" />

Category: Medicare

5 Common Mistakes to Avoid with Medicare

November 30, 2022

Medicare can be tricky. Here are some common mistakes to avoid!

The Medicare open enrollment period has begun, so we thought it would be a great time to discuss some of the most common mistakes retirees make when it comes to their healthcare. Along with your streams of income that you’ve created for yourself during your career, Medicare is one of your most important tools in retirement. It can protect you against medical emergencies that could be financially devastating, especially when you’re living on a fixed income.

It is, however, important to know that Medicare has its limitations, potentially making you susceptible to mistakes when signing up and choosing a plan. Far too often we visit with and hear about retirees who aren’t aware of how Medicare works or how to correctly utilize it as a tool for protection. We believe that many of the headaches could be avoided simply by knowing the obstacles that may present themselves along the way, thereby allowing you to prepare for what’s ahead. Let’s go over the five most common Medicare mistakes, as well as a few ways to avoid them.

  1. Not Understanding What It Is

In 2021, two-thirds of Americans were covered by a private insurance plan, meaning that they were either part of a group plan through their employer, or they sought out coverage from an insurance company on their own [1]. While private insurance plans may differ on a case-by-case basis, they generally function similarly with premiums, deductibles and various amounts of coverage in each plan. In comparison with the healthcare insurance you may have had during your career, Medicare has slight yet key differences.

For example, Medicare has four parts: A, B, C and D. Parts A and B are usually referred to as Original Medicare, with Part A covering visits to hospitals and skilled nursing facilities as well as hospice care and some home-based healthcare. It is free for those who qualify, which includes those age 65 and older who have contributed Medicare taxes for 10 years or longer.

There are, however, monthly premiums for Part B, the portion of Medicare that covers the cost of outpatient care, such as standard visits to a general practitioner.

Parts C and D can be a bit trickier for those first signing up for Medicare. Part C is commonly known as a Medicare Advantage or Medigap plan, and these plans generally replace Parts A and B (and often Part D) with a plan through a private insurance company which gets subsidized by the government. Part C Medicare Advantage or Medigap plans can also include extra coverage like dental, vision and hearing.

Part D is prescription drug coverage, which is not included in Original Medicare Parts A and B but can be added for an additional premium amount.

No matter which plans you choose, Medicare premiums typically come directly out of your Social Security benefit, and it is important to account for those deductions when figuring your Social Security benefit into your net income.

  1. Overestimating Its Capabilities

As we mentioned above, Part A of Medicare is free to those who qualify, potentially generating the common misconception that Medicare as a whole is free for those in retirement. In reality, only premiums for Part A come at no cost to the insured, which still doesn’t include 2023’s $1,600 deductible for hospital visits [2]. Part B comes with a standard monthly premium which will be $164.90 per month in 2023. Increasing and enhancing your coverage with a Medicare Advantage plan can also hike your rates, and the cost of Part D can increase with a penalty for missing your initial enrollment period.

When planning your retirement, it’s important to know that those with higher incomes pay more for Medicare, and there is a two-year look-back on your income per your tax returns when determining how much you will pay.

It’s also important to know that Medicare does not cover long-term care. While no one likes to think about the prospect of leaving their home, their possessions and their loved ones behind, 70% of today’s retirees will need some type of long-term care, and 20% will need it for longer than five years [3]. When the national annual median cost of a private room in a nursing home can top $100,000[4], it’s easy to see where the problem lies. It may be helpful to look elsewhere for long-term care coverage, including into a long-term care insurance policy or a life insurance hybrid policy that includes assistance to pay for long-term care if you need it or a death benefit for your beneficiaries if you don’t.

  1. Signing Up Outside the Initial Enrollment Period

You are not automatically enrolled when you qualify for Medicare at age 65, you must enroll yourself. There is a seven-month enrollment window which starts from the three months before your 65th birthday, the month of your 65th birthday and the three months following your 65th birthday.

Failure to enroll during that period could cause you to incur permanent surcharges.

