Are you or your spouse at the point in life where you’re ready to consider the best Medicare plan for you? If so, we at Altfest Personal Wealth Management would like to offer you some resources and suggestions as you make this often-confusing decision.

First, let’s review the basics. Medicare, as you probably know, is federal health insurance for retirees. In order to get Medicare, you must be 65 years old, or you must have been receiving Social Security disability benefits for two years, at which point you’re automatically enrolled in Medicare.

People who are just turning 65 and already are receiving Social Security will have their Medicare cards sent to them. Others at that age who are still working and not yet receiving Social Security will need to apply for Medicare .

Enrolling in Medicare involves making a series of choices about the program’s three main portions: Part A hospitalization coverage, Part B medical coverage and Part D prescription coverage.

You also may want to consider Part C, Medicare Advantage, which provides these coverages through approved private insurance companies. Or you might want to spend a bit more for a Medigap supplemental plan to cover expenses not paid by the basic Medicare Parts A and B.

 

Continuing Employer Coverage vs. Adopting Medicare Coverage If you’re still working, your first order of business is determining if you should continue to use your employer coverage or transition to Medicare coverage. The size of your employer is important — generally, employers with more than 20 employees are required to continue to offer you your existing health-care coverage. A few of the beneficial steps you can take to start your comparison are: Inquire with your HR department about your firm’s Medicare policy. Evaluate your spouse’s health-care coverage circumstances (Medicare is an individual policy, whereas most employer plans offer health-care coverage that covers spouses). Evaluate the pros and cons of continuing with your employer’s health care plan relative to what you would pay if you were covered by Medicare. Changes in both costs and coverage should be evaluated. Keep in mind that using Medigap, or Medicare Supplemental Insurance, will add to the costs of transitioning to Medicare coverage, as will Medicare Part D (see additional information below).

 

Let’s briefly look at each of these important elements of Medicare.

Part A: Hospitalization Coverage

This aspect of Medicare is free and has no premium if you paid Medicare taxes for 10 years or 40 quarters of time working, so enrolling is advised for everyone eligible, even if still employed. Part A does have a deductible of roughly $1,400 per benefit period, but after that, most hospital charges are covered.

Part B: Medical Coverage

The basic Part B medical coverage premium now is $148.50 per month. It rises for higher income levels because of something called the income-related monthly adjustment amount, or IRMAA. As a result, for people who are married, filing jointly, with modified adjusted gross income (MAGI) of $750,000 or more as reported on their IRS tax return of two years ago, the added IRMAA surcharge can lead to a monthly premium as high as $504.90. For higher earners preparing to enroll in Medicare, this elevated premium must figure in to costs.

However, an IRMAA surcharge can be appealed if the increase in income can be documented to be the result of a one-time event, like selling a valuable property asset or receiving an inheritance or severance package. And if your income is decreasing over time — perhaps once deferred compensation ceases a few years after retirement — you can ask Social Security to seek possible removal of your IRMAA surcharge, rather than waiting for the decrease to be result from the two-year lookback process. Note: In most cases, if you don’t sign up for Part B when you’re first eligible (starting three months before your 65^th birthday), you’ll have to pay a late enrollment penalty once signed up for as long as you have Part B. Your monthly premium for Part B may go up by 10% of the standard premium for each full 12-month period that you could have had Part B but didn’t enroll. The late enrollment penalty can be avoided by submitting a Proof of Prior Coverage form filled out by both you and your employer.

Part D: Prescription Coverage

There is also an IRMAA penalty for not taking the Part D prescription coverage when first eligible. In other words, if you don’t enroll in a Medicare prescription plan, you will be penalized when you do. The lifetime penalty is just 1% for every month that you are not covered, based on the average cost of a prescription plan, which is around $35 per month. Here, too, the late enrollment penalty can be avoided if you’re covered by an employer prescription plan by submitting a completed Proof of Prior Coverage form.

So that’s something to keep in mind when weighing whether an employer prescription plan or a particular level of coverage from a Medicare prescription plan is better for you at age 65.

Medicare Advantage

Another way to get Part A and Part B benefits is to sign up with Medicare-approved private companies for coverage, if you’d like to continue with health-care insurance that’s similar to what you’ve had. Most Medicare Advantage, or MA, plans include drug coverage (Part D).

Usually, to get the lowest costs you’ll need to use health-care providers that participate in the plan’s network and service area. They generally are structured either as Health Management Organizations (HMOs) or Preferred Provider Organizations (PPOs). These plans set a limit on what you’ll have to pay out-of-pocket each year for covered services to help protect you from unexpected costs. For 2021, the out-of-pocket limit may not exceed $7,550 for in-network services or $11,300 for in-network and out-of-network services combined.

Medicare Advantage plans have copayments for most every type of care, including seeing a primary care physician or specialist, various kinds of therapy or for hospital stays. In general, Advantage plans are well-suited for people who are healthy or don’t have the financial wherewithal to purchase Medigap supplement plans.

Medigap Supplement Insurance

Medigap is supplemental insurance that helps fill gaps in basic Medicare coverage. It’s sold by private companies. Such a policy can help pay remaining health-care costs not provided for by your basic Medicare plan, including copayments, coinsurance partial charges for care and deductibles. Many people like to purchase this to have greater peace of mind about meeting all potential costs of health care as they age.

Some Medigap policies also cover services that Original Medicare doesn’t cover, like medical care when you travel outside the U.S. and gym memberships.

Broadly, there are eight different levels of coverage with supplement plans. But it’s important to know that no matter which insurer you purchase it from, the coverage is exactly the same because Medicare sets the standards for each level of coverage. The differences instead will lie in the premiums. Know that if you opt for Medicare Advantage, you aren’t allowed to add a supplement plan.

Next Steps Before You Decide

Clearly, it’s useful to talk to a financial advisor who listens and has your interests at heart when preparing to enroll in Medicare — or when you’d like to adjust your existing plan.

The intricacies of coverage, premium cost considerations and best options are different for each client. Altfest has years of experience and works with trusted Medicare expert consultants to help you navigate this often-confusing process. Our checklists and personalized plan comparison guides help bring clarity to the maze of Medicare choices you will face. Should you wish to discuss your personal Medicare planning, feel free to contact a member of your wealth management team.

 

[1] https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-premiums-cost-sharing-out-of-pocket-limits-and-supplemental-benefits/

 

 

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