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Your step-by-step guide to enrolling in Medicare and replacing your old health insurance plan
Posted by Quotebroker Insurance Services Inc. on
UPDATE 8/16/2017: If you’ve come here looking for information on how to transition from your current health insurance plan to a Medicare plan, you’ve come to the right place- BUT, we’re the first to admit this post is LONG. If you don’t want to get into the nitty gritty details on exactly how everything works and just want the Medicare Enrollment Checklist, click here for the Cliff’s Notes. If you want to know not only what to do but why you’re doing it, read on:
Myles at Quotebroker
It seems like lately I have been getting a ton of calls from clients who are turning 65 and transitioning off of their traditional under-65 health insurance programs on to Medicare. It’s no wonder- roughly 10,000 Baby Boomers are turning 65 every day and they are projected to do so for about the next 14 years. For many of them, this is their second-favorite birthday (after 21, of course!) Turning 65 and becoming eligible for Medicare often represents a huge reduction in overall medical costs- both in premiums and in cost of services. However, the transition can be intimidating. There is an entire industry that revolves around marketing to what are known as “T65ers”- those who are soon turning 65. They get hit with directly with US mail, sales calls, and email ads but also indirectly with advertisements in their favorite publications or on their favorite television networks. This guide is your way to cut through all of the noise and find out exactly what you need to do to properly transition from your current plan to Medicare and when you need to do it. You can read the in depth guide below in its entirety or you can skip straight to the step-by-step checklist here that will guide you from your current plan to being fully covered via Medicare.
First, a disclaimer. You’re about to read thousands of words where I summarize a decade of experience and thousands of pages of CMS guidelines into a single blog post. As such, you’ll find a lot of waffly words like “most of the time” “generally” “in most cases” and “for most people.” Medicare rules have almost as many exceptions as they do rules. Your personal situation can vary drastically from this set of guidelines. Good news though- I’m happy to speak with you directly and in depth regarding your exact scenario. Just fire an email to firstname.lastname@example.org – I respond to every message. That said, here we go:
Step 1: Obtain Original Medicare
Original Medicare is the portion of Medicare granted directly from the government. It is comprised of Part A (hospitalization) and Part B (physician services.) Part A is generally offered at no cost- after all, you’ve spent decades paying into the system for your whole life, so now it’s time to reap the rewards of doing so. Part B however has a cost associated with it, and it’s tied to your income. The 2018 Part B cost is $134 for individuals earning less than $85,000 and couples earning less than $170,000. There are 4 more cost tiers for those earning more which you can review here, courtesy of Medicare.gov.
You can only obtain Part A and Part B directly from the government, via either Medicare.gov or your local Social Security Administration office. You cannot purchase this coverage from an insurance broker or company. You must obtain both Part A and Part B to be eligible for any additional coverage options described below. Enrollment in this coverage is time sensitive. You have an Initial Enrollment Period when you are new to Medicare – the three months before your 65th birthday (and subsequent eligibility to enroll in Medicare Part A), the month of your 65th birthday, and the three months after, for a total of 7 months. If you miss this window you may have to face penalties.
What is it? Medicare Parts A and B
What does it cover? Hospitalization and Physician Services
What does it cost? Generally, $134 monthly, but there are exceptions
When do I get it? Anytime during the three months before you turn 65, the month you turn 65, or the three months after you turn 65- with some exceptions.
Step 2: Decide which additional coverage, if any, in which you’d like to enroll.
Some people choose to simply stop at Step 1 and only use Part A and Part B for their medical needs. However, these folks are missing out on a wide range of services and coverage that can be had via additional programs that complement Part A and Part B. These programs generally fall into one of two categories: Medicare Advantage or Medicare Supplement.
Medicare Advantage plans, also referred to as Part C plans, are similar in structure to the under-65 health insurance plan you are used to. Both plans have stated deductibles, copays for office visits, copays or coinsurance for hospital charges, etc. When you sign up for an Advantage plan, you are assigning your Part A and Part B benefits to the private carrier to administer. You can often get some nice perks in the form of additional benefits, access to gym memberships or other discounts, or Part D prescription drug coverage.
Pros of Medicare Advantage plans: They are generally lower premium programs. In fact, oftentimes you can find plans for $0 monthly premium. They often roll Part D drug coverage (which we’ll get into more detail with later) in with the benefits. You can change your Advantage plan every year without having to qualify medically.