For instance, with Part D prescription drug coverage, you may incur a penalty. That penalty is calculated by taking 1% of the “national base beneficiary premium,” which is $32.74 in 2023[5], and multiplying it by the total number of full months you’ve gone beyond your initial enrollment period. For example, with next year’s national base beneficiary premium, if you delayed enrollment for Part D by 12 months, your premium would be an additional $3.93 per month.

  1. Picking the Wrong Plan

In the same way that your healthcare plan during your career probably had limited coverage, Medicare Advantage plans and Medicare Part D plans cover different providers and prescription drugs [6].

That’s why when you’re considering Medicare options, it’s important to have a list of your doctors and medications in hand. Consider working with a Medicare specialist who can help you choose between multiple carriers rather than going it alone.

  1. Neglecting to Revisit the Plan During the Open Enrollment Period

Medicare open enrollment runs annually from Oct. 15 through Dec. 7, so now is the perfect time to review your options. And remember, as you get older, your needs will likely change. You may move. You may begin to see different specialists or healthcare providers. Almost certainly, your need for different prescription drugs will change. As those needs change, so can your Medicare plan.

The open enrollment period gives Medicare beneficiaries a plethora of options in changing their coverage to tailor it to their unique circumstances. For example, you can opt to change your Original Medicare plan to a Medicare Advantage plan, or vice versa. Furthermore, you can change your Medicare Advantage plan to a different one that offers more complete coverage for your care. Finally, it gives you the ability to customize your Part D coverage, whether you’re adding it to your current plan, removing it from your plan or changing it to accommodate your needs [7].

Too often, Medicare beneficiaries have improper coverage, leaving them scrambling to pay for their care. You can revisit your plan each year during the open enrollment period to help ensure that you aren’t stuck with medical bills you could have avoided.

If you have any questions about retirement issues like Medicare, please give us a call!

You can reach your private wealth advisor at Silverhawk Private Wealth by calling 480.296.0200. We have offices across the United States to serve you. 

 

 

Sources:

  1. https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur202205.pdf
  2. https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly
  3. https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
  4. https://health.usnews.com/best-nursing-homes/articles/how-to-pay-for-nursing-home-costs
  5. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty
  6. https://www.aarp.org/health/medicare-insurance/info-2019/common-medicare-mistakes.html
  7. https://www.investopedia.com/medicare-open-enrollment-guide-5205470#toc-what-can-you-change-during-medicare-open-enrollment

Annual Medicare Open Enrollment Ends December 7

September 24, 2019

If you’re already enrolled in Medicare it may be time to evaluate your current coverage, make changes or switch plans during the open enrollment period from October 15 through December 7. If you have a Medicare Prescription Drug Plan, and are considering making changes from Original Medicare (Parts A and B) to a Medicare Advantage Plan, or vice versa, now is your chance to make changes or enroll.

Medicare health and drug plans are allowed to make changes to their offerings each year, including changes to costs, coverage, and what pharmacies and providers are in their network. If they no longer meet your requirements, during the Open Enrollment Period you can change Medicare health plans and prescription drug coverage for the following year. Changes made during Open Enrollment (also known as the Annual Enrollment Period) are effective for coverage as of January 1, 2020.

During Open Enrollment you can:

  • Switch from Original Medicare to a Medicare Advantage plan, and vice versa
  • Switch from one Medicare Advantage plan to another
  • Switch from one Part D plan to another
  • Change from a Medicare Advantage plan that doesn’t offer prescription drug coverage to one that does, and vice versa

You can also join a Prescription Drug (Part D) Plan for the first time if you missed your personal deadline for signing up. Or, you can drop your Part D coverage altogether.*

Do I Need to Change Plans?

If you’re enrolled in a Medicare health or prescription drug plan, review the materials that your plan sent you like the “Annual Notice of Change” (ANOC). If your plan is changing, be sure that it still meets your needs for the following year. If it doesn’t, now is the time to review your plan so that you’re satisfied with the level of care and coverage your receiving. Also, consider if your health has changed, if you may need additional care in the coming year, or if your premiums and out-of-pocked expenses are too high.

