How to Choose the Right Medicare Plan

If you’re approaching your retirement years, it’s time to start thinking about Medicare. This federal health insurance is made up of different components to help cover specific services. This article will help explain the basics of Medicare, including Parts A, B, C, and D, and provide some things to consider when choosing the right Medicare plan for you.

What is Medicare?

Medicare is the nation’s largest health insurance program, covering 65 million people in the United States, including older adults, younger adults with disabilities, and people with End-Stage Renal Disease.

You can choose two different types of Medicare coverage:

• Original Medicare (Parts A and B), provided by the federal government, includes hospital and medical insurance. You also have the option to enroll in prescription drug coverage (Part D) through a private insurance company that adheres to rules set by Medicare.
• Medicare Advantage (Part C) helps cover Parts A and B hospital and medical costs, but is provided by a Medicare-approved third-party insurance company. Most Medicare Advantage plans also include Part D prescription drug coverage.

Many people with Medicare also have other coverage, such as Medicaid (Medi-Cal in California), Medigap, or employer insurance, to help pay for some or all of their Medicare cost-sharing requirements and other benefits not covered by Medicare.

Medicare Enrollment

If you’re newly eligible for Medicare, you have a 7-month initial enrollment period to make your selections. The enrollment period starts three months before the month you turn 65 and ends three months after the month you turn 65.

If you miss that initial sign-up window, you can enroll during the General Enrollment Period, January 1 through March 31, with coverage starting July 1. (You may be subject to a late enrollment fee.) A Special Enrollment Period allows you to enroll if you had group health plan coverage through an employer when you turned 65 and that insurance ended within the last eight months.

Open enrollment for existing Medicare beneficiaries runs from October 15 through December 7 each year. During this time, people with Medicare can review their plans and make changes for the following calendar year. For instance, you can switch from Original Medicare to a Medicare Advantage plan, enroll in a different Medicare Advantage plan, and elect or switch between Medicare Part D prescription drug plans.

Medigap Enrollment

Once you’re 65 or older and have Medicare Part B, you can sign up for Medicare Supplement Insurance, or Medigap. Upon eligibility, you have a six-month Medigap open enrollment period. During this one-time open enrollment, you can purchase any policy you want, regardless of your health. As long as you pay your premium, your insurance will renew — but if you don’t get Medigap during your open enrollment period, it might cost more or you may be ineligible to purchase it later.

Medicare plan options

There are four types of Medicare plans:

1. Medicare Part A is hospital insurance that helps cover:
   • services associated with inpatient care at a hospital, skilled nursing facility, or psychiatric hospital
   • charges for the hospital room, meals, and nursing services
   • hospice care and home health care—but not long-term care.

    
   The federal government manages Medicare Part A. Most people do not need to pay premiums, but deductibles and coinsurance charges apply to some services.

2. Medicare Part B is insurance provided by the federal government to help cover other types of medical care, including:
   • inpatient and outpatient physician care
   • home health care
   • durable medical equipment, including wheelchairs, walkers, and hospital beds
   • physical therapy
   • ambulance services
   • 100% of the cost of many preventative services, including screenings, lab tests, shots and vaccines, and yearly wellness visits.

    
   With Medicare Part B, you can see any doctor who accepts Medicare in the United States. Most people pay the standard premium — set at $174.50/month for 2024 — for Part B, but people with a higher income pay more; those with a lower income pay less.)

3. Medicare Advantage, or Medicare Part C, is an all-in-one plan approved by Medicare and provided by private insurance companies to cover all the services covered by Original Medicare (Parts A and B) and usually Part D. In 2024, all California counties have at least two Medicare Advantage plans available.
    
   With Medicare Advantage, you pay a separate monthly premium in addition to the monthly Part B premium. You can choose between HMO or PPO plans, and most of these plans offer extra coverage for expenses not covered by Original Medicare, such as vision, hearing, and dental costs. In most cases, you’ll need to see doctors who are in the plan’s network.
    
   In order to join a Medicare Advantage plan, you must be enrolled in both Medicare Part A and Part B, and you must continue to pay the Part B premium. Since you’re still enrolled in Medicare Part A and Part B, you have the same rights and protections granted to Medicare beneficiaries.
    
   
4. Medicare Part D helps cover the cost of prescription drugs, as well as many recommended shots or vaccines, through private insurance that adhere to Medicare policies. You can elect a Medicare prescription drug plan in addition to Original Medicare, or get it by enrolling in a Medicare Advantage Plan that provides drug coverage.

If you decide to enroll in Original Medicare, you’ll have to pay for some of the cost of approved services. To help pay for these out-of-pocket expenses, you can purchase Medicare Supplement Insurance (Medigap). In California, 11 Medigap policies (Plans A-N) are available to help cover Medicare out-of-pocket copayments, coinsurance, and deductible expenses. Detailed comparison charts on the Medicare.gov website can help you find the right option for you. If you have a Medicare Advantage plan, you don’t need (and can’t enroll in) Medigap.