Cons to Medicare Advantage plans: While you may have lower monthly premiums, you may pay more at the point of service when you need care. While Advantage plans can come with any doctor network, the trend lately is to move away from the PPO model of choosing your own doctors and more toward the HMO model of managed care. What this means is you may have trouble finding an Advantage plan that your doctor accepts, depending on your specific area. Advantage plans are often regionally based and non-standardized, so you need to do more shopping to find the right product for you.
Medicare Supplement plans, also referred to as MediGap plans, are an alternative to Medicare Advantage programs. You must choose one or another- never both. Supplement plans generally cost more on a monthly basis, but may cover more at the point of service. They’re also referred to as MediGap plans because they fill some or most of the gaps in Original Medicare A and B coverage. For example, Original Medicare may offer to cover “everything but $30 per office visit.” If you have a Supplement that covers “up to $30 per office visit” when you go to the doctor they will bill Original Medicare for the cost of the visit, Original Medicare will pay all but $30 off the visit, and then your Medicare Supplement will step in and pay $30, leaving you with $0 balance. A properly designed Medicare Supplement plan will generally leave you with fewer out-of-pocket costs than the Advantage programs, depending on the type of service you’re using.
Pros of Medicare Supplement plans: When properly designed, will offer stronger coverage. Standardized coverage makes shopping easy: a plan with one carrier will offer identical benefits to any other carrier in the region. The only difference will be which carrier you want to work with and what the price you pay may be. You’ll have a wider doctor choice, in most cases, being able to use any doctor that accepts Original Medicare. Despite costing more on average than Advantage plans, Supplement plans are most of the time still less expensive than the cost of the health insurance program you had when you were what we call “u-65”- under 65 years of age.
Cons of Medicare Supplement plans: They can cost more than Advantage programs. There is less flexibility to change plans- you may be required to go through medical underwriting in order to move from one program to another, although initially your enrollment into the program is generally Guaranteed Issue.. Finally, assuming you wish to have RX coverage, you must also add on a separate Part D Prescription Drug plan. Which brings us to….
Part D plans, aka Prescription Drug Coverage
Unlike your traditional u-65 health plan likely did, your Original Medicare does not cover outpatient prescription drugs- anything you get from a pharmacy while you’re outside of the hospital. If you take medications, or if you don’t but eventually want to be able to without paying the cash rate if you develop a need, you need to add a Part D plan. We’ve already discussed one way to do this, via a Medicare Advantage plan (which, when combined with a Part D plan, are cleverly called “MAPD” plans- Medicare Advantage Prescription Drug plans.) The second way to do this is via a standalone Part D drug plan.
Standalone Part D plans can be added to Original Medicare only or can be coupled with a properly-designed Medicare Supplement program to create the most comprehensive level of coverage available. As with all Medicare plans, Part D plans are highly regulated however not uniform like Supplement plans. The coverage will be familiar to you in that Part D plans will retain most of the elements of your u65 drug coverage- deductibles, copays, OOP max, etc.
Most carriers will have multiple Part D plans from which to choose. The single biggest factor in picking the plan that’s right for you is going to be the formulary- the list of drugs the plan will cover. After all, what good is a plan with no deductible and low copays if it won’t allow you to use the drugs that you need? Unfortunately, in addition to being the most crucial factor it’s also the most time-consuming to research. Each drug company will publish a list of the drugs each of their plans accept. However, sometimes these come in the form of basic PDF files rather than searchable online indexes. You will get very used to your computer’s CTRL+F function if you choose to search the various Rx databases this way.
Luckily, you have two options to avoid this arduous process. First, you can access the drug lookup tool at Medicare.gov. You can simply enter your various prescriptions and the system will cross reference all of the published formularies for you. It will then spit out a list of the plans in your area that you can sort by annual Rx cost. The calculator will take into account the plan’s deductible, copays, and the formulary status of your drugs to produce a single number that projects about how much you stand to spend on Rx costs if you enroll in that particular plan.
