Last year, I wrote an article about the importance of understanding Social Security early in life. Social Security is complex and it’s going to take a while to understand all of the nuances of the program. In addition, whether it’s an election year or not, Social Security is a program that is being talked about by both Democrats and Republicans. If you have an opinion about Social Security (and you should) then you will want to pay attention to what the candidates have to say and make sure your legislators know your views.
A program that is often included in the same sentence with Social Security is Medicare. It’s a national health insurance program started in 1966. Medicare primarily provides Americans over age 65 with health insurance but it does also provide benefits to some younger people with disabilities.
Medicare has four parts. Here’s a really high level overview: Part A covers hospital services. Part B covers doctors services. Part C is an alternative to Parts A & B called Medicare Advantage. And Part D covers prescription drugs. I’m sure you can already see how this is going to get complicated.
AARP recently held a webinar series called “Making Sense of Medicare” that I thought was very interesting. In fairness to them, it by no means answered everything you might want to know about Medicare. But it did provide a good foundation that you can build upon. Here are a few of my takeaways from the webinar:
- Like Social Security, Medicare is age driven. The enrollment window for Medicare begins three months before you turn age 65 to 3 months after. You can sign up online or at a Social Security office. There are consequences if you don’t sign up within your enrollment window.
- Unlike Social Security, Medicare involves making a decision. When you sign up for Social Security, that’s it…you sign up. Medicare involves making a decision: Do you want the Original plan or the Advantage plan? There are pros and cons to each. Good news though, neither plan has a pre-existing condition clause.
- The Original Plan offers more choices. Under the Original plan, you can choose any doctor. For some people, that is a very important consideration. It also means that your costs could be a bit higher. But having the freedom of choice could be worth it. Oh, and there’s no dental or vision. Individuals who choose the Original Plan often make up the difference by purchasing Medicare supplemental coverage.
- With the Advantage plan, you could have lower out of pocket costs because you’re working within the Medicare network of doctors, hospitals, etc. This could be frustrating because you have to find doctors and providers who will take your coverage. But the savings might be worth it.
- Obviously, the decision about whether to go with the Original plan or the Advantage plan is entirely yours. Everyone’s medical and financial situation is different. The good news is resources are available. AARP has a Medicare Resource Center on their website. There’s also the State Health Insurance Assistance Program (SHIP), a network on free, one-on-one counseling and assistance, designed to help people navigate the complexities of Medicare.
- Keep in mind that while Medicare could be years away for you, it’s possible you have a parent or loved one that is close to Medicare age and they might be looking for resources. The AARP Resource page and SHIP could be a way that you can help them.
- You will want to plan on reevaluating your coverages every year. The good news is that once you make a decision, it is possible to change your coverage. Granted, there might be consequences, but it could be worth it. If you’re in the corporate world, then you’re familiar with the term “open enrollment”. Well, guess what? Medicare has open enrollment too. When you sign up for Medicare, plan on participating in open enrollment for the rest of your life.
Health insurance has never been an easy subject and it doesn’t look like it will get any easier when we retire. That’s why it’s important to spend time learning about Medicare now. So, when it comes time to make health insurance decisions, we can make the best ones possible for ourselves and our families.
Image captured by Sharlyn Lauby during sunset at the Halekulani Hotel on Waikiki Beach in Honolulu, HI
Nice first piece about a difficult and confusing subject.
Unfortunately, a generally accepted POV is not expressed: Buying an Advantage Plan from a private insurance company, instead of regular Medicare, takes your insurance out of the hands of an organization designed to pay you benefits (Medicare) and puts it back in the hands of organizations designed to charge you and collect your premiums (health insurers). A recent study found that 80% of Advantage Plan holders were dissatisfied in some way. No one ever complains about regular Medicare.
Plus Part C is NOT generally considered to be Advantage Plans, but instead so-called Supplemental Plans, that cover the 20% of the managed costs Medicare reimburses doctors and hospitals. If you are old enough to be eligible for Medicare, you are old enough to remember what private health insurance looked like when LBJ got Medicare passed in Congress in 1963. Medicare mimicked it. Back then, health insurance was divided into Hospitalization (Part A) and Major Medical (part B for doctors). Health insurance paid whatever the doctor charged but only 20% of it, leaving the balance to you.
Medicare tracked some of the changes in private insurance. As managed care came between doctors and patients and crippled our healthcare system, Medicare too adopted managed reimbursements. And private industry flooded in to offer Supplemental, sometimes called Medi-gap, Insurance to cover that 20%, which can be a lot when you’re hospitalized. Happily the Feds standardized all the offerings so private health insurers can charge whatever they can get away with for their six or seven different Supplemental Policies but they all have to offer identical coverage so the consumer can make any easily informed choice.
Part D for drug coverage, which again private carriers eventually added, is a long and complicated subject for another day.
Hi Bill! Thanks for sharing your POV. This is exactly what we need in order to make the best decisions for ourselves.