Deciding what Plan to Choose
In my experience as a Certified Financial Planner®, Medicare seems to be a main source of confusion for most people. Medicare is one of the most important parts of your retirement plan and, in my opinion, your most important decision only second to choosing when to take Social Security.
Since the Medicare Open Enrollment Period is fast approaching (every October 15th), I get a lot of questions about what plans to choose; however, your Initial Enrollment Period is the most important time to choose a Medicare Plan. The Initial Enrollment Period is the 1st opportunity you have to choose a Medicare Plan (There are two different types of plans that will be discussed below). This is at your 65th birthday. You have 3 months before your birth month and 3 months after your birth month to sign-up without a penalty (If you don’t sign up for Medicare Part B, there is a potential life-time penalty of 10% per year for every year past year Enrollment Period). Therefore, there is a total of seven months that you are allowed to sign-up for the Medicare program without penalties. (see – https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start)
However, if one continues to work past their 65th birthday and you have qualified healthcare (ask your HR Department for a “Letter of Credible Coverage”), then you will have another opportunity for an Initial Open Enrollment Period. This will then allow you access without penalty, and more importantly, allows you more opportunity in your Medicare Plan choice.
Your Most Important Time in Your Medicare Choice
When you first enroll for the Medicare Program (3 months before your 65th birthday if you decide to take Medicare at 65), you will need to take certain actions in this order:
- Sign up for Part A
- Sign up for Part B
- Decide between Two Medicare Programs & Part D
- Medigap – Traditional Medicare, or
- Medicare Advantage, and/or
- Part D – Drug Coverage (Most Medicare Advantage Plans include Part D)
Let me take a moment to discuss Part A of Medicare. Part A coverage includes your inpatient care in hospitals, critical access hospitals, and skilled nursing facilities (but not custodial or long-term care). It also helps cover hospice care and some home health care. If your have enough “Work Credits” you will be “Fully Insured” (at least 10 years of work making enough qualifying income). https://www.medicare.gov/what-medicare-covers/what-part-a-covers
If you are “Fully Insured,” then I highly recommend that you sign up for Part A at your 65th birthday if you have decided to continue to work – because it is free – and you can’t beat free – and it may pay some hospital bills that your current Medical Coverage doesn’t.
So, if you need to choose a Medicare Plan – either:
- A Medigap Plan – traditional Medicare, or
- A Medicare Advantage Plan
Which one is best? Well, that depends. In my opinion, and choosing for myself, there is most often only one choice for me…