NOW that you’re about to retire, there’s good news and bad news about your health insurance. The good news: When you turn 65, you’re eligible forMedicare — all in all, a pretty affordable way to get coverage for doctor bills, hospitalizations and, more recently, prescription drugs. The bad news: You’ve got a big job ahead of you, sorting through the Medicare bureaucracy.
For someone new to the system, the hundreds of options Medicare provides can be daunting. “We’ve seen C.P.A.’s get stymied,” said Paul Gada, personal financial planning director at Allsup, a provider of Social Security and Medicare consultation services that is based in Belleville, Ill. “The process can be difficult for even the most savvy individuals.”
More important, the choices you make now as a new retiree may have consequences down the line when your health care and financial needs change. Confusing as Medicare may be, it is better to learn the ins and outs of the system early than to try to figure it out 20 years from now. The newly eligible have a seven-month period to enroll, starting three months before their 65th birthday. And numerous resources are available to help both newcomers and veteran Medicare users.
Not long ago, retirees simply went to their local Social Security office and signed up for Medicare A, which covers hospitalization, skilled nursing facilities, hospice and some home health care. Then they signed up for Medicare B, which provides coverage for doctor’s fees for a premium ($96.40 a month in 2009). That was the end of it.
Big changes in the way Medicare is distributed have made signing up a lot more complicated. In addition to A and B, enrollees can now buy prescription drug coverage under Medicare D. Dozens of private insurance plans offer Medicare D coverage, and the plans can differ widely in both premium costs and the drugs they cover.
The government also allowed private insurers to offer Medicare Advantage plans, which combine A, B and D benefits, often under a network like an H.M.O. or P.P.O. Many offer extras like dental, vision and wellness coverage. Hundreds of different Medicare Advantage plans are sold today, and depending on where you live, you could have dozens of choices.
Options may decrease slightly in 2010, said Marc Steinberg , deputy director for health policy at the health care advocacy group Families USA, because the Center for Medicare and Medicaid Services, the federal agency that administers Medicare, has vowed to consolidate similar plans from the same insurers to help reduce confusion.
In addition, many insurers may decide not to offer Advantage plans if the government subsidies given to these plans are cut, as many of the current health care bills have proposed. Finally, because Medicare deductibles and co-pays are high — a $1,000 deductible for hospitalizations, 20 percent co-pays for most doctor visits — many people elect to buy a Medigap, or supplemental, policy to fill in what Medicare does not cover.
With traditional Medicare and Medicare Advantage, it’s sometimes hard to get a handle on exactly what is covered. Physical therapy, for instance, is covered under traditional Medicare only if your doctor prescribes it and then only for a limited time. Traditional Medicare with a Part D and Medigap plan offers the most flexibility, said Judith Stein, founder of the Center for Medicare Advocacy. Because most health care providers throughout the country accept Medicare, there’s usually no need to change doctors when you join the system. “In addition, you have access to whatever specialists you’ll need, and you’re covered no matter where you are in the country,” she said.
Most Medicare Advantage plans, however, work on a network system, so going to a doctor out of network can be difficult or more expensive. And, because of the extra coverage, Medicare Advantage premiums are often higher than those for traditional Medicare, or coverage is restricted in other ways, like low limits on lifetime coverage, Ms. Stein said.
On the other hand, Mr. Gada said that a good Medicare Advantage plan could make the process of enrolling much easier. “It’s one-stop shopping for Medicare’s alphabet soup of plans,” he said. And for some people, the extra dental and vision benefits are extremely important, he added.
For help finding and comparing Medicare Advantage and Medicare D plans offered by private insurers, go to the government-run Web sitewww.medicare.gov. The site has clear and useful information and offers a tool that will help you compare costs and coverage among the various plans offered in your region.
But the tool is far from comprehensive, so you’ll probably still have questions, both about the system and what’s best for your needs. To get free answers, try your State Health Insurance Assistance Program, known as SHIP. Counselors provide information about traditional Medicare, help you find D and Advantage plans that fit your needs, and help you compare plan costs. To find the SHIP office in your state, go towww.hapnetwork.org/ship-locator. That office will refer you to the location in your county. Or call your local agency on aging and ask for a SHIP location near you.
For-profit companies like Allsup will, for a fee, help clients navigate the system, help them enroll and often offer customized advice on related health and financial matters like long-term care insurance. A range of services is available for about $200.
Medicare recipients can change plans each year during the open enrollment period, Nov. 15 through Dec. 31. So if you end up with a Part D or Medicare Advantage plan you do not like, or if your health or financial picture changes, you can take action at that time.
BUT there are some moves you may make now that will have financial consequences later. If you opt for traditional Medicare, for example, but do not sign up for Medicare B (perhaps to avoid paying the premiums) and you do not have qualified alternative insurance like retirement benefits from your employer, you will pay a financial penalty if you enroll down the line — 10 percent for each year you do not have coverage. Many Medigap plans also charge higher premiums or exclude pre-existing conditions if applicants do not sign up when they first become eligible for Medicare enrollment.
All Medicare D prescription drug plans include the dreaded doughnut hole. You fall into it when your total annual drug costs hit a certain amount — $2,830 for 2010 — and you then must pay the next $3,610 out of your own pocket. After you have paid that amount, the insurer will pick up all but 5 percent of the prescriptions it covers; you pay the balance.
To make sure you are not hit with any further surprises, always check to see if the plan you choose covers the drugs you currently need. You can check on Medicare.gov, but it’s also worth calling the insurer directly. “Insurance companies change their list of approved drugs all the time, so it pays to make sure you’re covered, especially if you take certain medicines regularly,” said Seemin Pasha, director of policy and communication at Health Assistance Partnership, the privately financed project of Families USA.
And always check the list of approved pharmacies, Mr. Steinberg advises. “This isn’t such a problem in big cities, but in some rural areas, we’ve seen cases where the only pharmacy is 20 minutes away and it’s not on the approved list.”
This article has been revised to reflect the following correction:
Correction: October 17, 2009
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