Long-term-care insurance can be expensive, but so is the cost of long-term care. Here are some ideas to limit your insurance costs.
You can’t tell it by looking at the calendar, unless you know what you are looking for, but we are getting ready to head into one of the most important times of the year. No, I’m not talking about the holiday season, although I’m sure we will be hearing Christmas songs sometime soon. It’s a particularly important time of year if you, or a loved one, are covered by Medicare. It’s the Medicare open enrollment period, the time when Medicare beneficiaries can make changes to their plan and pick one that works best for them. In effect, each year you get a “do-over” on choosing your plan. The open enrollment period starts on October 15 and ends on December 7.
Open enrollment is a big deal, but unfortunately, most people don’t take advantage of it. Make sure that you do not let December 7 slip by without at least reviewing your Medicare options. Don’t assume that the plan that was best for you in 2017 will be the best for you in 2018. Plans change every year, and the open enrollment period is your chance to trade in your old plan for one that fits you better.
Are you satisfied with your current Medicare plan? Has it changed? Have premiums or out-of-pocket costs gone up? Has your health changed? Do you anticipate any change in medical care or treatment? Is the drug coverage you have still appropriate? These are all important questions to ask yourself because during open enrollment, you can switch from Original Medicare to a Medicare Advantage plan, or from a Medicare Advantage plan to Original Medicare; you can change from one Medicare Advantage plan to another; you can enroll in a Medicare prescription drug plan (Part D) or switch from one Part D plan to another.
Speaking of prescription drug coverage, one of the big changes that occur every year is a plan’s formulary, the plan’s list of medicines that are covered and how they are covered. Drug makers can raise or lower their prices, which will have an effect on your plan. Maybe a cheaper, generic version of a drug you need has become available. A plan’s formulary is one of the things you must review when evaluating Part D coverages. What good is a plan if it doesn’t cover the drugs you need?
So, where do you start? First, you should receive a notice from your current plan about any changes that will occur in 2018. They are required to send the notice to you for review. And while it’s a bit of a long document, it’s not difficult to work through if you know what you are looking for. Here are some of the things you should be reviewing: monthly premiums—and any change from last year; deductibles—they generally change a bit each year, and some plans will absorb some of the cost increases; copays and coinsurance—and any changes in amounts or requirements; drug tiers—to see if any drugs that you take moving from one pricing tier to another; out-of-pocket-maximums—you may have two caps to review, one for health coverage and one for drug coverage; provider networks—to see if your doctor and hospital choices have changed; drug formularies—for the reasons mentioned above.
There are also two sites I would recommend that you spend a little time on. The first is Medicare.gov, which can help answer a lot of your questions. The second is Medicare Plan Finder, which will help you get specific information on the plans that are available to you.
Open enrollment is also important because it gives you, as a consumer, a big say in what plans are offered. The best plans available are rewarded with new business as consumers exercise their right to choose. The plans that consumers don’t like will have to either change or disappear. But while open enrollment is good in theory, most people typically stay with what they have, even despite evidence that they would be much better off by changing to another plan.
Don’t be most people. By spending a few hours each year reviewing the changes in your plan, and the other plans that are out there, you can become a savvy Medicare shopper. Many articles have been written about what health care costs will be in your retirement years. Here is one way that you can work to control those costs.
What to do about health care is one of the major decisions that everyone faces when getting close to retirement. A lot of people delay retirement until they reach age 65 because they don’t want to lose their employer-sponsored health plan. Even if they are financially able to retire, they will often continue to work until they are eligible for Medicare. With the uncertainty that is the state of our health care system right now, it’s hard to blame them.
But what do you do once you turn 65 years old and are eligible for Medicare? In the first part of this series on Medicare planning, I discussed the importance of timing your Medicare enrollment (Medicare Enrollment—Not As Easy As It Sounds). The second part of the series (Medicare—Which Path Is Right for You?) was a discussion on the differences between Original Medicare and Medicare Advantage. In this post, I will discuss the types of Medicare Advantage plans that are available.
As a refresher, Medicare Advantage plans are sold and administered by private insurance companies. Original Medicare is administered by the federal government. Medicare Advantage plans must provide, at a minimum, the same coverage as Original Medicare Parts A and B. The plans often include prescription drug coverage and additional coverages like vision and dental, and some come with other benefits, like a gym membership. With Original Medicare, you can visit almost any doctor in the country. With a Medicare Advantage plan, you generally get care from within the provider’s network of medical professionals. Most people choose Original Medicare, but about 30% of enrollees select Medicare Advantage.
For this post, I am going to assume you have decided that a Medicare Advantage plan would be the right path for you. If that’s the case, it’s important that you understand the types of plans you will choose from. The most common Medicare Advantage plans are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private fee-for-service (PFFS) plans. Lesser-known plans under the Medicare Advantage umbrella include special needs plans (SNPs) and medical savings account (MSA) plans. We’ll take a closer look at each type and highlight the differences.
