Where It Starts

Becoming Medicare eligible and trying to understand and navigate the various aspects of Medicare and Social Security can prove daunting - if not downright frustrating for most people. Where do you start? First and foremost it starts with Medicare Parts A and B. For the uninitiated, Part A is your hospital insurance and Part B is your medical insurance (for a quick overview of all the parts of Medicare check out our Medicare 101 page). Without Parts A and B you will not be able to enroll in any Medicare plans (the exception being a standalone drug plan in which you need either Part A or Part B). Most people are automatically enrolled in Part A upon turning 65. As long as you have worked and paid into Medicare via payroll taxes through your job(s) for at least 10 years you will not have to pay a premium for Part A. With Part B, on the other hand, most people do have to pay a premium. If you are already drawing Social Security benefits before age 65, you will automatically be enrolled in Part B when you turn 65. If you are waiting to draw Social Security benefits until on or after age 65, you will have to sign up for Part B either in person at your local Social Security office or online through the Social Security website at: https://www.ssa.gov/benefits/medicare/. Signing up online is a fairly straightforward process and will probably only take 15 – 20 minutes assuming you know all of the personal information they will be asking. If you or your spouse have been working past age 65 and have been covered under an employer’s group health insurance, signing up for Part B through the Social Security website may not be possible. In this case, your best bet is to go down to any Social Security office and sign up in person. The reason is because you will need to show proof that you’ve had “creditable coverage”, a term that means “as good as or better than Medicare” since you turned 65. To demonstrate proof, you will need to take a “Request For Employment Information” form (found here: https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS-L564E.pdf ) to your employer (or spouse's employer) and have them fill out Section B. You will need to fill out section A and then bring the completed form with you to your appointment with Social Security. Some Social Security offices are extremely busy and are booking appointments up to 6 – 8 weeks in advance. Other offices are not busy at all and will take you as a walk-in appointment. You will definitely want to call ahead so you know what to expect. To find Social Security offices near you click here: https://www.ssa.gov/locator/.

What To Do If You Owe A Late Enrollment Penalty or Part B/Part D IRMAA

Despite doing everything correctly, some people will get bills and statements in the mail from Medicare indicating that they owe penalties or increased premium amounts. Sometimes it’s legitimate (for example, your income may be above a certain threshold and therefore Medicare is applying a surcharge), other times Medicare is just missing a small but crucial piece of information about you.

What Type Of Medicare Plan Should You Enroll In?

Once you are enrolled in Medicare Part A and signed up for Medicare Part B, it’s time to start looking at Medicare plan options. For people on Medicare there are typically two coverage options: Medicare supplement (also called “Medigap”) or Medicare Advantage (also called “Medicare Part C”). Both options have advantages and disadvantages and ultimately what it comes down to is what is right for you. 

Let’s look at the pros and cons of both choices.

Pros & Cons of Medicare Supplement (a.k.a. “Medigap”)

Medicare supplements, sometimes called Medigap plans, do exactly what the name suggests: they supplement, or ‘fill in the gaps’, of the health care costs Medicare doesn’t cover. Some people mistakenly assume that Medigap plans will offer benefits beyond what Medicare covers. The truth is that Medigap plans follow Medicare benefits like a train and caboose. If Medicare covers a procedure or service, then a Medigap plan will cover the same procedure or service – paying the portion Medicare does not pay up to the Medigap plan limits. Medigap plans are standardized, meaning they offer the same benefits and provider choices regardless of the insurance company and are identified by letters A through N (for an overview of Medigap plans and benefits, tap here). Premiums are the only difference between Medigap plans with the same letter sold by different insurance companies. Medigap plans are also very portable in that you can take it anywhere in the U.S. and the benefits will be the same. There are no network restrictions, so you can see any medical provider in the U.S. who accepts Medicare and there are no referrals required to see specialists. Medigap plans in general offer more freedom and flexibility compared to Medicare Advantage plans. 

Tap here to get Medicare supplement rates in your area.

What To Look Out For With Medigap

Medigap plans have premiums that tend to be higher than Medicare Advantage plans and the premiums typically increase as you get older. The other downside is that you will also need to enroll in a standalone prescription drug plan for an additional premium in order to receive Part D benefits (Medicare Part D is pharmacy prescription drug coverage. to find out more about Part D, tap here).   

Pros & Cons of Medicare Advantage

Medicare Advantage plans have become increasingly popular over the years for a variety of reasons. Most notably the premiums will be considerably lower than Medicare supplement plans and many Medicare Advantage plans include Part D coverage (which eliminates the need to purchase a standalone drug plan). Copays are fairly nominal under most plans for everything from doctor office visits to diagnostic testing, rehabilitation, outpatient surgeries and inpatient hospitalization. Plus, they may also include extra benefits for things that Medicare doesn’t cover - which can go a long way in helping their plan members stay healthy, active and save money on other qualified products & services.

Tap here for Medicare Advantage plan options and rates in your area.

What To Look Out For With Medicare Advantage

With a few exceptions, Medicare Advantage plans are network based plans. A majority of Medicare Advantage plans are HMO’s, which are very network restrictive. As with most HMO plans, if you go out of the network for routine care you will be responsible for the entire cost (emergency care is covered in-network for all Medicare Advantage plans regardless of where it occurs). There are Medicare Advantage PPO plans offered in a few areas but they tend to have higher premiums and out-of-pocket costs (i.e.: deductibles, copays and co-insurance) compared to HMO plans. Even though PPO plans allow you to see out of network providers, the out of network costs are typically 50% of charges – which may be too steep for some people.

One other thing you want to be especially aware of is the “Out of Pocket Maximum” (sometimes referred to as the Annual Out of Pocket Maximum or Maximum Out of Pocket, etc.). This is the most you could be responsible for in a given year. Ideally, if you do choose a Medicare Advantage plan, you will want a plan with an Out of Pocket Maximum as low as possible.

The Bottom Line

Some people find that their doctors are already in a network and they would prefer to save on monthly premiums. They may also be attracted to the extra benefits that a Medicare Advantage plan offers. In cases like this Medicare Advantage plans work well. For others, perhaps they have doctors who are not in any networks or they live in more remote areas where their Medicare Advantage plan choices are very limited. In these cases a Medigap plan is much more appropriate.

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