If you are age 65 or older then you have likely been receiving a lot of correspondence from companies promoting their Medicare health and Medigap plans. Open enrollment period for the 2011 Medicare Health Plans, Medigap, and Part D Prescription Plans begins November 15. If you want to change to a different plan or you are choosing a plan for the first time, you must sign up by December 31. Many of the insurance providers have either eliminated certain plans or made substantial changes so now is the time to do your comparisons to ensure your getting the most benefit for your premium dollars. The Medicare Health Plans, Medigap plans, and Prescription Plans that you choose should be tailored to your specific needs and situation.
At age 65, you are eligible for Original Medicare which is Part A and Part B. Original Medicare pays 80% of your health care costs and you are responsible for the remaining 20%. You have two different insurance options that will help absorb the additional costs.
1. The first option is for you to maintain Original Medicare and buy a Medigap plan to cover the 20% which are copayments, coinsurance and deductibles. You pay a premium for the Medigap policy but do not have any additional cost throughout the year except for an annual deductible of $155. The premiums for Medigap policies range between $125 and $200 per month. These plans are for people who want to know exactly what their out-of-pocket costs will be throughout the year and/or have health issues with frequent doctor and hospital visits. A Medigap policy does not include prescription coverage and you must buy a plan for prescription related expenses if you want to avoid paying those costs directly out of your pocket. If you choose to purchase the Prescription Part D plan, you’ll want to carefully examine each plans coverage options and choose one that covers the medications you are using.
2. The second option is for you to purchase a Medicare Advantage Plan which provides your medical benefits and prescription benefits in one plan. A Medicare Advantage Plan combines Part A and Part B benefits with prescription drug coverage to give you lower out-of-pocket costs than if you only had Original Medicare. Medicare Advantage Plans work very well for people who want no to low premiums and are willing to pay the out-of-pocket costs when they go to the doctor or hospital. Essentially you ‘share the costs’ with the insurance company instead of being responsible for the entire 20% out-of-pocket expenses if you only had Original Medicare. Obviously no one can predict their future health but these plans work well for people who do not go to the doctor often and/or for people who want to self-insure a portion of the out-of-pocket costs.
Medicare has become very complex in the last few years with so many plans being offered. It is worth your time to research the plans to ensure you have the best plan for your current situation and you will want to check with your doctor to make sure they accept your plan.
My thanks to Kimberly Reynolds, CFP® for her contributions to this article.