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How to Choose A Medicare Plan-Part 1

November 16, 2015

Rather than present this How to Choose A Medicare Plan guide in one large article, this will be a two-part series. This, the first article, will review how you should approach learning about Medicare and a process to follow in making your choices. We will also review Original Medicare and Medicare Supplement policies. In part 2 we will look at Medicare Advantage plans, including some basic features of Medicare Advantage and the pros and cons of choosing a Medicare Advantage plan over Original Medicare.

In each part we have linked to other articles we have written that provide more detail on the subject. Readers are encouraged to at least peruse those links for more information. By the end of this two-part guide, you will have a good grasp on Medicare and the choice within Medicare that is best for you.

How to Choose A Medicare Plan – Part 1

It is estimated that 10,000 people turn 65 every day in this country, and that staggering pace will continue until the year 2030. While not everyone needs to deal with Medicare at age 65 because they maintain employer healthcare and delay retiring, the number of people who must learn how Medicare works and make decisions regarding their Medicare choices is the highest it has been since Medicare began back on July 01 of 1966. This article is meant to help those new to Medicare learn how to choose a Medicare plan and be comfortable with their decision.

Whenever I give webinars about Medicare, one of the first subjects I talk about is how to choose a Medicare plan, or any health insurance plan and be confident in your decision. The process doesn’t start with picking up the Medicare & You guidebook to study all the features Medicare. It doesn’t start with learning about the pros and cons of keeping Original Medicare vs. moving to a privately run Medicare Advantage plan. No, the first step in finding the right health insurance plan for you is much more personal. The first step is answering for yourself and your spouse a simple question; why do you have health insurance? Or, what do you want your health insurance to do for you?

This is a personal question. There is no right or wrong answer. Every one of us, or every couple will respond differently to the question. Those people who start this process with their own answer to that question tend to have a much easier time and be more confident in their decision than those who start by trying to understand the details of Medicare.

Why do you have health insurance?

What do you want your health insurance plan to offer you?
Perhaps it’s best to share with you my own personal answer as an example. For me and my family I have a two-part answer.

  1. So that no health event will have a financial consequence that is stressful or threatens to negatively impact my quality of life and financial goals.
  2. So that, should I need, I have the freedom to choose from within any medical expertise; the best doctor, the best medical facility in the country in order to assure I get the absolute best medical care possible without being financially burdened.

Medicare Supplement QuotesHaving talked to many hundreds of people over the years I know that some people are more willing to risk higher medical costs in order to reduce monthly premiums. Some people are financially secure enough that they simply want coverage that limits the maximum out-of-pocket financial risk so that even in the worst case scenario, their health insurance protects their estate. Still others want their health insurance to pay for every penny of their medical bills. The point is to come up with your own reasons for having health insurance before you get too deeply involved in the nitty-gritty of your Medicare choices. Once you have taken this important first step in how to choose a Medicare plan, you can move on to understanding what Medicare offers and the choices you need to make.

Initial Enrollment

For most of us, our initial enrollment period into Medicare is triggered by your being 65-years of age or older AND enrolling in Medicare Part B. In our webinar and in-person presentations we go over the details of Medicare Part A, Medicare Part B as well as how you can increase your Social Security income. However, for the purpose of this article, those details are not critical. You are encouraged to read the linked articles or request an online meeting for more information.

When you enrol in Medicare Part B you start an Initial enrollment period that allows you time to select any Medicare coverage or policy without health underwriting. You can get the best price possible for the plan of your choosing and cannot be declined or rated. This is an important period and absolutely the best time to find and enrol in the Medicare plan that is right for you.

Medicare Part A Part BMedicare Advantage vs. Original Medicare

Your first choice once you enrol in Medicare will also be your most important; whether to keep the Original Medicare you have paid for all your working life and supplement its coverage with a Medigap plan, or hand over your Medicare rights to a private for-profit insurance company via a Medicare Advantage plan.

There are pros and cons of each choice, which we will cover in this article. If we look at a national average we find that seven in ten people on Medicare choose to stay with Original Medicare. Three out of ten decide to switch to a Medicare Advantage plan. Unfortunately, many of those people are unaware that they had a choice and did not take the step you are taking now in learning about your options.

Original Medicare

Original Medicare comes in three parts: Medicare Part A (in-patient hospital coverage), Medicare Part B (outpatient and physician services) and Medicare Part D (prescription drugs). You will find more details on each plan in the linked articles.

If you are eligible for Social Security or Railroad Retirement benefits you will automatically receive Medicare Part A once you turn 65. Medicare Part A has no premium. You paid for this from payroll taxes during your working years.