Since health care and drug expenses make up a good portion of a retiree’s budget and the budget of those close to retiring, we are available to answer your questions and help you with your options. Drug costs may differ substantially depending on the drug plan, so we suggest you review your current plan against others to see which offers the lowest out-of-pocket expenses for the particular brand-name and generic drugs, if any, that you use.

Among this year’s changes for 2020 is the closing of the coverage gap, or donut hole, for generic drugs. The gap was closed in 2019 for prescription drugs.

Here’s how the coverage gap works, according to Medicare. After you and your drug plan have spent a certain amount of money for covered drugs, you may have to pay more for your prescription drugs up to a certain limit. In 2019, once you and your plan have spent $3,820 on covered drugs, you’re in the coverage gap (this amount may change each year, and Medicare has yet to announce any changes).

Once you reach that coverage gap, you’ll have to pay 25% of your out-of-pocket costs for brand-name and generic drugs. You continue to pay those costs until you reach the threshold for catastrophic coverage, which for 2019 is $5,100 (again, this could change for 2020). Once you hit that limit you have to pay no more than 5% of your drug costs for the rest of the year.

Other changes to the Medicare program coming in 2020 are to Medigap plans (Medicare supplemental insurance). In general, Medigap policies are sold by private insurance companies and cover some of the health care costs that Medicare doesn’t, including co-payments, coinsurance and deductibles. They are standardized plans that must provide the same basic benefits, but some offer additional benefits and premiums vary.

For 2020, Medigap plans sold to new people with Medicare won’t be allowed to cover the Part B deductible. Because of this, Plans C and F will no longer be available to people new to Medicare starting on January 1, 2020. If you already have either of these two plans (or the high deductible version of Plan F) or are covered by one of these plans before January 1, 2020, you’ll be able to keep your plan. If you were eligible for Medicare before January 1, 2020, but not yet enrolled, you may be able to buy one of these plans.

ARE YOU ABOUT TO TURN 65?

The Open Enrollment Period doesn’t apply if you’re new to Medicare.

If you are 65 or older or turning 65 in the next three months and not already getting benefits from Social Security you should sign up for Medicare Parts A and B, unless you are working for a company with 20+ employees.

*If you don’t elect to get Part D coverage when you are first eligible, you may have to pay more to get this coverage in the future.

 

Medicare is an important part of retirement. Let’s discuss your retirement plan. Contact Silverhawk Private Wealth at 480.296.0200.

 

 

 

Sources:
“What actions can I take during Medicare open enrollment each year?” AARP. https://www.aarp.org/health/medicare-qa-tool/actions-to-take-during-open-enrollment/
“Closing the Coverage Gap—Medicare Prescription Drugs are Becoming More Affordable,” Medicare.gov, The Official U.S. Government Site for Medicare. https://www.medicare.gov/Pubs/pdf/11493.pdf.
“How to compare Medigap policies,” Medicare.gov, The Official U.S. Government Site for Medicare. https://www.medicare.gov/supplements-other-insurance/how-to-compare-medigap-policies

7 Things You Should Know About Medicare Before You Retire

August 17, 2018

It’s important to understand the facts about Medicare before heading into retirement.

Here is a basic overview of seven things you should be aware of when it comes to this important federal health insurance benefit. But keep in mind that certain parts of the Medicare program vary by state, so you will want to get more in-depth information before you turn 65 based on your primary retirement residence.

  1. It’s not free.

Even though studies have shown that Medicare is cheaper than most health plans offered by private insurers, it still does not cover all health costs when a person retires. In some cases, Medicare is one of the largest expenses for retired individuals. A retired couple aged 65 in 2018 may need an average of $280,000 to cover Medicare expenses (not including over-the-counter medications, most dental services, or long-term care) according to Fidelity Investments.1

  1. There is no out-of-pocket annual or lifetime limit.

When it comes to Medicare, there is no yearly or lifetime out-of-pocket maximum. In addition to deductibles, for Medicare Part B retirees usually pay at least 20% coinsurance for approved costs, regardless of how high the costs may be.

