless you live in a state with different rules, you would have to
undergo medical underwriting, which could result in a higher premium or being
denied coverage altogether if you have underlying health issues.
One
exception: If you try out an Advantage Plan for the first time and decide
within the first 12 months that it’s not for you, you generally would get a
special enrollment period to purchase a Medigap policy without any
underwriting.
Additionally,
be sure that if you definitely want Medigap, pick the one that would be
suitable long term, McClanahan said.
“Once
you pick a Medigap plan, it can be really difficult to change because there
might be underwriting,” she said.
Prescription drug coverage
If
you’re first signing up for Medicare and wonder why you’d need prescription
drug coverage when you are healthy and take no medications, be aware that you
may face a life-lasting late-enrollment
penalty if you change your mind down the road. And, you could
find yourself shelling out full price for medicines if you have a health event
and no coverage.
“People
hate paying for Part D if they don’t have health issues, but the problem is
that you don’t know when something could happen,” McClanahan said.
If
you already have a stand-alone Part D prescription drug plan alongside original
Medicare (and, perhaps, a Medigap policy), you can change it during this open
enrollment if you find one that better suits you. If you take no action, you
generally will remain with the same plan — which could have changed its
formulary and how it covers (or doesn’t cover) certain medicines.
Be
sure that any medications you take are on your plan’s formulary and that you’re
at peace with any additional requirements for the plan, such as step therapy
(trying a lower-cost drug before a more expensive one). Also, know your
deductible. While not all Part D plans have one, it could be up to $435 (for
2020).
The
bottom line is that regardless of the Medicare coverage you choose, it’s
important to consider the “what ifs” in addition to the cost.
“Insurance
is always one of those things where you might be glad you paid an extra amount
up front,” Boden said. “Sometimes it’s about peace of mind, even if you’re
paying a little more each month.”
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