As your 65^th birthday approaches, thoughts of retirement with endless beaches are much more enjoyable than trying to make sense from the bombardment of Medicare postcards, unceasing calls from oversea customer service centers or leisurely reading the 128-page Medicare and You handbook.

Few things could be as tedious as deciphering Medicare, but few things are as critical to decide for this next phase of life.

Below are a few questions to consider when deciding upon Medicare options:

• Do you have any financial resources for retirement to pay for a Medicare Supplement (Medigap) or Medicare Advantage Plan (some are as low as $0 premium)?
• How much health care protection do you want in place in case an unforeseen event does happen?
• Do you want separate medical, dental, vision and hearing plans or all plans rolled up into one?
• Do you prefer an open network to any doctor that accepts Medicare or are you okay with defined networks?
• Do you want to prepay for your health care or pay for health care services as needed? 

Avoiding Penalties with Initial Enrollment

Enroll in Medicare Part A (hospital, skilled nursing & hospice) and B (medical) when eligible.  You can enroll during your initial enrollment period (IEP), which is the 3 months that precede your birth month through the 3^rd month after your birth month.

You can also enroll if you miss your initial enrollment period if you are moving from employer coverage (which also includes spouse who may be covered as a dependent). 

Enrolling on time in Medicare will help you avoid expensive Part B and/or Part D penalties. 

Last year we came across a gentleman that was paying a $200 Part B penalty per month!  That could have been completely avoided, had he enrolled in Part B during his IEP.  

Part A penalties are much higher, but rarer.  For those that have 10 years (40 quarters) of employment paying into Social Security you are not at risk of a Part A penalty and there is no monthly premium for Part A.

Original Medicare

Original Medicare may be best for you paired with a prescription drug plan if you are okay taking on an unlimited amount of risk. 

Original Medicare is great, in that it covers portions of hospital or medical coverage, but the risk that a Medicare member takes on is unlimited. 

For example, last year one of our snowbird clients had a heart attack while out of state and had to unexpectedly be airlifted to the nearest hospital.  Medicare would cover 80% of the airlift, hooray!  That also meant that the client would be on the hook for 20% of a $100,000 bill before even arriving at the hospital!

Not many can afford a $20,000 expense in a given year.  Fortunately, the client had a Medicare Supplement plan to cover the amount owed for the air ambulance. 

According to a Reuters article¹, 60% of bankruptcies are due to medical debt.  Having only Original Medicare provides some coverage, but can leave you unprotected for when the storms come.

Under Original Medicare you will be paying for Medicare Part B (at least $164.90 in 2023 or higher if IRMAA penalty kicks in for higher income earners) plus a separate Medicare Part D prescription drug plan. 

Depending on your specific needs, prescription drug plans can be rather inexpensive (e.g., $7-30 per month on the lower end, but will depend upon options in your area), which excludes the actual cost of prescriptions.

Medicare Supplement (aka Medigap)

Similar to Original Medicare, there is no network.  You can see any doctor in the US that accepts Medicare, which provides plenty of flexibility. 

Under a Medicare Supplement you’ll also pay the Part B Premium ($164.90 in 2023 or higher if IRMAA penalty kicks in for higher income earners) and the Medicare Supplement premium. 

If you have a good amount of financial resources for retirement and want protection against what Original Medicare doesn’t pay (e.g., 20% unlimited cost sharing) then a Medicare Supplement may be the best option for you. 

This would be similar to a pay in advance situation where Medicare Supplements tend to pay for all or most of what Original Medicare doesn’t cover.  A Medicare Supplement offers the best health insurance protection during your retirement years with the most flexibility.

However, it’s not all rainbows and butterflies. Prescription drug plans along with coverage for any extra dental, vision or hearing benefits would require separate plans. 

Management of a Medicare Supplement Plan, Prescription Drug Plan and separate plans for dental, vision and hearing are overwhelming for some.  The best benefit by far is knowing that you have the excellent medical coverage, but the downside is the expensive cost and juggling multiple plans.

Beware: Medicare Supplement plans by regulation have to be the same for each area (e.g., Plan G is the same plan across all insurance companies that offer it in your area), but these plans come at drastically different prices from one insurance company to another. 

For example, a $160 plan at one company can be $350 at another.  Work with an independent advisor (see our contact info below, if we can be of assistance) to help guide you through this process to ensure you are not overpaying for the same plan.

Medicare Advantage (Part C)

Unlike Original Medicare, Medicare Advantage plans offer a more limited network. Some providers are in network, some are not. 

These plans range from $0 to $200+ and offer a variety of benefits at different levels.  Even with a $0 premium Medicare Advantage plan, you must be enrolled in Medicare Parts A and B, which means you will be paying for the $164.90 Part B premium (or higher if IRMAA penalty kicks in for higher income earners). 

Just because a Medicare Advantage plan premium is higher with one insurance company than another doesn’t necessarily mean it’s better, as it completely depends on your specific situation.

We see some plan premiums that offer better benefits at about $75 per month than plans with premiums for $150 per month.

So why would you want to consider Medicare Advantage?  Medicare Advantage plans often include dental, vision, hearing and fitness benefits as well.  In addition, there is a maximum amount you would pay in any given year with a Medicare Advantage Plan since you’ll have a copay each time you have a healthcare need such as seeing a specialist, going to the ER, having an outpatient surgery, etc. 

This would be considered a “pay as you go” Medicare plan.  A Medicare Advantage plan would be good for you if you are okay with a defined network, want lower monthly premiums than a Medicare Supplement, and want to have other benefits that are often included such as dental, vision, hearing, fitness and benefits for over-the-counter products.  Medicare Advantage is an all-in-one plan that is often managed with one insurance card.

Conclusion

At retirement (or earlier if facing certain disabilities), you are faced with some really complex Medicare decisions. There is no one size fits all approach with Medicare.  Often a plan from a best friend may not be great for you. Sometimes we see spouses with the same plan by default rather than analyzing each person’s situation to understand various needs and options. There is no perfect plan as they each have a variety of pros and cons.

Medicare is extremely complex and confusing!  Reach out using any of the following to see how we can of help in your specific situation:

info@superiorfinancialgrp.com
www.retirementbenefitpros.com

 

¹ https://www.reuters.com/article/us-healthcare-bankruptcy/medical-bills-underlie-60-percent-of-u-s-bankruptcies-study-idUSTRE5530Y020090605