How Does Medicare Work?

Medicare is such an essential part of retirement planning because you can save for your retirement, but there’s often no way to cover 100% of your medical expenses out of pocket. There are also a lot of Medicare mistakes you can make simply because you’re not well-informed on the topic.

In our most recent podcast, we had the pleasure of speaking with one of the leading experts in Medicare: Diane Omdahl.

She’s the co-founder and President of 65 Incorporated.

Who is 65 Incorporated?

65 Incorporated is a business that provides Baby Boomers and seniors with unbiased Medicare information. The company offers software and consulting services that help guide you to the right Medicare option for you. 

You’ll find the company on:

  • Kiplinger
  • MarketWatch
  • U.S. News

Diane is a registered nurse working in long-term care, and then she became a director of a home health agency, where she learned all about Medicare rules first-hand. Now, for over two decades, she has helped educate seniors on Medicare.

When Should a Person Begin Planning for Medicare?

Retirement planning is different for everyone, and while many people retire at 65, some retire at 62. First and foremost, it’s crucial to know that you cannot be on Medicare until you’re 65. If you retire early, you’ll need to get health insurance to cover those years.

Diane recommends that you start planning out your Medicare 9 – 12 months before you plan on going on Medicare.

You’ll need to create a My Social Security account to apply, so this is something that you can do beforehand to get the ball rolling. The biggest issue Diane finds is that people run out of time because they don’t take measures beforehand.

One of the biggest misconceptions that Diane sees is that people think they need to take Medicare at 65 no matter what.

You can:

  • Enroll in Medicare
  • Stay on health insurance if you work with a company that has 20 or more employees
  • Contribute to an HSA

If you have health insurance through your employer or contribute to an HSA, it may not be in your best interest to go on Medicare just yet. However, if you’re on Social Security or on disability, you will automatically be enrolled in Medicare.

Every person’s situation is unique, and that’s why it’s important to sit down with a professional to learn when the best time is to enroll in Medicare. 

What is Open Enrollment?

Open enrollment starts on October 15 and ends on December 7 of each year. This period allows people with a Part D or Advantage plan the option to change plans. You may love your current plan, but if you’re not paying attention during open enrollment, it’s not uncommon for plans to change.

Some people will be on very low-cost Part D plans, and then find that the price of their current plan doubles after open enrollment.

You have to pay attention to your plan during open enrollment.

Can You Change Your Medicare Plan?

There are two main Medicare “paths,” as Diane likes to call them.

  1. Original Medicare with supplement plans
  2. Medicare Advantage 

When you make your initial plan to go on either path, it is very important. You can change plans, but things are getting a little more complicated in some states. You may not be able to change plans easily due to health reasons or where you live.

Also, note that there are three main Medicare parts:

  • Part A, which covers hospital and home healthcare.
  • Part B, which is an outpatient medical component.
  • Part D, which is your prescription drug plan.

What is Original Medicare?

Original Medicare has multiple parts:

  • A
  • B

You’ll also want Part D and some sort of Medigap plan.

What is Medicare Advantage?

Medicare Advantage is also considered Part C, and it was introduced to help combine Part A, B and D into one.

How to Choose Your Medicare Path

Medicare has these two paths, but which one is right for you? This is where it gets tricky. Eventually, everyone’s health will begin to decline to some degree. However, the biggest issue is financials.

  • Original Medicare is where you pay monthly and have to pay for certain procedures.
  • Medicare Advantage is more like a pay later solution, where you pay for procedures later.

Coverage rules differ, too. If you want to see a specialist, you need a referral on the Advantage plan and not on the Original plan.

Original Medicare has a lot less coverage rules than Advantage plans with some caveats, such as buying a mobile wheelchair. Under the Original Medicare plan, your doctor can recommend physical therapy without additional approval.

So, there’s a lot to think about.

Unfortunately, many people want to get Medicare as quickly as possible. There’s a lot of information surrounding Medicare, and you may want to just get it over with and choose a plan that isn’t optimal for you.

Don’t do this.

It may be more difficult in the future to change your plan, and in some cases, it may not even be possible.

That’s why it’s so important to sit down with an expert like Diane to choose the right path the first time.

For example, Diane received a call from someone with:

  • Cancer
  • Cannot get a referral
  • Cannot get the supplement

He’s stuck in an HMO plan, and he needs prior approval before chemo can begin. Unfortunately, he needs to jump through hoops and may even need to delay treatment because he’s not on the right plan to begin with.

When to Sit Down with a Financial Advisor to Discuss Medicare

Ideally, you’ll want to sit down with a financial advisor at 62 or so to discuss Medicare. Medicare has a two-year look-back period, and the period will determine how much you pay for Medicare.

Financial advisors can help you restructure your wealth to help reduce your Medicare expenses.

Medicare is one of those things that you need to focus on when trying to secure your retirement. You want to sit down with an expert to discuss Medicare and learn which option is the best choice for you. Don’t just fall for everything they say on television about Advantage plans because you’ll often find that there are missing tidbits and misleading claims that can cost you a lot of money.

Want to hear the podcast for yourself?

Click here to look through our list of podcasts.

