Your Money, Smart Money: Understanding the basics of Medicare

Open enrollment for Medicare is coming this fall and the time is now to start researching your options. Whether you have already enrolled in Medicare or this enrollment period will be your first, understanding the basics of Medicare will help ensure the coverage you choose is right for your health and your wallet. Here are answers to some of the most frequently asked questions below: What is Medicare and who is eligible? Medicare is a national health insurance program for those over the age of 65 or those under 65 that have certain disabilities. Medicare was designed to help support these individuals' retirement healthcare needs while containing some of the associated costs. When and how do I enroll? When a person turns 65, they can participate in what is called the Initial Enrollment Period, which begins three months before the month you turn 65 and ends three months after your 65th birthday month. If your birthday is on the 1st of the month, your Initial Enrollment Period starts four months before your age-65 month and ends two months after it. The Initial Enrollment Period is the time when you can make your first Medicare selections. There is an Open Enrollment Period every year, during which individuals can change their healthcare selections from the previous year. It's worth reviewing your situation annually, particularly if any of your needs have changed. For most of those eligible, open enrollment begins on Oct. 15 of each year and ends Dec. 7 1. Special timeframes may apply, depending on your situation. Consider consulting a financial advisor for guidance so you can avoid late penalties upon signing up. Do I sign up for Medicare if I work past age 65? If you are still working at 65 and have qualified health insurance coverage from your employer or your partner's employer, you can delay enrollment in some parts of Medicare until your Special Enrollment Period. During your Initial Enrollment Period, you are allowed to sign up for Part A of Medicare when you turn 65 but delay enrollment in the other parts of Medicare. This allows you to avoid Medicare late fees while remaining on your current coverage. When you or your spouse stop working and your insurance coverage from an employer ends, you are eligible to apply to the other parts of Medicare within the Special Enrollment Period. This period begins the month your employee coverage ends and lasts for seven months after, totaling an eight-month period 2. What is the difference between Traditional Medicare and Medicare Advantage? Typically, the first decision you will make during enrollment is whether you want to participate in Traditional Medicare or Medicare Advantage. The main differences between the two are who provides the plan and the type of coverage. Traditional Medicare is provided by the government whereas Medicare Advantage is provided by private health insurance companies. When seeking medical care, the doctors and hospitals that are covered by the two plans vary 3. With Traditional Medicare, you can go to any doctor or hospital system in the U.S. that accepts Medicare coverage. In contrast, with Medicare Advantage you can only see service providers who are in your plan's network and area of service. Those with Medicare Advantage may experience fewer options for care when outside of their service area or if fewer doctors are within network 4. Consider how traveling and where you settle in retirement may impact the care you receive under each plan. What are the main components of Medicare? Traditional Medicare and Medicare Advantage are each divided into different components of coverage: Parts A-D. Part A and B are the foundational components of Medicare. Part A is what provides an individual with in-patient hospital care and some post-hospital services. Part B provides coverage for outpatient physician consults, such as lab tests or flu shots. Part D is coverage for prescription drugs. Parts A, B, and D comprise Traditional Medicare. Any healthcare need not covered within these three parts can be addressed through Medigap policies, which are essentially add-ons to your government plan from a private insurance company. So, what is Part C? Part C is Medicare Advantage. Medicare Advantage plans are provided by private insurance companies and offer Medicare Part A and Part B coverage along with additional benefits such as vision and dental. A way to think about the difference between the two overarching plan structures is that with Traditional Medicare you sign up for ala carte components and Medicare Advantage is a bundled package of parts 5. Does my coverage carry over year to year? Once you select a Traditional Medicare or Medicare Advantage plan, your plan will carry over year to year. However, it is beneficial to review your coverage and costs during each Open Enrollment Period in case your needs or the plans have changed. Selecting healthcare in retirement can be a delicate balancing act between how much you spend on annual expenses and the coverage you receive. Whether you are enrolling in Medicare for the first time or are reviewing your existing plan, a financial advisor can help ensure your insurance plan makes the most sense for your financial goals and health needs. 1 https://www.medicare.gov/basics/get-started-with-medicare/get-more-coverage/joining-a-plan 2 https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/working-past-65 3 https://www.ameriprise.com/binaries/content/assets/ampcom/pdf/understanding-medicare.pdf 4 https://www.medicare.gov/basics/get-started-with-medicare/get-more-coverage/your-coverage-options/compare-original-medicare-medicare-advantage 5 https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare Glenn Kenes, CRPC, AIF, is a private wealth advisor and managing director of Barber Kenes Retirement Solutions, a private wealth advisory practice of Ameriprise Financial Services, LLC, in Auburn. He specializes in financial planning and asset management strategies and has been in practice locally since 1995. Contact him at: BKRetirementSolutions.com or 530-823-0710, 470 Nevada Street, Ste. 200, Auburn, CA 95603.