Medicare Part B is optional in that you can delay it as long as you have other insurance coverage from an employer. Some are able to delay enrolling in Medicare Part B for years. There is no time limit as long as you have credible employee coverage.

How to Choose A Medicare PlanOnce you enrol in Medicare Part B you will pay a monthly premium. That premium in 2016 is $121.80 per month for those new to Medicare. This monthly premium will be deducted from your Social Security check.

With your Medicare Part’s A & B, you are free to see any doctor or go to any medical facility in the United Sates that accepts Medicare. In case you’re curious, approximately 99% of all U.S. doctors accept Medicare.

You do not need to get referrals before going to a specialist or any other doctor. You can change doctors and get second opinions all you want. You are in control of your healthcare. If you choose to go to Anderson Clinic or Mayo Clinic for their specialists, or any other speciality clinic you may do so and if they accept Medicare you are covered.

This is important: Original Medicare covers procedures that are deemed by your doctor to be medically necessary. Please take a moment to go through this online copy of the Medicare & You guidebook. Use a search feature by pressing CNTRL <F> (that is the control and F buttons simultaneously. This brings up a search screen. In the search screen type “medically necessary”. There are about 20 different times this term is written into the Medicare & You guide. Take a moment to see how the term is used and you scroll through each case using the down arrow in the search bar. You will understand how important this is to your Medicare decision as we move forward with describing your Medicare choices.

Medicare Supplements

Original Medicare is great coverage, but it was never intended to be stand-alone insurance coverage.

If you have Original Medicare, you are allowed to purchase a Medicare Supplement policy (aka Medigap Plan). You can only purchase a Medicare Supplement policy if you have Original Medicare. Adding a MedicareSave on Medicare Supplement means an additional cost, but it’s generally very affordable. A Supplement policy covers the deductibles and co-pays that you would personally be responsible for under Medicare. With a Medicare Supplement policy, you can reduce your out-of-pocket medical expenses to as little as zero ($0) or to just the annual Medicare Part B deductible of $166 or some other limited amount. There are eleven different Medicare Supplement plans. You can a brief description of the benefits they cover in the table on page 101 of the 2016 Medicare & You guidebook or page 11 of the Medicare publication Choosing A Medigap Policy.

Medicare Supplements supercharge your Medicare benefits to a level that is not achieved by any other choice you may make in Medicare.

It’s important to understand that Medicare Supplement plans are standardised and are accepted by all doctors that accept Medicare.

Although Medicare Supplement plans are offered by private insurance companies, the benefits of each plan type (i.e. Plan F, Plan G, Plan N etc.) are identical. The benefits provided by ALL Medicare Plan G’s, for example, are identical regardless of the insurance company that offers the plan. This is strictly regulated by Medicare and cannot be changed. However, although the benefits are identical, the insurance companies are free to charge whatever they choose. This is why it’s important to shop plans and make certain you are getting the best price. We have found that the highest priced plans can often be as much as twice the cost of as the lowest priced plan.

When you have a Medicare Supplement plan and you see a doctor, the doctor’s office does NOT bill the Medicare Supplement insurance company, they bill Medicare. Medicare pays its portion and then instructs the Supplement insurer on the balance due. Medicare is the doctors’ one-stop biller. Which is why all doctors that accept Medicare accept all Medicare Supplement plans regardless of the insurer.
MedicareLastly, with Original Medicare and Medicare Supplement plans there is no Open Season or Annual Enrollment period. Once you own a Medicare Supplement plan it does not change from year-to-year. Your policy is guaranteed renewable. That means it will automatically continue and cannot be cancelled unless you request to cancel or stop paying your premium.

You can switch policies or insurers at any time, for any reason. Depending on the circumstance, you will likely have to undergo medical underwriting which consists of asking questions about your medical history. Even if your Medigap policy type is cancelled by the U.S. Government, you will be grandfathered and can keep your policy if you wish.

To Summarize:

  • With Original Medicare, you can see any doctor or medical facility in the country that accepts Medicare.
  • You control your medical care.
  • You do not need a referral.
  • Your doctor determines what is medically necessary.
  • You can add a Medicare Supplement to reduce your out-of-pocket risk to the level that best suits your budget and your needs.
  • Medicare Supplements are standardised by Medicare.

There is no open season for Original Medicare or Medigap plans. Your policy is guaranteed renewable. You can switch Medigap plans any time of year as often as you wish but may have to undergo medical underwriting

Next: In Part 2 we review Medicare Advantage Plans

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