5 Medicare Mistakes to Avoid

Medicare is crucial when trying to secure your retirement because private health insurance is very expensive. And if you’re in retirement without any form of insurance, you’re one medical emergency away from depleting your funds.

We had the pleasure of speaking to Roderick Spann of Senior Advisors and discussed five Medicare mistakes to avoid so that you can enjoy a worry-free retirement.

5 Most Common Medicare Mistakes to Avoid

1. Not Enrolling in Part B Under the Right Circumstances

Medicare has what is considered an “initial” enrollment period. This enrollment period revolves around a person’s 65th birthday. The period is valid during the following time periods:

  • Three months before turning 65
  • The month of turning 65
  • Three months after turning 65

Generally, a person will enroll in the three months before they turn 65 so that Medicare begins on the first of the month that they turn 65.

If you have an employer with over 20 employees, you can remain on their group plan and not go on Medicare Part B. However, if your employer has fewer than 20 employees or you’re no longer employed, you need to enroll in Part B.

It’s crucial to enroll in Part B because it is the medical insurance portion of Medicare. Essentially, Part B covers any medical care outside of the hospital. Part A only covers your in-hospital care.

Part B covers your:

  • Outpatient surgery
  • Doctors
  • X-rays
  • CAT scans
  • Etc.

Ideally, if you need to enroll in Medicare, do it at the beginning of the initial three-month period. Delays can lead to penalties, and you never know what may go wrong during the initial enrollment that must be rectified.

2. Ignoring Medicare Part D

Medicare has a lot of parts. For example, let’s say that you get sick, visit the doctor and are prescribed medication. Parts A and B of Medicare will not cover prescriptions. Instead, you’ll need to have Part D, which offers you drug coverage.

Part D prescription plans are all very different, and there are 25 – 30 of these plans available. Many people choose a plan recommended by a friend or coworker, but this is a bad idea because you may need specific coverage not offered in the plan.

Plans have different:

  • Co-pays
  • Premiums
  • Etc.

If you’re not analyzing your prescription drug coverage when choosing a plan, you can spend thousands of dollars more than necessary. For example, plans have preferred pharmacies that offer the best prices and coverage. If you don’t go to this pharmacy because it’s too far away, you may spend thousands of dollars more per year than you would on a different plan.

Analyzing your prescription drug coverage is crucial when opting into Part D.

3. Not Understanding Medicare Advantage vs. Medigap Coverage

Unfortunately, navigating Medicare is complex. Just when you think you have all the coverage you’ll possibly need, you’re presented with options for Medicare Advantage or Medigap coverage.

And these plans are worth considering because they offer additional coverage.

Before going into these coverages, let’s backtrack and discuss original Medicare.

Original Medicare

Original Medicare is your Part A and B coverage. Under these plans, just 80% of medically necessary services are covered. You’re responsible for an unlimited 20% of coverage.

So, what can you do?

Enroll in a Medicare Supplement or Medigap plan. These two plans do exactly what they sound like: fill the gap in original Medicare. However, Medicare Advantage is Different.

Understanding Medicare Advantage

Medicare Advantage works differently from Medigap and Medicare Supplement plans. You’ll move from original Medicare to private insurance under Medicare Advantage. The main difference here is:

  • Plan costs
  • Choice of doctors

Original Medicare allows you to go to 99% of hospitals and 90% of providers. Advantage plans are like HMOs, where you must go to specific doctors and hospitals. These plans are regional based.

4. You Have Retiree Coverage or Employer Plans and Don’t Think You Need Medicare

Retiree coverage may not be the most cost-effective or robust as you need. Some plans have $0 premiums, and that’s something you’ll want to stay on. However, we’re seeing many retiree plans that have monthly premiums, making them less effective than Medicare Advantage or even an Original Medicare plan.

You must sit down and analyze:

  • What your plan covers
  • Coverage and cost versus Medicare

Again, you need to analyze every portion of your current coverage to determine whether Medicare is a good option for you.

5. Selecting a Plan Based on a Friend or Family Member’s Advice

Friends and family may not have the best insight into the right plan for you. A plan may be optimal for you and horrible for your neighbor. Unfortunately, Medicare is not a one-size-fits-all solution.

You should speak to someone in the area who is a specialist and can help you sift through the plans and options that you have available through Medicare.

It’s important to have a thorough understanding of your:

  • Medical needs
  • Medicare options

This way, you can then weigh the pros and cons of supplement or Medigap plans or even the different parts of Medicare.

If you’re 64 and turning 65 soon, planning for Medicare with an expert would take an hour of your time and can be extremely beneficial for your healthcare needs. A few of the questions that are asked are:

  • Are you employed?
  • Do you plan to retire at 65?
  • Does your current insurance cover just you or others?

Once you answer all the questions, you’re presented with plans and options that will best fit your unique needs. Experts can even help and assist you with the actual enrollment process, so you know how to navigate Medicare from start to finish.

Did you spot the recurring theme with all these plans? You need to know the coverage you really need and to understand what’s available through Medicare that can help you maximize your coverage.

Roderick is a professional Medicare Agent, so if you need help with Medicare or have questions, reach out to him at (908) 481-5678 or send him an email.

If you need help with securing your retirement, schedule an introduction call with us today.