Medicare Decisions: I’m about to Turn Age 65, What Should I Do?

Turning age 65—and having to make Medicare decisions along with it—generates a variety of emotions among our clients.  For some, dread.  For others, relief.  For most, some degree of confusion.  In which parts of Medicare do I need to enroll?  Do I enroll for them now or later?  Do I need a supplemental policy?  If so, which one?

In this post, we will give a brief overview of the answers to these questions.  Our best advice, however, is to seek help from Medicare experts.  Many municipalities across the country have a dedicated team within the local government that gives counseling on Medicare decisions—often as a free service.  Here in Fairfax County, for example, our local government contains a branch known as the Virginia Insurance Counseling and Assistance Program (VICAP).  They provide educational resources, including virtual and in-person “Medicare 101” presentations, as well as one-on-one consultations. 

If you do not have a free local service, there is also a whole industry of Medicare-focused insurance agents, who are eager to provide advice on the subject.  If you decide to hire an agent, first, make sure that the agent is licensed and has significant experience selling Medicare plans in your state.  Some agents sell Medicare plans in addition to a variety of other insurance policies.  Find one that focuses exclusively on Medicare and is aware of all of the nuances of Medicare decision-making.  Second, look to hire an “independent” agent, who represents a number of different insurance companies, or a “fee-only” agent, who is paid a flat fee for their services rather than a commission from the insurance company.  You want to avoid hiring a “captive” agent, who represents only one insurance company and earns a commission by pushing that company’s products (whether they are the best fit for you or not). 

Finally, you can use online tools for guidance, such as the “Find a Medicare plan” feature on the official Medicare website.

Which Parts of Medicare Do You Need?  The first major choice in Medicare decision-making is whether you will get Medicare Part C or… everything else—Part A, Part B, Part D, a Medigap policy, dental and vision.  

• Part C.  Part C, also called a Medicare Advantage Plan, is a managed care plan that covers your hospital insurance (Part A), medical insurance (Part B), as well as usually prescription drug coverage (Part D), vision, and dental.  Often, Part C plans are less expensive than the alternative, but they also restrict your choice of doctors or facilities to those who belong to that particular plan (or else you will pay significantly higher out-of-pocket expenses).  If you choose Part C, you still enroll in Part A and B (and pay the Part B premium), but you cannot buy a Medigap policy.  This keeps your total premiums lower than with traditional Medicare.

• Traditional Medicare.  Alternatively, you can enroll in “traditional Medicare,” or fee-for-service plans.  This involves enrolling separately in Part A and Part B, as well as a Medigap (i.e. Medicare Supplement) policy, Part D, vision, hearing, and dental policies as needed/wanted.  There is generally no fee for Part A because the cost was covered by your employment taxes while you were working.  For Part B, there is a standard premium ($148.50 per month in 2021), and then you may pay an additional premium if your annual income exceeds certain thresholds.  The cost for each of the other policies vary, depending on the features of the plan that you choose.  Many Medicare experts recommend that if you can afford “traditional Medicare” instead of Part C, that is often preferable.  The Part C plan may not include access to providers that you need or want to use down the road, you may have trouble obtaining certain expensive services (e.g. rehab) later in life, and it can be difficult and expensive to attempt to switch from Medicare Advantage (Part C) to a Medigap policy in the future.

When Do I Enroll for the Different Parts of Medicare?  The timeframe for enrolling in each of the parts of Medicare depends on whether you are still working or eligible for other health coverage at the time that you turn age 65.

• You (and your spouse) are retired and/or otherwise have low quality or high-priced health insurance:  You can enroll in Part A and Part B any time in the 7-month period around your 65^th birthday (i.e. your birthday month and the three months before/after).  Depending on your circumstances, you will likely want to enroll in the 3-month window prior to your birthday month so there is no delay in starting coverage.  If you enroll during the initial 3-month window, coverage will start at the beginning of your birthday month. 
• You (or your spouse) are still working and have employer health insurance of reasonable quality and price.  You should still sign up for Medicare Part A during the initial 7-month window around your 65^th birthday.  (Again, you do not need to pay a premium for Part A.)  For Part B (as well as a Medigap policy, Part D, and any additional policies), you can wait until you or your spouse is close to retirement.  You can enroll for Part B without penalty if you enroll while still covered under a group health plan or in the 8-month window following the end of your group health coverage.  Again, you likely want to enroll prior to your retirement date so that there is no delay in starting coverage.
• You (or your spouse) have health insurance coverage under a retiree health benefit plan.  If you are eligible for retiree health benefits (such as FEHB, Tricare, or other government or long-term employer benefits), you may want to compare cost and benefits to see if the program is preferable to Medicare.  If so, you may choose to forego signing up for Medicare altogether and rely solely on the retiree benefits instead.  (For federal employees considering this decision, OPM has a helpful booklet online.)  Note, however, that if you change your mind in the future and want to sign up for Medicare at a later date, you will face a late enrollment penalty on Parts B and D as well as potentially higher costs for a Medigap policy.

If I Enroll in Traditional Medicare, Do I Need a Supplemental (Medigap) Policy?  While traditional Medicare offers considerable benefits relative to the expense, there are a number of gaps in which you pay out-of-pocket costs unless you have a supplemental policy.  Medicare Part A and B both have deductibles and coinsurance that the patient is responsible for paying.  For example, patients have to pay 20 percent of the cost for services under Part B once the deductible has been met, with no cap on out-of-pocket costs.  Under Part A, there is a coinsurance charge for hospital stays over 60 days or skilled nursing facility stays over 20 days.  A Medigap policy provides coverage to avoid these costs. 

Importantly, in the 6-month window after you first enroll for Medicare Part B, you can purchase a Medigap policy without restrictions or penalties for any pre-existing conditions you may have.  Medigap policies are also guaranteed renewable (i.e. cannot be canceled as long as you pay the premium), regardless of any health problems that you may develop over time.  This is a valuable protection for consumers, but it raises the stakes for trying to pick the best possible Medigap policy for you when you first enroll.  If the policy turns out not to be ideal but you had pre-existing conditions— or you develop health issues before you have an opportunity to switch— you may be stuck with that initial policy for life.

Which Medigap Policy Should I Choose?  There are 10 different types of Medigap plans.  Each Medigap policy offered by insurance companies have standard features defined by the particular Medigap plan under which it falls.  Currently, the most popular Medigap plans for initial enrollees are Plan G and, to a lesser extent, Plan N.  Under Plan G, you must pay a small deductible ($203 in 2021) for Medicare Part B services, and after that, the Medigap policy covers all eligible expenses without any co-insurance or co-pays.  Under Plan N, you must pay the same deductible ($203), but after that, you still have some co-pays and co-insurance for eligible expenses:  a $20 co-pay for visiting certain doctors, a $50 charge if brought to the emergency room and not admitted, and potentially a 15% surcharge on visits to doctors who don’t accept the Medicare-approved amount for their services.  There are also high-deductible Medigap plans— e.g. a high-deductible version of Plan G— which have lower monthly premiums but a higher deductible ($2,370 in 2021) before starting to cover eligible expenses.  The premiums for all of these plans vary by state, so you should investigate the relative costs for the plans in your state (in addition to considering your expected healthcare needs) in making a decision among the available Medigap policies.

If you have general questions about Medicare or would like to talk through the options that you are considering, please do not hesitate to call or email us.  Again, we also recommend taking advantage of experts (especially the free ones, without any conflicts of interest!), with whom you can outline your particular health issues and needs and who have a depth of experience weighing the costs and benefits of these Medicare decisions.