Last week, we wrote about Medicare’s open enrollment period. Since the program’s creation in the 1960s, it’s been expanded and amended several times, leaving participants facing a confusing hodgepodge of rules and terminology. This week, we’ll sort through the alphabet soup of Medicare coverage and spell out what you’ll need to know to get started.
Regardless of which coverage options you choose, you need to sign up on time. Your “initial enrollment window” starts roughly three months before your 65th birthday and extends for about three months after—failing to sign up during that period can lead to higher premiums.
There is one exception: You can delay Medicare enrollment if you’re still working at age 65 and receive health care through your employer. In this case, we recommend enrolling a month before you retire to avoid gaps in coverage.
Let’s break down Medicare’s benefits by the letter:
- Medicare Parts A and B. Medicare Part A covers hospital care and Medicare Part B covers doctor’s visits. Sometimes referred to as “Original Medicare,” everyone who signs up for Medicare receives these two basic types of coverage. And we do mean basic: Many common health care expenses are not fully covered by Parts A and B. If you require frequent hospital stays or doctor’s visits, the deductibles can be confusing and expensive. As a result, many people choose to supplement or replace Parts A and B with additional insurance.
- Medicare Part C. More commonly known as Medicare Advantage, Medicare Part C consists of the private insurance plans that can be used as alternatives to Medicare Parts A and B. Most Medicare Advantage plans offer more comprehensive coverage than Parts A and B and may include things like glasses and contact lenses, as well as dental care and prescriptions. Premiums for Medicare Advantage are generally more costly than for Parts A and B, and benefits and availability vary by geographic area.
- Medicare Part D. Medicare Part D is supplemental insurance that covers prescription costs.
- Medigap (Plans A through N). Like Medicare Advantage, Medigap plans help bridge the gaps in Medicare Parts A and B. Medigap plans use letters to delineate themselves—ranging from Plan A to Plan N, with Plan G being the most comprehensive. In general, Medigap plans offer less coverage and are less expensive than Medicare Advantage plans. However, Medigap plans don’t include prescription coverage; if you opt for one, you’ll also need to get a separate Part D prescription plan.
How do you know which plans to choose? Check out Medicare.gov to see the Medicare Advantage plans available in your area. If you don’t find the coverage you want, explore a Medigap and Part D prescription plan.
Still confused? Listen to our “Medicare Made Simple” podcast to learn more about your options. Please contact your wealth management team for advice specific to your situation. Your team’s financial planning professional would be happy to discuss these issues with you as you prepare for retirement.
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