The decision is complicated. Medicare has an enormous variety of coverage options, with large and varying implications for people’s health and finances, both as beneficiaries and taxpayers. And the decision is consequential – some choices lock beneficiaries out of traditional Medicare.
Beneficiaries choose an insurance plan when they turn 65, but after their initial sign-up, most beneficiaries can make changes only during the open enrollment period each fall.
The 2024 open enrollment period, which runs from Oct. 15 to Dec. 7, marks an opportunity to reassess options. Given the complicated nature of Medicare and the scarcity of unbiased advisers, however, finding reliable information and understanding the options available can be challenging.
First Time Sign Ups
The choice is complex, especially when you are signing up for the first time and if you are eligible for both Medicare and Medicaid. Insurers often engage in aggressive and sometimes deceptive advertising and outreach through brokers and agents.
Choose unbiased resources to guide you through the process, like www.shiphelp.org. Make sure to start before your 65th birthday for initial sign-up, look out for yearly plan changes, and start well before the Dec. 7 deadline for any plan changes.
Two Paths With Many Decisions
Within Medicare, beneficiaries have a choice between two very different programs. They can enroll in either traditional Medicare, which is administered by the government, or one of the Medicare Advantage plans offered by private insurance companies.
Within Each Program are Dozens of Further Choices.
Traditional Medicare
Traditional Medicare is a nationally uniform cost-sharing plan for medical services that allows people to choose their providers for most types of medical care, usually without prior authorization.
- Deductibles for 2024 are $1,632 for hospital costs and $240 for outpatient and medical costs.
- Patients also have to chip in starting on Day 61 for a hospital stay and Day 21 for a skilled nursing facility stay. This percentage is known as coinsurance.
- After the yearly deductible, Medicare pays 80% of outpatient and medical costs, leaving the person with a 20% copayment.
- Traditional Medicare’s basic plan, known as Part A and Part B, also has no out-of-pocket maximum.
Medicare Supplemental Insurance
People enrolled in traditional Medicare can also purchase supplemental coverage from a private insurance company:
- Known as Part D, for drugs. And
- Medigap, to lower or eliminate their deductibles, coinsurance and copayments, cap costs for Parts A and B, and
- Add an emergency foreign travel benefit.
Part D plans cover prescription drug costs for about $0 to $100 a month. People with lower incomes may get extra financial help by signing up for the Medicare program Part D Extra Help or state-sponsored pharmaceutical assistance programs.
There are 10 standardized Medigap plans, also known as Medicare supplement plans. Depending on the plan, and the person’s gender, location and smoking status, Medigap typically costs from about $30 to $400 a month when a beneficiary first enrolls in Medicare.
Medicare Advantage
The Medicare Advantage program allows private insurers to bundle everything together and offers many enrollment options.
Compared with traditional Medicare, Medicare Advantage plans:
- Typically offer lower out-of-pocket costs. They often bundle supplemental coverage for hearing, vision and dental, which is not part of traditional Medicare.
But Medicare Advantage plans also:
- Limit provider networks, meaning that people who are enrolled in them can see only certain providers without paying extra.
- In comparison to traditional Medicare, Medicare Advantage enrollees on average go to lower-quality hospitals, nursing facilities, and home health agencies but see higher-quality primary care doctors.
Medicare Advantage Plans Also Often:
- Require prior authorization – often for important services such as stays at skilled nursing facilities, home health services and dialysis.
Choice Overload
Understanding the tradeoffs between premiums, health care access and out-of-pocket health care costs can be overwhelming.
Turning 65 begins the process of taking one of two major paths, which each have a thicket of health care choices.
While many Medicare Advantage plans boast about their supplemental benefits, such as vision and dental coverage, it’s often difficult to understand how generous this supplemental coverage is.
For instance, while most Medicare Advantage plans offer supplemental dental benefits, cost-sharing and coverage can vary. Some plans don’t cover services such as extractions and endodontics, which includes root canals.
Most plans that cover these more extensive dental services require some combination of coinsurance, copayments and annual limits.
Even when information is fully available, mistakes are likely.
Part D beneficiaries often fail to accurately evaluate premiums and expected out-of-pocket costs when making their enrollment decisions.
Past work suggests that many beneficiaries have difficulty processing the proliferation of options. A person’s relationship with health care providers, financial situation and preferences are key considerations. The consequences of enrolling in one plan or another can be difficult to determine.
The Trap: Locked Out
THIS IS THE CONSEQUENCE OF MAKING THE WRONG CHOICE THAT MOST PEOPLE AREN’T MADE AWARE OF!!
At 65, when most beneficiaries first enroll in Medicare, federal regulations guarantee that anyone can get Medigap coverage. During this initial sign-up, beneficiaries can’t be charged a higher premium based on their health.
Older Americans who enroll in a Medicare Advantage plan but then want to switch back to traditional Medicare after more than a year has passed lose that guarantee. This can effectively lock them out of enrolling in supplemental Medigap insurance, making the initial decision a one-way street.
For the initial sign-up, Medigap plans are “guaranteed issue,” meaning the plan must cover preexisting health conditions without a waiting period and must allow anyone to enroll, regardless of health. They also must be “community rated,” meaning that the cost of a plan can’t rise because of age or illness, although it can go up due to other factors such as inflation.
People who enroll in traditional Medicare and a supplemental Medigap plan at 65 can expect to continue paying community-rated premiums as long as they remain enrolled, regardless of what happens to their health.
In most states, however, people who switch from Medicare Advantage to traditional Medicare don’t have as many protections. Most state regulations permit plans to deny coverage, impose waiting periods or charge higher Medigap premiums based on their expected health costs. Only Connecticut, Maine, Massachusetts and New York guarantee that people can get Medigap plans after the initial sign-up period.