Medicare is one of the most complex insurance programs in the country. With its multiple parts working together, it is easy to get confused. To help you out, here are six top tips about Medicare everyone should know before they enroll. These six tips will give you a solid foundation for understanding Medicare.
1. Be prepared to pay for Medicare
One of the biggest misconceptions about Medicare is that it’s free and covers 100% of your health care costs. Unfortunately, this is not the case. While some parts of Medicare are premium-free, others are not, and they each have deductibles, copays, and coinsurance. In addition, Medicare doesn’t cover everything, and you pay coinsurance for the things it does cover.
Most Medicare beneficiaries qualify for premium-free Part A because they paid into it during their working years. However, everyone pays a premium for Part B (except those who are eligible for Medicaid). Original Medicare (Part A and Part B) also have deductibles, copays, and coinsurance you pay for Medicare-covered services. There are also separate costs associated with Part D prescription drug coverage.
2. Know when to enroll in each part of Medicare
When you first become eligible, you need to pay attention to a few critical Medicare enrollment periods. Your Medicare Initial Enrollment Period begins three months before your 65th birthday and lasts for seven months. You need to sign up for Medicare and a Part D plan, if you want one, during this time. You can choose either Original Medicare or a Medicare Advantage plan.
If you choose Original Medicare and want extra protection from a Medicare Supplement Plan, you need to enroll during your Medigap Open Enrollment Period. This period begins the month you are both age 65 or over and enrolled in Part B. You have guaranteed issue rights during this time and can buy any plan sold in your state.
If you don’t enroll during your Initial Enrollment Period and you don’t have creditable health coverage, you could owe a late enrollment penalty with your Part B and Part D premiums.
3. You will probably need to enroll in a Part D plan
Part D is Medicare’s prescription drug program, but it is technically private insurance. You purchase it directly from the insurance company. Even if you don’t take any prescription medications, you should still enroll in Part D if you don’t have coverage from another source. If you enroll later on, the late penalty applies for as long as you have Part D.
You can get Part D through your Medicare Advantage plan or as a stand-alone plan if you choose Original Medicare.
4. Enroll in either a Medigap or Medicare Advantage plan
You can enroll in either a Medigap plan or Medicare Advantage plan (Part C). These plans can help lower your out-of-pocket spending with Medicare. For example, Medigap plans pay after Original Medicare and help cover your Parts A and B cost-sharing expenses.
Medicare Advantage plans take the place of Original Medicare coverage. These are private plans and premiums and cost-sharing are set by the insurance company. Medicare Advantage plans have an annual maximum out-of-pocket limit; once you reach that limit, your plan pays 100% of covered health care costs.
5. Don’t mistake the AEP for another Medigap OEP
Earlier, we mentioned two critical enrollment periods, the AEP and the Medigap OEP. The Annual Election Period occurs each year between October 15 and December 7. You can make changes to your current Medicare coverage, such as switching to Medicare Advantage or a different Part D plan.
However, you don’t have guaranteed issue rights to make changes to your Medigap plan. If you apply outside your Open Enrollment Period, you may have to pass medical underwriting before you’re approved for a plan.
6. Review your Annual Notice of Change every year
Each year in September, you will receive an Annual Notice of Change (ANOC) from your Part D plan and/or Medicare Advantage plan. Your ANOC is one of the most important communications you receive each year, because it explains any coverage changes to your plan for the upcoming year.
Review your ANOC each year to determine whether you should use the AEP to change plans or not.
One last tip? Start your Medicare research at least six months before you need to enroll. This will allow for a smoother and less stressful transition.