Navigating Medicare in retirement

Finding a health care option that fits your life

Health care costs can be one of the largest expenses for retirees. When you're aging into Medicare, it can be a big change. You're moving to a new plan with different coverage, different benefits and different language.

You'll have some big decisions to make and want to carefully review your options. Consider your budget, your current and future health care needs and how you want to get your medical care. Why? Your personal financial situation could be impacted by the plan you choose.

It's helpful to think about the future impact of costs. If your needs for care change dramatically, how will your insurance coverage protect you financially?

You can expect to have healthcare expenses such as premiums, deductibles, copays and coinsurance. Premiums are the regular cost you pay to maintain coverage, while deductibles, copays and coinsurance are forms of cost-sharing paid out of pocket when you receive care. Each of these amounts varies depending on the plan you choose. Some plans have lower premiums but higher out-of-pocket cost-sharing, while others have higher premiums and lower cost-sharing. Understanding these terms and their tradeoffs is important so you can choose the plan that best fits your needs and budget.

Basics of Medicare

Medicare is the government health insurance plan available to people 65 or older, younger people with disabilities and people with end-stage renal disease. Original Medicare consists of two parts, Part A and Part B, which are provided by the government. Other components are provided by private insurance companies that work with Medicare to round out your coverage.

• Part A is hospital insurance provided by the U.S. government that helps pay for the cost of inpatient care in a hospital or skilled nursing facility, as well as home health care and hospice care.
  
  You're typically automatically enrolled in Part A and Part B if you're already receiving Social Security benefits. If you haven't started Social Security, you need to enroll in Medicare on your own at medicare.gov Opens in a New Window.‍ ‍
• Part B is medical insurance provided by the U.S. government that helps pay for doctor visits, outpatient care like rehab therapy and some preventative services. It also covers doctors' services in a hospital and most medicines administered in a doctor's office.
  You're eligible for Part B and Part A at the same time, but Part B is voluntary. Many people with Part A also enroll in Part B to make sure their basic health needs are covered. To be eligible for TRICARE For Life, you must have Medicare Part A and be enrolled in Medicare Part B.
  Parts A and B have a monthly premium, but many people will qualify for a premium-free Part A, if sufficient work history exists. The standard monthly premium is dependent on income limits and can change each year. Medicare Part B requires a monthly premium, which is typically paid by the beneficiary and may be higher based on income.

• Part C: Medicare Advantage plans combine coverage for Parts A and B into a single plan. Most plans will include coverage for prescription drugs. These plans are offered by private insurance companies. They can vary in plan type, coverage amounts and premiums, among other things.
• Part D: Prescription drug plans are offered by private insurance companies to provide coverage and reduce your out-of-pocket costs for medication.

Medicare Supplement, or Medigap, plans

Medicare Supplement plans, also known as Medigap plans, can be used to "wrap around" Medicare by covering certain out-of-pocket costs like deductibles, copays and coinsurance. This can make healthcare expenses more predictable.

Medicare Supplements, which require a monthly premium, are offered by private insurance companies. Rather than adding new types of coverage, they help pay for costs that Medicare Parts A and B already approve but do not fully cover.

Plans follow a letter naming system, like Plan F or Plan G, and each plan is standardized by law. This means that a Plan G from one insurance company provides the same basic benefits as a Plan G from another company, although premiums and pricing structures may vary.

Medigap plans work only with Original Medicare (Parts A and B) and are not compatible with Medicare Advantage plans.

All Medigap plans cover Medicare Part A coinsurance and hospital costs. However, coverage differs across plans for other expenses. For example, Plans K and L cover only a portion of Part B coinsurance, 50% and 75%, respectively. This typically results in lower premiums but higher out-of-pocket costs.