Health maintenance organization: With this type of plan, you select a primary doctor from the insurer’s network, and that doctor manages your health care. If you need to see a specialist, you usually will need a referral from your primary doctor, and you are typically not covered for services provided outside of the network, although there are exceptions. The rules of this type of plan may be the most restrictive, but it will generally offer the lowest plan costs.
Preferred provider organization: Under a PPO, you generally can go to any doctor or hospital, but you will pay more if you use a provider outside of the insurer’s network. If you need to see a specialist, you generally won’t need a referral, but if you select a provider outside of network, you will pay more. This type of plan is more flexible, but it usually comes with a higher premium.
Private fee-for-service plan: This plan was once the fastest-growing type of Medicare Advantage plan. It was popular because you didn’t have to choose a primary care doctor and usually didn’t need a referral to see a specialist. You had to be careful with this plan, however, because not all Medicare providers accepted it. The popularity of this type of plan has declined because of some changes in the Medicare laws. It’s important to make sure you understand the details of how the plan works if you opt for it.
Special needs plan: As the name implies, this type of plan is available for Medicare enrollees who have some type of special need. The plan will offer custom benefits designed to meet the specific needs of the plan member. You could be eligible for this type of plan if you have a severe and/or chronic condition like diabetes, end-stage renal disease, chronic heart failure, or dementia. Living in a nursing home is another example of a condition that would be eligible for this type of plan.
Medicare savings account: This type of plan is not as popular as the other types of plans. It combines a high-deductible health plan with a bank account in your name. When you select this type of plan, Medicare will make deposits into your bank account that you can use to pay for medical expenses. This type of plan is really only appropriate for you if you don’t need a lot of care, because the amount deposited into your MSA is often less than the deductible.
As I wrote in the first part of this series on Medicare, getting the coverage that is best for you is not a simple process. You don’t just show up at age 65 and sign up. You need to make sure you understand your options and make the best choices based upon your individual needs. Don’t pick a plan because a friend or family member picked it. Make sure that it’s right for you.
Enrolling in Medicare is not a simple process. As you approach age 65, there are several decisions that need to be made. Making a wrong decision, based on your circumstances, can have a big impact on your finances and your health insurance coverage. In the first part of this series on Medicare (Medicare Enrollment—Not As Easy As It Sounds), I discussed the importance of the timing of your enrollment. In this article, I will try to help you understand the different paths that you must choose from when it’s time for you to enroll.
It’s important to understand that you have two paths to choose from when enrolling in Medicare. You can select either Original Medicare or Medicare Advantage. Both paths have advantages and disadvantages, and what might be the best path for you may not necessarily be the best path for friends or family members.
The first step in choosing the right path is understanding the difference between the paths. Original Medicare is administered by the federal government and consists of a few different parts. Part A is the coverage that pays for expenses incurred during inpatient hospital visits and for those in a skilled nursing facility. It also pays for some expenses related to home health care and hospice services. Medicare Part B pays for medically necessary services, like lab tests and doctor visits, to diagnose and treat your health issues.
When you choose Original Medicare, you start with Parts A and B, and then you can add optional coverages. Part D is an optional coverage that pays for prescription drug expenses. The other optional coverage is a Medigap policy. Medigap policies are administered by private insurance companies and offer a variety of coverages for co-pays and deductibles. It is important to note that not all health care providers accept Medicare patients, but most do, so you can choose from a wide variety of doctors and specialists.
Medicare Advantage plans offer an alternative path for Medicare enrollees. These plans are administered by private companies. They are required to offer the same coverages as Original Medicare, and they often offer more, like vision, dental, or hearing coverage. Most of them offer drug coverage. They work with a network of providers and therefore have more rules when it comes to getting a referral to a specialist. The premiums are typically significantly lower than Original Medicare, and some plans are offered with zero premium. But zero premium does not mean zero cost. There are out-of-pocket expenses, usually with each service provided under the plan.
Which Path Should You Pick?
So, which path should you choose? Like most financial questions, the answer is … it depends. If your doctor is not in a Medicare Advantage network, you’ll need to find a new doc or go with Original Medicare. If you plan to travel extensively, you might also want to consider Original Medicare because you are not limited to doctors within a network. If your health is good and you don’t incur a lot of medical expenses, a Medicare Advantage plan can probably save you some money.
Of course, that leads to the question that many ask: “Why not sign up for Medicare Advantage while healthy and switch to Original Medicare and a Medigap plan when we need more services?” That would be nice, but it doesn’t work that way. Once you’ve decided which path is right for you, it’s not easy to change. There are certain times each year when you can apply for a change, and there are some rules you have to follow.