  1. The four parts of Medicare.

The “alphabet soup” of Medicare consists of four separate parts: A, B, C, and D.

Part A: This part is sometimes called “original” Medicare, and is basically hospitalization insurance. It covers inpatient care, short stays at skilled nursing facilities, hospice stays, lab tests, surgery, doctor visits and home health care related to a hospital stay. Part A is usually free.

Part B: Part B is the medical insurance portion of “original” Medicare coverage. It covers outpatient care, doctor’s office visits, lab work, preventative services, ambulance services, and medical equipment. The standard premium for 2018 is $134 per person, per month, but premiums are higher for people in higher income brackets.

Part C: This optional part refers to Medicare Advantage plans. Medicare Advantage is not a separate benefit, but is used for private health insurers that provide Medicare benefits. Part C plans replace Parts A and B, and usually replace Part D (optional).

Medigap: Sometimes called Medicare supplement insurance, Medigap is not a Part C plan. Medigap policies do not replace Parts A and B, in fact, Parts A and B are required in order to have it. Medigap is private insurance that helps supplement or pay some of the costs not covered by Parts A and B, which may include copayments, coinsurance, and deductibles. There are many rules which apply to Medigap, and plans are standardized by state.

Part D: This optional part provides prescription drug coverage. A person is eligible for Part D if they are enrolled in Part A and B, or Part C replacement coverage (which may include Part D coverage.) Part D coverage varies by plan and types of prescription drugs.

  1. Medicare does not cover everything.

The question in regard to Medicare is not what is covered, but what is not covered. Parts A and B of Medicare do not cover the following:

  • Amounts not covered by deductibles and coinsurance (20%), with no limits
  • Care outside of the U.S.
  • Eye exams (except for diabetics), vision care or eyeglasses
  • Hearing exams or hearing aids
  • Most dental care services or dentures
  • Routine foot care (except for diabetics)
  • Limited physical therapy, occupational therapy, speech pathology services
  • Long-term care (LTC) or custodial care

Some Part C or Medigap plans may offer some coverage for these, depending on the policy or plan.

  1. Medicare is mandatory.

Once you are 65 and receive Social Security there is no way to opt out of Medicare.

  1. When to sign up for Medicare.

An individual must sign up for Medicare within three months after they turn 65 years old, unless they are covered by an employer plan (subject to certain rules.) If a person is already receiving Social Security benefits when they turn 65, they will automatically be enrolled in the original Medicare plan Parts A and B.

  1. How Medicare is deducted.

Medicare Parts A and B are automatically deducted from a Social Security check if the individual is 65 and receiving Social Security benefits. Coverage begins the first month that an individual turns 65-years-old. Medicare Part B premiums must be deducted from Social Security if the monthly benefit amount covers the deduction. If deduction exceeds the benefit amount then the individual will be billed quarterly. Optional plans like Part C, Medigap or Part D may have other payment options, or may also be deducted from Social Security.

For more information about Medicare, as well as many other retirement issues, please reach out to your personal wealth advisor at Silverhawk Private Wealth.

Silverhawk Private Wealth – Headquarters
21090 N. Pima Road
Scottsdale, AZ 85255
Irvine Office 
949.207.6036
Seattle Office
1601 5th Ave Suite 1100
Seattle, WA 98101

Be sure to request your free copy of our Medicare whitepaper, which goes into more detail about the Medicare program.

 

Sources:
This overview has been compiled from information sourced from the official Medicare website, https://www.medicare.gov/. Please visit the site for more information.
1 Fidelity Investments, “How to plan for rising health care costs,” April 18, 2018. Fidelity.com. https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs (accessed August 7, 2018).