What are the main differences between the alphabet soup of Medicare Parts A, B, C, and D? Can I enroll my spouse when I sign up? How easy is it to switch plans? Do I need a supplemental plan? What role does Medicare play as part of my retirement income strategy?
Medicare expert Marcia Mantell, president of Mantell Retirement Consulting, and John Wells, a Fidelity planning and guidance consultant, fielded these and other common Medicare questions at a recent webcast hosted by Kerry Sweeney Harris, vice president at Fidelity Investments.
Watch the full webcast or read some key highlights below.
|Q||What are the key parts of Medicare?|
Marcia Mantell: It’s important to know about the various parts of Medicare. Let’s talk about Medicare Parts A, B, and D first. Originally, Medicare was made up of two distinct parts: Part A, which provides hospital insurance, and Part B, which pays your doctors. There's also Part D, which is the prescription drug part of Medicare (see next question for discussion of Part C).
Medicare Part A covers four key areas: hospital inpatient care, skilled nursing facility care, hospice care, and some home health services. There are a lot of rules, time periods and selected items that are covered and you will find the complete list on Medicare.gov. Remember that the doctors and other medical professionals who care for you while you are in the hospital are not covered under Part A.
That’s where Medicare Part B comes in. It helps you pay for your physicians including regular doctor visits or specialists who see you during that approved hospital stay. Part B also covers a long list of outpatient care and services such as wellness exams, emergency room visits, diagnostic tests, physical therapy, and diabetes testing. You can find more details online in Medicare’s “Medicare & You” book.
Medicare Part D is designed to help pay for most prescription drugs. Part D plans are offered through private insurance companies in your local area. These plans are very complicated and the options you have will not be the same as someone else has in another part of the state or the country. Most people sign up for Parts A and B as soon as they become eligible. Although Part D coverage is not mandatory, it is highly recommended. You may not be taking prescription drugs now or when you turn 65, but you just never know when your health could change. If you don't sign up on time, you could end up paying a permanent penalty for the rest of your retirement on that Part D coverage.
Read Viewpoints: Answers to key Medicare questions
|Q||If I enroll in Medicare Parts A, B, and D, do I have to also enroll in Medicare Part C?|
Marcia Mantell: Many people are looking for a more streamlined version of Medicare. That's where Medicare Advantage plans—also known as Medicare part C—fit in. Essentially these are all-in-one plans that wrap together the original parts of Medicare, A and B, plus Part D and Medigap into a single package. Sometimes listed as Medicare Health Plans, they are sold through private insurance companies but must follow very specific Medicare guidelines.
Five things to know:
- Medicare Advantage is also known as Part C.
- You can choose a Medicare Advantage plan during your initial enrollment period or you can switch to one during the open enrollment period which runs October 15th to December 7th every year.
- The cost of the Medicare Advantage plans may be less than the combined cost of original Medicare plus your Medigap, but they can come with restrictions so do your homework.
- If you select a Medigap plan separately because it offers vision or dental or other things not in original Medicare, remember that you will pay your Medicare Part B premium along with an additional Medigap premium.
- Many physicians and hospitals do not take Medicare Advantage insurance, so you need to check first before signing up.
Medicare is complicated and there is no “one size fits all” answer. Remember that you do have a number of Medicare options. So research them, see whether your preferred doctors and hospitals participate in the Medicare plan that you are considering, and then pick the plan that works for you.
|Q||I’m getting ready to retire and have always had health care coverage from my employer. Is Medicare very different?|
John Wells: Yes. It's a big change to go from being covered by your employer’s health insurance benefits program into enrolling in Medicare. Let me share the story of Richard, age 65, and his wife, Brenda, age 62. Both had been covered under his employer benefits for the last 25 years. Richard has recently decided to retire. He will be losing his medical coverage at work, but he’s enrolling into Medicare.
Now Brenda has to go find her own coverage. She looked around and she found an individual plan to meet her needs. The cost was more than they had anticipated. Once she obtained the actual cost, we built the cost into their retirement income plan. We added the cost of her coverage for those first three years before her eligibility for Medicare along with Richard's estimated Medicare premiums. Seeing this combined figure helped them to understand the cost of health care in retirement and fortunately, having this detail has helped them stay on track for their long term retirement goals.
|Q||Does the increase in the Social Security Full Retirement Age (FRA) have any impact on Medicare?|
Marcia Mantell: No. In general, Medicare is only available once you reach age 65 so there’s no other age options unless you have certain diseases or disabilities.
However, the age that you can begin receiving full Social Security retirement benefits has increased in recent years. If you were born from 1943 to 1954, your FRA is 66. If you were born later, you will have an FRA of 66 and some months or 67 (see www.SSA.gov). These ages have no impact on your Medicare eligibility.
It can be confusing because the two programs, Social Security and Medicare, are not integrated. Simply stated, you can claim your Social Security benefits anytime from age 62 to 70—it's up to you to choose—but Medicare only becomes available the month you reach 65.
|Q||My mom is enrolled in a Medigap plan. How easy is it for her to switch to a different plan?|
Marcia Mantell: It can be difficult to change policies but it is possible. It’s important to point out that each policy has restrictions for entry any time after the Medigap Open Enrollment period, the six month period after you reach age 65 and have enrolled in Part B. Once you are outside this enrollment window, you are subject to the underwriting rules of each insurance company. Your mom’s health would need to be assessed and her medical history reviewed. If she has any preexisting conditions, there might be a delay before coverage could begin. In addition, she may also be charged a lot more or could be denied coverage. Consider the following if you want to switch plans.
- Medigap is a supplemental insurance plan that was designed to cover the gaps in coverage left by Medicare. Unlike Medicare, however, Medigap is not a government-sponsored insurance program. It is sold through private insurance companies and you purchase the policy on your own.
- Read the entire policy. Understand what she’d like to change and talk to her current insurer to see whether there's a way to address your concerns.
- Check with other insurers about what the requirements to switch policies would be and whether there's even an option for her to switch.
- Explore Medicare Advantage plans to see whether one might fit the bill for what you are looking for. However, if you choose a Medicare Advantage plan and then your mom wants to go back to original Medicare, she may well not qualify to get a Medigap policy. To help you get started, read “Switching Medigap policies” on Medicare.gov.
Having the right Medicare coverage is a key part of your retirement plan. There are many options to explore, so be thorough. Remember, you can enroll in Medicare only for single coverage. Your spouse or partner will not be covered by your plan and is required to enroll on his or her own. Among the many factors to consider in your Medicare decision: health status, cost, coverage, amount of travel you plan to do, and access to existing or preferred doctors and hospitals.
- Go to Medicare.gov to find detailed information about the various costs and coverage options.
- Use our Planning & Guidance to estimate your expenses in retirement and input income sources like investments and Social Security to see how long your money will last.
- Read Viewpoints: Three key decisions to make before you retire and Medicare taxes and you
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917