October always makes us think of special things: the football season, the leaves turning color, and Medicare open enrollment.
What’s that you say? You don’t think about Medicare open enrollment come October? Well, the fact is, if you’re Medicare eligible, you should. Medicare open enrollment is the one time each year when, without incurring penalties, you can switch Medicare plans and potentially save yourself a lot of money in premiums. Equally important, Medicare open enrollment is the time when insurers announce changes to the lists of doctors and drugs they cover. If there’s a coverage change that affects you, Medicare open enrollment is the time to do something about it.
For a primer on Medicare open enrollment, which begins October 15th, we’re turning to this article we read this week on the Kiplinger website, written by reporter Elaine Silvestrini. She runs through the basics with essential facts you need to know as this important season gets underway.
Medicare Open Enrollment Brings Out the Ads
“You can tell by the advertisements that inundate the airwaves and your mailbox,” Silvestrini begins. “You’re likely even getting unsolicited calls and emails. All kinds of health insurance brokers and companies want to dazzle you with their offerings. Yep, Medicare open enrollment starts soon. It’s time to make sure you have the best plan or plans for you.”
She continues her article with a review of the basics. “As most retirees know,” she writes, “Medicare has several parts. Part A, which is offered at no cost, generally covers hospitalizations. Part B covers outpatient medical care. Part D is prescription drug coverage provided by private insurers.”
There are also two types of coverage offered by private insurers. Medicare Advantage plans are a sort of umbrella plan designed to replace parts B and D with combined stand-alone coverage. Medigap plans are supplemental plans which add to, but do not replace, Medicare Part B by covering copays and coinsurance charges.
Silvestrini cautions about some misconceptions surrounding Medicare. “While some people assume that Medicare will cover all their healthcare costs, experts warn that’s not the case,” she writes. “A 65-year-old retiring this year can expect to spend an average of $157,500 in healthcare and medical expenses throughout retirement, according to data from Fidelity Investments. This highlights the importance of reviewing your Medicare plan choices during open enrollment each year to ensure you have the best coverage to meet your needs.”
Know Your Medicare Open Enrollment Dates
The best place to start is with the calendar. “Every year, Medicare’s open enrollment period is October 15 to December 7,” says the article. As we noted above, open enrollment is the time to enroll in or make changes to any Medicare or Medicare Advantage policies. (However, if you’re trying to switch to a Medigap policy, you may encounter hurdles which we’ll cover below.)
Just to confuse things a bit, there’s actually another open enrollment period between January 1 and March 31 – but this is only for people with Medicare Advantage plans. “During this January open enrollment,” says Kiplinger, “you can change from one Medicare Advantage plan to another or go back to original Medicare.”
Remember, if you’re happy with the coverage you have, you don’t have to do anything. You’ll typically be re-enrolled in the plan you’re on. But for plenty of reasons, an annual review is a good idea.
Take Advantage of Medicare Open Enrollment
The Kiplinger article cites figures that show how fewer than one-third of enrollees actually compare plans and reevaluate their coverage during open enrollment. This is in spite of the fact that Part D plans often change which drugs they cover, and Medicare Advantage plans can change their provider networks as well as other terms of service.
For her article, Silvestrini spoke with Tim Smolen, director of the Washington State Health Insurance Assistance Programs (SHIP), which helps residents navigate Medicare. Smolen says “beneficiaries consistently care about three things during open enrollment: access, what benefits are included in their plan, and cost.”
That last issue is the toughest to gauge. “It’s very difficult to forecast in the year ahead how much health care you’re going to use,” Smolen says.
Medicare Open Enrollment: Understanding Medigap Plans
Medicare supplement plans, referred to as Medigap, are an important option for beneficiaries. “People who choose to keep traditional Medicare may also enroll in a supplemental Medigap plan from a private insurer to cover costs like copays,” writes Silvestrini. “Traditional Medicare, when not paired with Medigap, does not have a limit on out-of-pocket expenses in a year.”
In other words, with Medicare alone, you could be subject to sky-high costs that are essentially unlimited. The risk can be disastrous.
Medigap policies have standardized benefits, the article explains. “Most states offer 10 types of Medigap policies, but premiums vary by insurer,” says Silvestrini. “You can compare costs, benefits and availability on Medicare’s website.”
The big problem people face when switching from Medicare Advantage to a Medigap plan is the challenge of health insurance underwriting. When you first enroll in Medicare, Medigap insurers are obligated to offer you coverage. But once that initial window closes, usually after six months, Medigap insurers can reject you or sometimes charge you more based on the condition of your health.
