By Nick Strain, CFP®, CPWA®, AIF®, Senior Wealth Advisor at Halbert Hargrove
As you approach age 65, you’ll probably receive dozens of pieces of mail about Medicare, all the many potential choices – and insurers that want you to sign up with their plans. This barrage can be overwhelming. Navigating Medicare can be difficult! As you start your research process to determine what the right options are for you, it’s helpful to know the lay of the land first.
We recommend that you speak with one or two trusted Medicare insurance brokers. Reputable brokers can offer valuable help in navigating Medicare, which may be at no cost to you. Also, why not talk with friends or family members who have experience in selecting their own Medicare options? Be sure to consider what’s important to you. For example, do you want to make sure you can keep your same doctors? With any plan under consideration, you’ll want to confirm that your current prescriptions will be similar or potentially lower in cost. You also will want to be sure you can have really good care if you experience health issues like cancer or a heart condition, or need surgeries in the future.
There are pros and cons for Original Medicare and Medicare Advantage that are worth exploring. I’ll outline first the basics of what your two options are, along with a few of the main pros and cons. But you will want to talk to a Medicare insurance specialist: You will have your own pros and cons list based on your health and medical needs.
There are two main plan types you will be choosing from:
- Original Medicare
- Medicare Advantage Plan
Original Medicare
Signing up for Original Medicare will cover Part A (Hospital Insurance) and Part B (Medical Insurance). You will also need to sign up for Medicare Supplemental Insurance (Medigap policy) and Part D (Prescription drug coverage).
Part D is not required but is an essential protection if you don’t have existing drug coverage from a private plan or the VA, for example. The same goes for Medigap policies, which cover the out-of-pocket costs Medicare doesn’t pay for, and are issued by private insurers. If you sign up for Medigap at 65, insurers can’t deny coverage for pre-existing conditions. Medigap policies are essential to cover care and costs that Part A and Part B does not cover. Medigap will cover additional copayments and coinsurance for out of pocket expenses, home healthcare, certain medical equipment, some hospital costs not covered by Part A and lab costs that are needed. Medigap policies can also cover emergency medical if traveling outside of the U.S. It’s also important to note that Medigap policies do not cover long term care, vision or dental care, hearing aids, eye glasses or private in home care.
Why do people choose Original Medicare?
- Can see any doctor anywhere
- No prior authorizations
- Few out-out-pocket costs other than monthly premiums
- Benefits don’t change, although premiums may go up
Medicare Advantage Plan
Under this option, you sign up through an insurance company that provides all of the components of Medicare but under one roof. You sign up for Part C (which combines A and B) and then sign up for Part D (prescription drug coverage) all with the same insurer.
Why do people choose Medicare Advantage?
- Simplicity of having one insurance company / system
- Low or $0 premiums
- Additional potential benefits of vision, hearing, dental being offered
Comparing Care Options: The Pros and Cons
Original Medicare
- Care
- Pro: Can see any doctor anywhere in the U.S. Example: Original Medicare can be good for people who might have a serious health issue like cancer. If they want to get specialist treatment at a world-renowned institution, they have the option of doing so.
- Con: There is little incentive to coordinate care among your doctors.
- Costs
- Higher premiums
- Lower out-of-pocket costs
- Original Medicare can be better for higher users of health care services because of the lower out-of-pocket costs.
Medicare Advantage
- Care
- Pro: You are signing up with an insurance carrier and system, so there will be better coordination of care. Example: A person is diagnosed with cancer and the care provider will coordinate care within their system to all of the specialists within their system. Kaiser Permanente, for example, is well known for having specialists within their network.
- Con: You are limited to the plan’s network of providers and doctors. You will need to petition the insurance company to get treatment outside of their network. Typically, it can be difficult to go out-of-network – and expensive in terms of paying out of pocket.
- Con: If you first select a Medicare Advantage plan and then get diagnosed with cancer or another serious long-term health issue and need extensive care, it may be difficult or potentially impossible to switch to Original Medicare for your care and be able to purchase a Supplemental Insurance policy (Medigap).
- Costs
- Pro: Lower or $0 monthly premiums
- Con: Larger out-of-pocket costs for co-pays, meeting higher deductibles, and coinsurance at time of treatment
- Con: Benefits can potentially change if the federal agency that manages Medicare decides to lower payments to insurance companies for certain services.
- Medicare Advantage tends to be more advantageous for those who don’t need/don’t utilize health care services frequently
Enrollment Options
Initial Enrollment
- The initial enrollment is between three months before you turn 65 and the three months after you turn 65.
Special Enrollment
If you are still working when you turn 65 and decide to stay with your company insurance and delay Medicare at that time, you can sign up for Medicare during one of these periods:
- Any time before your private health insurance ends
- The month your private health insurance ends
- The 8-month period after this coverage ends
Open Enrollment after age 65
- The open enrollment period for you to review policies runs from October 15 through December 7. During this time, you can potentially switch to a new policy either within your insurer’s coverage – or switch to a new insurance company that is offering an incentive to switch. Insurance companies often do change benefits and costs to attract new enrollees, so it can be beneficial to review your policy each year in the light of competitors’ offerings.
I would encourage everyone approaching age 65 – and in subsequent years during the open enrollment period – to shop around for the best options, benefits, and price. There are different pros and cons for Original Medicare and Medicare Advantage. It’s important to explore both options thoroughly. Review policies on Medicare.gov and consult with an insurance broker to get help in navigating Medicare. You want to ensure that you secure the plan that’s right for you, your health situation, and personal finances.
Disclosures:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
