With “open enrollment” for Medicare now in full swing (from October 15th through December 7th), it’s time for people already with Medicare benefits to review their coverage and switch plans if they want different options — or more savings.
“Reassessing your choices every year to accommodate changes in your health or the prescriptions you’re using is important,” says Dianne Savastano, Founder and President of Healthassist, an independent advisory firm that guides individual and families through the healthcare and insurance maze. “Plus there may be changes in your existing plan provisions or pricing that you need to address.”
In addition, many plan details, rules, and prices change from year to year, based on legislative changes and cost-of-living increases. In 2018, for example, the thresholds for high income earners will be reduced, so more participants will pay higher Part B and Part D premiums (more on that later). “That’s why you really do have to pay attention before making decisions that will affect your healthcare options and expenses,” cautions Savastano.
It’s also a good time for anyone approaching Medicare eligibility at age 65 to get up to speed on how the program works and begin to understand their choices “before becoming inundated with marketing offers from insurance companies eager to sign you up,” says Savastano.
Here, with Savastano’s assistance, is a review of five key facts about Medicare that can help you make wise choices, whether you’re new to the program or already enrolled.
Once you reach age 65, you must enroll in Medicare, unless you’re still working and covered by your employer’s health insurance plan. Medicare isn’t optional, says Savastano, “it’s the ‘only game in town’ once you retire.”
In addition, you must enroll sometime between three months before and three months after the month of your 65th birthday (a total of seven months). If you don’t, you can still apply later during Medicare’s general enrollment period (from January 1st to March 31st each year), but you’ll permanently pay higher premiums as a penalty for your delay.
On the other hand, if you are fortunate enough to be able to retire before age 65, you’ll need to find a “bridge” of health insurance coverage until your Medicare benefits kick in. This could be COBRA benefits offered by your former employer, a policy purchased through your state’s health insurance exchange, or private insurance your buy on your own.
While you’ll have many choices of insurance carriers under some portions of Medicare, the structure of your coverage is very different from the plans you’ve been familiar with during your working years as shown in the illustration below. Here’s how Medicare works:
Source: “Medicare Premiums: Rules for Higher-Income Beneficiaries” p.5 https://www.ssa.gov/pubs/EN-05-10536.pdf
The Social Security Administration (SSA) calculates each individual’s Part B and Part D premium adjustments each year based on the income reported to the IRS two years before. In 2017, for example, the SSA used 2015 income tax data. But if your income is lower in a more recently filed income tax return, you can contact Social Security (and submit the paperwork) to request a change in your IRMAA charges.
To learn more about the IRMAA rules, you can download Medicare’s free booklet “Medicare Premiums: Rules for Higher-Income Beneficiaries” at Medicare.gov.
The opinions expressed and information contained in this article are given in good faith, may be subject to change without notice, and are as of the date issued. The accuracy and completeness of this information is not guaranteed. Since each client’s situation is unique, please review your specific investment objectives, risk tolerance and liquidity needs with your advisor before a suitable investment strategy can be selected.
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