Understanding the differences between plans can help you choose the coverage that best fits your healthcare needs and budget. You can find a list of plans and plan benefits at Medicare.gov Opens in a New Window.‍ ‍

TRICARE for Life

Retired military members are eligible for a supplemental coverage plan to wrap around Medicare Part A and Part B called TRICARE for Life, or TFL Opens in a New Window.‍ ‍ Enrollment is automatic and you'll be responsible for your Part B premiums. Like with Medicare Parts A and B or with some Medicare Supplemental plans, some cost-sharing expenses may occur. TFL will coordinate with Medicare, and when you receive services that are covered by both, you will typically pay nothing out of pocket. However, if a service is covered by only one program or not covered at all, some cost-sharing expenses may apply. As previously mentioned, to be eligible for TRICARE For Life, you must have Medicare Part A and be enrolled in Medicare Part B.

Medicare Advantage

Medicare Advantage plans are an all-in-one approach to Medicare. They work in place of Medicare Parts A and B, typically include prescription drug plan benefits and are issued by private insurance companies.

Many Medicare Advantage options have a zero premium payment plan, although you may still need to pay for your Medicare Part B premium. Each plan is going to have varying costs or limits for things like deductibles, copays, coinsurance and out-of-pocket limits.

Medicare Advantage plans are similar to health insurance options you may be familiar with. They're structured similarly to most employer-provided health insurance plans and can provide choices in how you get your care by offering different plan types:

• Health maintenance organization, or HMO, plans require you to select a primary care physician who will help manage and coordinate your care. They'll also help with referrals to specialists.
• Preferred provider organization, or PPO, plans typically allow you to see any provider you want for care but likely have a determined network of providers. You'll pay less for in-network providers versus providers who are out of network.
• Private fee for service plans, or PFFS, allow you to see any Medicare-approved doctor or hospital that accepts Medicare and agrees to the plan’s payment terms, though costs may vary depending on the provider.

Because plans can vary in benefits and costs, there's a bit more shopping and research when choosing a plan.

Medicare Advantage versus Medicare Supplement plans

Medicare Advantage offers a lower monthly premium and tailored benefits, but there's a potential for higher out-of-pocket costs when you need care.

Medicare Supplement plans help reduce or eliminate out-of-pocket expenses like deductibles, copays and coinsurance. In exchange, you generally pay a higher monthly premium, but your healthcare costs are more predictable.

Let’s say you break your arm, which requires immediate hospital attention, surgery, rehabilitative care and medication. With both plans, you'll have coverage for those needs.

If you're on a Medicare Advantage plan, you'll pay deductibles and coinsurance costs that are determined by your plan.

With Medicare Supplement plans, your out-of-pocket costs for hospital care could be fully covered. The supplement plan you choose will determine which other costs are covered. Plan G will cover your doctor visits and skilled nursing facility coinsurance costs. Plan L will cover those same coinsurance costs but only up to 75%.

So, if the total medical costs for your broken arm were $12,000, with a Medicare Advantage plan you'll be responsible for your portion of cost-sharing up to your yearly out-of-pocket limit. Medicare Advantage caps total annual spending, regardless of total bill. If you're on a Medicare Supplement plan, you may have less cost-sharing, but you may pay more each month for your plan.

It all depends on when you want to pay. You can pay monthly premiums in case you end up needing expensive care. Or you could try to save on the monthly premiums but likely pay more out of pocket if you need expensive medical care.

Figuring out the care you want

Your Medicare decision can be challenging given the complex nature of health insurance. Figuring out the best direction for your personal situation should be based on which plan or plan types meet your needs.

Start by asking yourself a few questions:

Doctors

• How do you prefer to receive medical care?
• Do you prefer flexibility in picking providers, or are you comfortable with using a primary care provider?
• Are there any doctors you're currently seeing that you'll need to keep going to?

Medications

• Are you currently on medications?
• Do the plans you're considering cover your medications?
• What are the differences in medication costs between plan types?

Out-of-pocket costs

• Do you prefer lower monthly premiums in exchange for potentially higher out-of-pocket limits?
• Do you prefer lower overall medical costs in exchange for paying more monthly?
• How does the plan you're researching fit within your budget?

Annual enrollment period

Medicare can be a big decision for retirees. Take time to research your options, evaluate the different plan types and form a game plan. By preparing for the Medicare Annual Open Enrollment Period, which runs from October 15 through December 7 each year, you'll be better prepared to make smart choices for your future coverage needs.