Enrolling in Medicare is not a simple process. As you approach age 65, there are several decisions that need to be made. Making a wrong decision, based on your circumstances, can have a big impact on your finances and your health insurance coverage. In the first part of this series on Medicare (Medicare Enrollment—Not As Easy As It Sounds), I discussed the importance of the timing of your enrollment. In this article, I will try to help you understand the different paths that you must choose from when it’s time for you to enroll.
It’s important to understand that you have two paths to choose from when enrolling in Medicare. You can select either Original Medicare or Medicare Advantage. Both paths have advantages and disadvantages, and what might be the best path for you may not necessarily be the best path for friends or family members.
The first step in choosing the right path is understanding the difference between the paths. Original Medicare is administered by the federal government and consists of a few different parts. Part A is the coverage that pays for expenses incurred during inpatient hospital visits and for those in a skilled nursing facility. It also pays for some expenses related to home health care and hospice services. Medicare Part B pays for medically necessary services, like lab tests and doctor visits, to diagnose and treat your health issues.
When you choose Original Medicare, you start with Parts A and B, and then you can add optional coverages. Part D is an optional coverage that pays for prescription drug expenses. The other optional coverage is a Medigap policy. Medigap policies are administered by private insurance companies and offer a variety of coverages for co-pays and deductibles. It is important to note that not all health care providers accept Medicare patients, but most do, so you can choose from a wide variety of doctors and specialists.
Medicare Advantage plans offer an alternative path for Medicare enrollees. These plans are administered by private companies. They are required to offer the same coverages as Original Medicare, and they often offer more, like vision, dental, or hearing coverage. Most of them offer drug coverage. They work with a network of providers and therefore have more rules when it comes to getting a referral to a specialist. The premiums are typically significantly lower than Original Medicare, and some plans are offered with zero premium. But zero premium does not mean zero cost. There are out-of-pocket expenses, usually with each service provided under the plan.
Which Path Should You Pick?
So, which path should you choose? Like most financial questions, the answer is … it depends. If your doctor is not in a Medicare Advantage network, you’ll need to find a new doc or go with Original Medicare. If you plan to travel extensively, you might also want to consider Original Medicare because you are not limited to doctors within a network. If your health is good and you don’t incur a lot of medical expenses, a Medicare Advantage plan can probably save you some money.
Of course, that leads to the question that many ask: “Why not sign up for Medicare Advantage while healthy and switch to Original Medicare and a Medigap plan when we need more services?” That would be nice, but it doesn’t work that way. Once you’ve decided which path is right for you, it’s not easy to change. There are certain times each year when you can apply for a change, and there are some rules you have to follow.
It’s relatively easy to switch from Original Medicare to a Medicare Advantage plan. But if you want to go from a Medicare Advantage plan to Original Medicare, it can get complicated. After spending an amount of time in a Medicare Advantage plan, you can lose the guarantee to get a Medigap plan. The Medigap insurance companies can put you through medical underwriting. That means if you have a pre-existing chronic condition, you can be denied coverage. And having Original Medicare without a Medigap policy can become cost prohibitive, especially if you have a chronic condition.
Remember, I said it isn’t easy. But the key to making any decision is to gather as much information and knowledge about the subject as you can. You can then weigh the pros and cons of each choice as they apply to your situation. The Medicare website (www.Medicare.gov) is a great resource and can help make sure you are on the right path.