Selecting or changing a Medicare plan

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By Elliot Raphaelson
Posted on October 05, 2023

[Ed. Note: The annual Medicare open enrollment period, during which all beneficiaries can change Medicare plans and drug coverage, runs from October 15 through December 7. This article addresses how to first sign up for Medicare as well as sources to help existing Medicare beneficiaries make changes.]

Selecting a Medicare plan is complex. I will discuss some of the important factors and sources of information that will help you avoid mistakes.

For a summary of the basics, you should obtain a free copy of “Medicare & You (2023),” a government handbook that is updated each year. Contact the Center for Medicare and Medicaid Services (CMS) at 1-800-633-4227 to obtain a copy; or visit medicare.gov/medicare-and-you to get a PDF or ebook version.

Traditional Medicare refers to Part A (hospital insurance), Part B (medical insurance) and Part D (drug coverage). The major advantage of enrolling in traditional Medicare is that you can visit any hospital or doctor affiliated with Medicare without a referral or prior authorization. Although traditional Medicare is flexible, it may not be your most cost-effective choice.

Paying for Medicare

If you have worked for at least 10 years under Social Security, Part A is free.

Part B premiums are based on your income. In 2023, for most participants, the standard monthly premium is approximately $165 per month. However, if your family’s adjusted gross income (AGI) exceeds $194,000, your monthly cost will be higher (the same is true for an individual with income above $97,000).

Medicare Part B covers 80% of your physician services. However, you can obtain “medigap” coverage (supplementary insurance) at additional cost, which will cover the additional 20% and, in many cases, any deductibles, co-pays or other “gaps” in Medicare coverage.

For example, if you require hospitalization, there is a $1,600 deductible under Medicare that could be covered by medigap. If you require skilled nursing care after a hospital stay longer than 20 days, the cost would be $200 per day without medigap coverage.

The bottom line is that without medigap coverage, you could be facing substantial out-of-pocket expenses.

Part D premiums are tied to income, with an average cost of $43 per month. You have only 63 days after your initial enrollment in Medicare to enroll in Part D. Enrollment after that date will result in higher premiums. Medicare.gov can help you find and compare plans that cover the drugs you regularly take.

Choosing a medigap plan

There are 10 types of medigap plans. Medicare.gov explains the differences between the plans and the associated premiums. “Medicare and You” also summarizes the various medigap options. The cost of medigap, based on coverage choices, varies but can exceed $200 per month.

[Ed. Note: Each plan type provides exactly the same coverage regardless of which company you buy it from. So, once you’ve selected the plan type, it makes sense to base your decision of insurer largely on price.]

The best time to buy a medigap policy is during your Medicare Open Enrollment period, which is the six-month period that begins the first month you have Part B and you’re 65 or older. After this enrollment period, you may not be able to buy medigap, or it may cost more. [Ed. Note: Under a new law, Maryland residents who already have a medigap policy may change their plans without penalty during the 30 days from their birthday each year.]

Medicare Advantage plans

Medicare Advantage Plans, known as Part C, are an alternative to traditional Medicare. If you are very healthy, and remain so, a Medicare Advantage plan may be cost-effective, but there are disadvantages you must understand.

These plans, which vary significantly, can include insurance coverage for routine dental, vision and hearing. Advertisements don’t always cover all the pros and cons, so you have to do your homework before you select a Medicare Advantage plan. “Medicare and You” provides valuable information.

In order to be eligible, you must first sign up for Medicare Parts A and B. The private companies that offer Advantage plans have to be approved by Medicare. Some of these plans offer prescription drug coverage. Some of these plans offer lower monthly costs than traditional Medicare.

In most cases, you will need to use healthcare providers who participate in the plan’s network, though there are some PPO plans that allow you to go out of network. Advantage plans set a limit on what you have to pay out-of- pocket each year for covered services. Some plans offer non-emergency coverage out of network, but typically at a higher cost.

Information resources

An excellent resource is your State Health Insurance Assistance Program (SHIP). SHIP is available in all states. You will be assigned an unbiased individual with expertise in Medicare to work with you. There is no cost. I volunteered for SHIP for several years.

Another excellent source of information is Get What’s Yours for Health Care: How to Get the Best Care at the Right Price by Philip Moeller. The book is comprehensive, unbiased and covers the pros and cons of traditional Medicare vs. Medicare Advantage. Moeller also provides good advice on minimizing drug costs.

Bottom line: Medicare options are plentiful and complex. Some cost-effective options are available only at the time you apply. Don’t hesitate to ask your primary healthcare advisers for their advice.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.