“Some states offer more protections than others, but, in general, your first time enrolling in Medicare is your best opportunity to get a Medigap policy,” Kiplinger recommends.
Medicare Open Enrollment: What to Look for with Medicare Advantage
Medicare Advantage plans can be good for some but not for others. Like Medigap plans, these plans have a monthly premium that varies depending on the plan. (You still need to pay your Part B premium.)
The benefits of Medicare Advantage plans is that they are comprehensive. “The plans frequently include prescription drug coverage and limits on annual out-of-pocket costs for covered services,” Silvestrini writes. “They also may offer extras not included by traditional Medicare, such as dental, hearing and vision coverage and gym memberships.”
But the chief drawback is that Medicare Advantage insurers limit beneficiaries to in-network providers. “During open enrollment, experts recommend checking to make sure your preferred providers remain in the network for your plan,” says Kiplinger.
Medicare Open Enrollment: Medicare Advantage Issues
There can also be unexpected costs with MA plans. (We wrote about the problem just recently here on the Blog.) “These plans have come under fire in recent years for their aggressive marketing tactics,” Silvestrini writes. “Some beneficiaries have told of having good experiences with their Advantage plans until they get sick and find themselves fighting for coverage.”
Silvestrini spoke with Sandy Leith, director of SHIP for Illinois, who says “advertisements for some plans set people up for failure,” and that companies hide important details in fine print. “They’re getting away with a lot of misrepresentation and services that aren’t up to par,” Leith told Kiplinger.
Medicare Open Enrollment and IRMAA
While most people pay the same premium for Medicare Part B (not yet announced for 2024) and for Part D, those with higher household income will pay a surcharge. It’s called the “income-related monthly adjustment amount,” better known as IRMAA.
“In 2023, a single person with an income between $97,000 and $123,000 was charged $230.80 a month for Part B, compared to premiums of $164.90 for people who earned less,” says Kiplinger. “Your income for IRMAA purposes is calculated based on income two years before the plan year.” If your income exceeds $500,000 per year ($750,000 for a couple), your premium for Part B would exceed $560 per month per covered beneficiary, and you’d also pay a monthly Part D surcharge of $76.40 above your prescription plan premium.
Medicare Open Enrollment: Appealing IRMAA
There is recourse available if you get hit with the IRMAA surcharge, says Silvestrini. “You can appeal your IRMAA if your income is significantly lower now than two years ago due to a life-changing event, such as retirement, divorce or death of a spouse, or if you think the government made a mistake,” she writes. “Beyond that, the only way to avoid the surcharge is to have less modified adjusted gross income (MAGI), which includes all taxable income from work and investments, as well as the taxable portion of your Social Security.”
But that can be a challenge. “Unfortunately,” she adds, “most popular deductions, such as charitable donations and mortgage interest, do not reduce your MAGI. However, withdrawals from Roth IRAs don’t count toward your MAGI. If you’re still working, you can contribute more toward tax-deferred retirement accounts to lower your income. Another option is to delay starting Social Security.” That will help keep income below IRMAA thresholds.
Medicare Open Enrollment: When do you Have to Enroll in Medicare?
If this is your first year signing up for Medicare, you may have additional requirements that will determine when you join the program. “In general, you initially enroll in Medicare within three months before and three months after turning 65,” says Kiplinger. “Failing to do so can result in financial penalties, increasing your premiums for the rest of your life.”
However, there are exceptions. If you receive health insurance through their employer or through their spouse’s job, you can delay enrollment in most cases (as long as the workplace has 20 or more employees). “Be sure to check with your employer about how it handles your group health coverage at age 65,” the article advises.
It’s especially important that you become aware of rules regarding COBRA – what Silvestrini’s article calls “COBRA trap.” If you opted for COBRA coverage after you left your job, that does not count as “employer coverage.” You’re still expected to apply for Medicare at age 65 or when employer coverage ceases.
Medicare Open Enrollment: Help is Available
“The choices can seem overwhelming,” Kiplinger acknowledges, “and the marketing can be confusing and misleading. Fortunately, each state has unbiased experts who can walk you through the different plans and help you make sure your plans are the best for your needs.”
You can find State Health Insurance Assistance Programs by searching www.shiphelp.org or by calling 877-839-2675. You can also call Medicare directly at 800-633-4227. (Note that the program in Washington State, for those living near AgingOptions and Life Point Law, is called SHIBA – Statewide Health Insurance Benefits Advisors. It operates through the Office of the Insurance Commissioner.)
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(originally reported at www.kiplinger.com)