Medicare open enrollment: How to pick a plan

Medicare open enrollment is a time each year during which people who are on Medicare can change their health plans or their prescription drug coverage for the following year. This year’s open enrollment period is from Oct. 15 through Dec. 7.

Here are your benefit options:

• Original Medicare: Part A (hospital coverage) and Part B (medical coverage)
• Medicare Advantage Plan (Part C): A combination of Part A and Part B. It may also include prescription drug coverage (Part D)
• Medicare Prescription Drug Plan: Part D

Here are your options for making changes:

• Switch from Original Medicare to a Medicare Advantage Plan or vice versa.
• Change from one Medicare Advantage Plan to another Medicare Advantage Plan.
• Switch from a Medicare Advantage Plan that doesn’t offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage or vice versa.
• Join a Medicare Prescription Drug Plan.
• Switch from one Medicare Prescription Drug Plan to another Medicare Prescription Drug Plan.
• Drop your Medicare prescription drug coverage completely.

There is a second Medicare enrollment period that runs from Jan. 1-Feb. 14, but you will not have as many options during that period for making changes. Here is what you can do:

• If you’re in a Medicare Advantage Plan, you can leave your plan and switch to Original Medicare.
• If you switch to Original Medicare during this period, you can also join a Medicare Prescription Drug Plan.

How Medicare works

Contrary to popular belief, Medicare is not free, and it’s important to understand the ins and outs of Medicare before you sign up. Making the wrong choices can be expensive.

Even if you’ve been on Medicare for years, you may want to re-evaluate your options annually to make sure you’ve got the right plan. “I think everyone should consider switching,” says Lita Epstein, author of “The Complete Idiot’s Guide to Social Security and Medicare.” “Plans change, benefits change, and the premiums change.”

It’s especially important to re-evaluate your options if you have a Medicare Part D drug plan or a Medicare Advantage plan because those plans can change significantly from year to year, dropping and adding drugs and doctors or changing copays and deductibles. 

Medicare plans are actually broken into multiple parts:

• Part A covers hospital care, skilled nursing, hospice and some home health care. If you or your spouse has at least 10 years of Social Security work history, this part is free. If you don’t have that work history, it can be up to $458 per month. Your premium amount is determined by how many Social Security work credits you have.
• Part B covers doctor visits, preventive care, outpatient care and hospitals and some home health care. In 2021, this part is projected to cost $144.60 a month for Medicare beneficiaries whose incomes are $87,000 a year or less ($174,000 for a couple) and up to $491.60 for those with higher incomes. 
• Part C is also known as a Medicare Advantage plan. It substitutes for parts A and B and, in most cases, Part D, the drug plan. Premiums range from $0 to more than $100 a month, varying by location and coverage.
• Part D covers prescription drugs. Premiums are about $15 to $50 per month.

Coverage options

The first big decision Medicare beneficiaries must make is whether to go with traditional Medicare (parts A, B and D) or a Medicare Advantage plan (Part C). Medicare Advantage plans have lower premiums, but they usually require members to get their care only from network doctors and hospitals. Both options have deductibles, copays and co-insurance, where you pay a percentage of the bill.

Those who choose traditional Medicare usually add a Medigap policy, which is a supplemental policy that covers what Medicare doesn’t. There are 10 types of Medigap policies, offered by private insurers or via groups such as AARP, and costs vary considerably, based on gender, age, health, whether you smoke, location and company. Costs vary widely, depending upon the plans and where you live.

The reason you need a Medigap policy is that Medicare set no maximum for out-of-pocket costs. But with a Medigap policy, most of those costs are covered.

About one-third of Americans choose Medicare Advantage plans. Those plans, a combination of HMOs and PPOs, have an out-of-pocket limit. But customers tend to pay more in copays and co-insurance than they do with traditional Medicare, plus have access to fewer doctors and hospitals. Some of the plans include vision, dental and hearing coverage, which is not covered by traditional Medicare, but those services are offered from a limited network of providers.

Getting started with Medicare

No matter what your retirement age, you become eligible for Medicare when you turn 65 and you can sign up the three months before your birthday, your birth month and the three months after. If you don’t sign up during this seven-month period, even if you’re still working, you may face a long-term penalty.

If you start with traditional Medicare and a Medigap supplement, your supplement rate is not based on your health record. But if you start with a Medicare Advantage plan and then switch to traditional Medicare later, the company offering the supplemental coverage will base your premium on your health history and may even deny coverage. 

Americans who are very low income may be eligible for extra help with Medicare premiums and health care costs. Beneficiaries in this financial situation can find additional guidance from Medicare.gov.

How to find help

You can find ratings of Medicare Advantage plans from the National Committee for Quality Assurance.