Medicare is a valuable source of health insurance for people 65 and older and for some younger adults with permanent disabilities. Understanding Medicare enables you to make well-informed health care decisions and to avoid getting lost in the maze of the plan’s options.
Medicare includes four parts:
Consider the following steps to personalize your own plan:
Step 1: Choose your plan.
Medicare offers two major options:
Step 2: Determine if you should purchase prescription drug coverage (Part D).
If you choose Original Medicare and want prescription drug coverage, you must purchase Part D. The various plans are approved by Medicare but offered through private companies. Enrollment is required, and a delay may cause a premium increase. Costs and coverage vary by plan.
Step 3: Consider purchasing supplemental coverage.
Medigap polices help fill in the gaps of Original Medicare coverage. Private companies issue these policies with different levels of coverage and costs. It is generally best to purchase a Medigap policy during the open enrollment period which begins the month you turn age 65 and enroll in Part B, and lasts for six months. While it is possible to buy a Medigap policy at a later date, those who purchase during the open enrollment get the benefit of the most cost-effective premium levels without undergoing underwriting, as mandated by federal law.
Choosing your Medicare options requires careful planning and timing. Consider planning well in advance before you turn age 65. Contact a Medicare agent (1-800-663-4227) for assistance.
Make sure that you understand your enrollment periods to avoid late penalty fees. You can enroll three months before and three months after you turn age 65 during the Initial Enrollment Period. Other enrollment options may also be available. You may also consider taking advantage of free, personalized health insurance counseling, which is available through your State Health Insurance Program (SHIP). The phone numbers are available at Medicare.gov/contacts.
While on Medicare, review your plan annually with special attention to your “Annual Notice of Change” letter. Research indicates that individuals are prone to stick to their original plan and often miss opportunities for additional savings and newly provided services. During the Open Enrollment Period (October 15-December 7) you can change your Medicare health plan and prescription drug plan. If you have a Medicare Advantage Plan, you can even switch back to Original Medicare.
Finally, remember that Medicare does not provide complete coverage for health insurance and custodial care. As part of your financial plan, coordinate your coverage with your Medigap and long-term care policies.
by Marty Reid, CFP - Marty Reid is a Registered Representative of and Securities and Investment Advisory Services offered through Cetera Advisor Networks LLC, Registered Broker Dealer, Member FINRA/SIPC. Reid Financial and Cetera Advisor Networks are unaffiliated.
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