What Medicare expects you to know … but nobody told you

Are you getting these calls? We sure are. Somebody introduces themselves – almost certainly with a fake name – and asks if you’re covered by Medicare. Then they ask if you’re still paying out-of-pocket for healthcare costs. And because every Medicare recipient inevitably does make some copayments and fulfills some deductibles – just like the rest of us – they try to sell you an “Advantage” plan.

But do you need it? Do you need that particular plan? Oh, they didn’t tell you there were other Advantage plans? Would a different kind of policy – which they also didn’t tell you about – meet your needs better?

It’s time to hang up the phone and learn about what your options really are.

The A-B-C-Ds of Medicare

On the first day of the month in which you turn 65, you become eligible for Medicare. You might qualify earlier if you have end-stage renal disease, Lou Gehrig’s disease or some other terminal, high-cost condition.

This qualifies you for Medicare Part A, which covers hospitalization costs. There are no premiums, but there might be copayments.

That’s distinct from Part B, which covers doctors’ visits. This does require paying a premium as well as copayments. The premium, though, is typically deducted from Social Security checks, so it’s easier for people to budget around it. For a married person turning 65 today who enrolled within the past three months and currently receives group health insurance through a job paying less than $194,000 per year, that monthly premium is now $164.90. Your mileage may vary, so consult Medicare’s premium calculator.

Parts A and B together are often called “Original Medicare”.

Let’s skip Part C for now. That’s complicated – and rife with scams. We’ll drill down on that later.

Which brings us to Part D, which covers prescription medications. While these plans are designed to work hand-in-glove with Original Medicare, they are offered by private insurers and so they vary in exactly what they offer. As a result, they differ in price. Depending on what medications you take now, what you consider the likelihood of needing more medications in the future, your willingness to accept generic substitutes and your degree of concern about how much you might need to pay for especially high-cost drugs, you might rationally select one Part D plan over another.

What choices you need to make

So, about Part C. It’s also called Medicare Advantage and it’s what the high-pressure cold callers are selling.

Medicare Advantage is not necessarily a scam. It is a private-sector alternative to Medicare offered by managed-care companies. These plans typically offer a range of coverages – dental, hearing and vision, for example – not covered by Original Medicare, but you would need to stay within the plan’s network of doctors and hospitals.

It also duplicates Part D’s prescription coverage, so there’s no need to pay extra for a drug plan. And because Medicare Advantage plans generally offer lower co-pays than Original Medicare, participants often have lower out-of-pocket expenses.

What the phone salespeople aren’t telling you, though, is that Medicare Advantage is not your only option for controlling healthcare costs as a U.S. retiree. They fail to mention Medicare Supplement Insurance, also called Medigap. This extra insurance mitigates your exposure to copays, coinsurance and deductible expenses.

You can only get Medigap coverage if you’re on Original Medicare. While they are offered by private insurers, they have to conform precisely to one of 10 varieties. These differ in their coverage of skilled nursing care, foreign travel, out-of-pocket limits and certain Part B blind spots.

Choose wisely; choose soon

Not much about Medicare is free, and even less is automatic. You need to step up and claim your benefits. And you need to do that within three months of your 65th birthday, otherwise you’ll be tagged with lifelong higher premiums. So, the time to start getting serious about your Medicare options is not your 65th birthday, not even the first day of the month in which your 65th birthday occurs. It is three months before that date.

As your requirements change, you’ll have opportunities to update your coverage. But you can only do so without penalty during the annual enrollment period, which runs from October 15 through December 7. During that yearly window, you can switch between Original Medicare and a Medicare Advantage plan.

As for whether you want to go with a Medicare Advantage plan or a Medigap plan or neither is a question that you need to research. And if you stick with Original Medicare, you’ll need to select which Part D provider makes sense for you and which kind of Medigap plan is in your best interest.

Medicare has posted a helpful guide to coverage choices on its website, and that’s probably the best place to start your investigation. The American Association of Retired Persons also has a good pillar page on the topic, but bear in mind they’re trying to sell you their own Medigap and Part D plans.

Ultimately, though, this is your decision. And, like any other decision you make about funding your retirement, you should consider consulting an experienced financial professional.