It’s relatively easy to switch from Original Medicare to a Medicare Advantage plan. But if you want to go from a Medicare Advantage plan to Original Medicare, it can get complicated. After spending an amount of time in a Medicare Advantage plan, you can lose the guarantee to get a Medigap plan. The Medigap insurance companies can put you through medical underwriting. That means if you have a pre-existing chronic condition, you can be denied coverage. And having Original Medicare without a Medigap policy can become cost prohibitive, especially if you have a chronic condition.
Remember, I said it isn’t easy. But the key to making any decision is to gather as much information and knowledge about the subject as you can. You can then weigh the pros and cons of each choice as they apply to your situation. The Medicare website (www.Medicare.gov) is a great resource and can help make sure you are on the right path.
It sounds so easy and uncomplicated: Reach age 65, sign up for Medicare, and your health insurance is taken care of for the rest of your life. But seldom are things as easy as they sound. That is certainly the case with Medicare, the health insurance system in place for more than 55 million Americans. While signing up for Medicare sounds relatively simple, there are a lot of moving parts that require decisions that will impact your pocketbook and your insurance coverage.
As important as Medicare is in the life of our senior and disabled citizens, there are very few resources that provide proper guidance on working your way through the Medicare maze—and it’s certainly not a set-it-and-forget-it kind of decision. This post, and upcoming posts that we will make on this subject, will attempt to clear up some of the confusion and misinformation surrounding this very important topic.
Our first piece of advice on this topic is that you must be proactive in dealing with this complicated program. The book Get What’s Yours for Medicare (Phillip Moeller, 2016) points out that “No One Told Me” is a scary cautionary Medicare tale. Prepare yourself so that you don’t have to ever say that no one told you.
Before we get into how the enrollment process works, it would be good to go over the Medicare basics. Medicare has three parts: Part A provides insurance for expenses incurred at hospitals and is generally premium-free. Part B provides coverage for doctors, as well as outpatient and medical equipment expenses. And Part D is prescription drug coverage. We know—what happened to Part C? We’ll cover that in a future post.
We recommend six steps when going through the Medicare enrollment process:
Check your timing.
Choose your Medicare path.
Select your specific plans.
Enroll in Medicare (note that this is the fourth step, not the first!).
Enroll in your specific plan(s).
Review your coverage annually.
There are some decent resources that can help with steps three through six. But there aren’t many that will help with the first two steps. Yet it’s steps one and two where 90% of Medicare mistakes are made. We should not take those mistakes lightly because just one mistake can cost you thousands of dollars and may not be able to be undone. This post will offer guidance on the first step, and future posts will address the rest.
Check Your Timing
To get started, we must first determine the best time for you to enroll in Medicare. At age 65, if you are a U.S. citizen, you are eligible to begin Medicare—but being eligible doesn’t mean that you have to sign up right then. If you are already receiving Social Security when you turn 65 (which is another topic we will discuss in a future post), you should be automatically enrolled in Medicare Parts A and B—but, again, this doesn’t necessarily mean that you have to accept, and pay for, Part B. By receiving Social Security benefits, you are automatically enrolled in Part A. Your decision to sign up for Part B is going to be determined by whether you have coverage through an employer group health insurance policy. This is the case whether you are receiving Social Security benefits or not.
So if you are turning 65 and are not covered by a group health policy through an employer, you’ll want to sign up during your initial enrollment period, which is the seven-month window surrounding your birth month (the window includes the three months before your birth month, your birth month, and the three months after). If you are covered by a group health insurance policy, you’ll need to enroll during a special enrollment period. For Parts A and B, this means that you can enroll at any time while you are still covered, or within eight months after coverage or employment ends (whichever is first). For Part D, you’ll have 63 days after the coverage or employment ends (again, whichever is first).
Of course, there is always an exception to make things more complicated. If you are covered by an employer group plan with fewer than 20 employees, then you must sign up during your initial enrollment period. This is because, for small employers, the group plan will stop being the “primary” payer of claims and will become “secondary” to Medicare.
If you make a mistake in this phase of your enrollment, you could end up paying late enrollment penalties. And these are not small, slap-on-the-wrist kinds of penalties. In most cases, if you don’t sign up when you are first eligible, your premium can go up 10% for each 12-month period that you would have had coverage. And those increases don’t go away after a year or two. They follow you for life. Or you could end up with a more costly coverage that you cannot switch out of. You could face long delays in enrollment of up to a year and a half without coverage. And finally, you could end up having to pay back health care costs that you thought were covered.
It’s obvious that the basic step of signing up for Medicare is anything but basic. And that’s just signing up. Deciding which path and which plans are best for you isn’t exactly a picnic either. We’ll discuss those in future posts.