Things to consider when choosing a Medicare Plan

It’s important to consider the costs and benefits when choosing the right Medicare plan for you. A few things to consider:

How to Enroll in Medicare

If you’re getting Social Security—because of retirement or a disability—you’re automatically signed up for Part A and Part B when you’re first eligible. You should receive information about your Medicare coverage options a few months before you turn 65 or when you get your 25th month of Social Security Disability or Railroad Retirement Board (RRB) benefits. While Medicare Part B is optional, Part A is required unless you withdraw your original application for Social Security and pay back all your cash benefits.

You won’t be enrolled in Medicare automatically if you aren’t receiving Social Security or aren’t eligible for Social Security requirement, but you can sign up through the Social Security Administration.

Out-of-Pocket Costs

While Medicare helps cover hospital bills, you should plan for out-of-pocket costs. As noted above, the standard premium for Plan B is set at $174.70 per month, but you’ll also need to pay for Part B coinsurance, which is 20% of the cost for each service or item once you reach your $240 yearly deductible.

The estimated average monthly premium for Medicare Advantage/Part C in 2024 is $18.50 per month, but you’ll also want to consider co-pays for any doctor’s visits. Additionally, prescription drug coverage (Medicare Part D) premiums will average around $55.50 per month with a maximum deductible of $545 for the year.

Maximum Out-of-Pocket Expenses

Your Medicare maximum out-of-pocket (MOOP), the annual cap on your out-of-pocket covered medical expenses, is another factor to consider when choosing the right Medicare plan for you. While Original Medicare doesn’t have a MOOP, Medicare Advantage and Medigap plans do.

• Medicare Advantage/Part C Out-of-Pocket Maximum (2024): $8,850 for approved services. Individual plans can set lower limits. Part D cost sharing does not apply.
• Medigap/Supplemental Insurance Out-of-Pocket Maximum (2024): The 2024 out-of-pocket maximums vary by plan, but once you reach your limit, the plan pays 100% of your costs for approved services for the remainder of the year.
• Medicare Part D: While Part D prescription drug plans don’t have hard out-of-pocket maximums, there is an $8,000 cap on out-of-pocket costs for covered drugs. If you surpass $8,000, you enter a catastrophic coverage phase where your copays and coinsurance for covered drugs are significantly reduced for the rest of the year.

Researching Medicare Advantage

Medicare Advantage Carriers
 
Medicare Advantage covers more than half the nation’s seniors, but it’s important to do some research before you select one.

• Visit the Medicare Advantage Plan provider’s website to review its benefits and its limitations.
• What is the Plan’s star rating? Medicare.gov’s Plan comparison tool can help you.
• Does your preferred doctor or hospital accept Medicare Advantage?
• Are you getting the best value on your prescription drug costs?
• Compare costs, specifically focusing on premiums and maximum out-of-pocket expenses.
• Do you prefer an HMO or PPO? If you see a lot of specialists and don’t like waiting for referrals, a PPO option may be best for you.

Changing Medicare Plans
 
If you decide Medicare Advantage isn’t the right plan for you, you’ll need to contact Medicare (800.633.4227) to cancel your enrollment—and you can only make these changes at certain times of the year.

• For all Medicare beneficiaries: Open Enrollment runs from October 15 to December 7. Your changes will take effect January 1.
• For Medicare Advantage beneficiaries: Medicare Advantage Open Enrollment runs from January 1 to March 31 to change Medicare Advantage providers or sign up for Medicare Original. Your coverage starts the first of the first month after the plan gets your request.
• If you joined a Medicare Advantage Plan during your Initial Enrollment Period (e.g., when you turned 65), you can change to another Medicare Advantage Plan or go back to Original Plan within the first three months of your enrollment.

If you switch to Medicare Original, don’t forget to sign up for Part D prescription drug coverage or you’ll face a penalty later.
 
Additional Insurance
 
If you have Medicare and group health coverage, both insurers may cover your medical costs, based on “coordination of benefit” rules. The primary insurer pays your claim first, up to the limits of the policy. The secondary insurer pays your claim only if there are costs the primary insurer didn’t cover, but all uncovered costs may not be paid.
 
Because Medicare Part A is free for most people, consider enrolling in Part A even if you have employer coverage to help fill any coverage gaps. Medicare Part B requires premium payments, so compare the costs and benefits to your employer’s plan.

How Patelco can help

Once you have Medicare, it’s important to review your medical expenses and your Medicare coverage each year. After all, Medicare is not free, and your out-of-pocket expenses can have a major impact on your financial health.
 
For help understanding all the options available to you, contact your State Health Insurance Assistance Program (SHIP). In California, the Department of Aging can refer you to one of the Area Agencies on Aging in your county.
 
Patelco is also committed to supporting our members as they plan for their older years. We offer complimentary retirement readiness consultations with our CFS¹ Financial Advisors to help you reach your goals.