Your second option is to outsource all of this work to your agent. They will likely go through this same process via Medicare.gov, however a good agent will be able to point out a few things that the online system will not. In particularly, if a drug is not covered on the formulary, an agent will be able to identify that and show you how the drug’s “not covered” status is skewing the results of your search. One strategy when this happens is to look into switching to another drug that is on the plan’s formulary. Every plan is required to cover at least one drug in each therapeutic class, so just because the plan doesn’t cover your blood pressure medication doesn’t mean it doesn’t cover any blood pressure medication. If you are able to switch, you may save hundreds or even thousands of dollars per year. Alternatively, your agent can help you pursue a formulary exception. These can be more complicated, but essentially it’s a request to your plan to cover your specific drug for your specific case, even though they normally won’t. This can be a bit riskier, however, as you must actually enroll in the plan before you can apply for a formulary exception.
You have no obligation to buy a Part D plan from the same carrier that sold the Medicare Supplement plan to you. In fact, you can often get a better deal if you mix and match. If you haven’t noticed thus far, Medicare coverage can be a deeply personal thing, so there’s no one-size-fits-all approach. Use any flexibility in the system to your advantage!
Step 3: Choose your Coverage and Enroll
So now you’ve obtained Part A and Part B directly from the government and you know all of your options available in obtaining additional coverage. Or do you? Here are all of the permutations we’ve talked about so far:
Medicare Part A alone
Medicare Part A and B
Medicare A, B with a Prescription Drug Plan
Medicare Advantage Prescription Drug Plan (MAPD) – but must not purchase these separately!
Medicare Part A and B with a Medicare Supplement
Medicare Part A and B with a Medicare Supplement and a Prescription Drug Plan
Seem overwhelming? These are just the most popular possible permutations. There are a host of other available plans depending on your particular needs. Special Needs enrollees and those considered low income are just two of the possible subsets of people who may be eligible for a completely different plan design. Today we are primarily dealing with traditional Medicare enrollment, but I’ll be following up shortly with an addendum to address these additional options.
Now that you have chosen what type of coverage you would like, it’s time to actually enroll. Remember way back at the beginning of this colossal post we talked about your timeline to enroll? This is called your Initial Enrollment Period and it enables you to access two key benefits. First, you can enroll outside of Open Enrollment which is only held once per year. Second, if you choose a Medicare Supplement plan, you can enroll in the plan without regard to any medical conditions. This is a significant factor when deciding between Advantage and Supplement. Normally to enroll in a Supplement plan you are required to answer a medical questionnaire proving your health, just like your under 65 plan back before the Affordable Care Act took effect. Having this provision waived during your Initial Enrollment Period is not quite a once-in-a-lifetime offer, but it’s close. If you forego this during IEP, the exceptions that allow you to enroll in a Supplement plan at a later date without medical underwriting are much rarer.
You have the coverage picked out, you are within your IEP- now it’s time to physically enroll. Depending on the carrier and coverage, you may be able to do this online or you may have to use traditional paper forms. These forms are available at here or can be requested via email at email@example.com . Typically enrollment and processing takes 7-10 days, and enrollment dates are granted on the first of the month. If you are within the 3 months before your birthday, you will be granted an effective date of the first of your birth month. If you are after that period, you’ll likely be granted an effective date of the first of the following month.
Step 4: Coordinate the termination of your old coverage
The last thing you need to do (for now!) is coordinate the termination of your old coverage with the beginning of your new Medicare program. Depending on the plan you currently have, you may be required to give a certain amount of notice. It is always easier to cancel a plan in advance rather than go back after the fact and try to get a carrier to pay you back for excess premiums paid. Also, if you are on CoveredCA, it is EXTREMELY important that you coordinate the cancellation of that coverage with your Medicare start date. If you are eligible for Medicare, you are most likely not eligible for CoveredCA subsidies and you may face a large repayment when you file your taxes. Keep in mind you do not want to cancel your coverage until your new Medicare plan is fully in place. Our team will be able to help you coordinate the two plans so you neither have double coverage nor a gap in coverage leading into your new Medicare plan.
Exhausted yet? Don’t worry- the full process is actually much simpler than reading this blog has been. Our clients have us handle the majority of the actual work. We’ll arrange all of the quotes, make recommendations and assist with all forms. It’s just up to you to choose from the curated list of programs available and we’ll take it from there.
As always please feel free to leave any questions in the comment sections or contact us directly for 1-on-1 assistance. There are dozens if not hundreds of different Medicare eligibility scenarios and we can’t possibly cover all of them here. We’d love to hear from you about your specific situation!