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For the millions who will turn 65 this year, here’s what you need to know about navigating Medicare
As Bill Saiff, 65, a management consultant in Washington, D.C., approached his milestone birthday in December, the anxiety about what he needed to do to enroll in Medicare was palpable.
“Medicare is so unnecessarily difficult,” he told Yahoo Finance. “My health insurance coverage is through my wife’s employer, and they offer a much better medical plan for now, so staying on her plan is a better deal for me than Medicare, but the confusion about what to do was frustrating.”
Saiff’s scenario — including his confusion — is prevalent. And with 4.1 million Americans turning 65 this year — a record number — the decision is front and center for many families.
“The transition from employer-sponsored health insurance to Medicare is really complicated and can be quite treacherous,” said Mark Miller, a retirement expert and author of “Retirement Reboot: Common-Sense Financial Strategies to Get Back on Track”.” “Same if you’re transitioning from an Affordable Care Act plan to Medicare.”
“Medicare is my poster child for the complexity of the retirement system,” Miller said. “Bar none, it is the most complicated.”
Understanding Medicare Enrollment
Medicare coverage begins for most Americans at age 65 who are not actively covered by an employer-provided health plan. The initial enrollment period is three months before, the month of, and the three months after your 65th birthday.
Lose your subscription and start accumulating late registration penalties and risk gaps in coverage.
The timing of your enrollment involves a number of factors, including whether you are currently receiving Social Security benefits, whether you are still working and actively covered by an employer’s plan, or whether you have coverage through your spouse’s plan, such as Saiff, and whether that insurance is needed to pay claims for people who are eligible for Medicare but are not enrolled.
“Medicare provides great insurance, but it is not a universal program,” said Philip Moeller, an expert on Medicare and Social Security and main author from the “Get What’s Yours” book series, he told Yahoo Finance.
There are exceptions to the mandatory registration period.
For example, if you’re still working at age 65, you can choose to stay on your employer’s (or your spouse’s employer’s) health insurance past age 65, as Saiff did. But you’ll need proof that you were covered when you enroll in Medicare later to avoid late enrollment penalties. Also, if you work for an employer with 20 or fewer employees, you must enroll in Medicare at age 65.
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Bottom line: Unless you’re still working with employer health coverage or are covered by your spouse’s insurance, you’ll probably need to sign up at age 65.
You also need to decide if i should sign upin traditional Medicare or Medicare Advantage, the comprehensive managed care alternative to the traditional program offered by health insurers.
If you enroll in an Advantage plan, it will be difficult to transition back to traditional Medicare, which I’ll talk about shortly.
Missing the enrollment window can lead to costly late enrollment penalties on the premiums you pay and risky—potentially large—gaps in your insurance coverage. (Getty Creative) (Jacob Wackerhausen via Getty Images)
How it works
Medicare has three parts that cover the essentials. Part A covers hospitalizations, skilled nursing facility services, and home health and hospice care. Part B covers preventive services, hospital and physician outpatient services, and doctor-administered drugs. Part D covers prescription drugs you take on your own.
“Traditional Medicare has more moving parts, but it’s the gold standard from the standpoint of the broadest possible access to health care providers and the least amount of bureaucratic hassle from intermediary insurance companies,” Miller said.
However, if you choose traditional Medicare over Medicare Advantage, you’ll need to purchase supplemental coverage to protect yourself from potentially high costs.
Known as Medigap, these are health insurance policies sold by private insurers that pay some or all of certain costs that remain after Medicare has paid. They may cover outstanding deductibles, coinsurance, and copayments, and they may also cover health care costs that Medicare doesn’t cover at all, such as medical care received while traveling outside the U.S.
With Medicare Advantage, you agree to see health care providers in the insurer’s network. Advantage plans typically bundle Part A and Part B services and, often, Part D prescription drugs. These plans are supposed to cover all the services covered by traditional Medicare, but what appeals to many seniors is that many offer extras, such as dental, vision, or hearing coverage. Most also include prescription drug coverage or gym memberships.
Retirees who receive health insurance benefits from former employers are typically automatically enrolled in Medicare Advantage plans. These plans often offer more extensive networks of doctors than a typical Medicare Advantage plan.
Traditional Medicare has no restrictions on the doctors who care for you.
What attracts many seniors to Medicare Advantage plans is that many offer extra services, such as dental, vision or hearing coverage. Most also include prescription drug coverage or gym memberships. (Getty Creative) (Thomas Barwick via Getty Images)
Comparing costs
People with traditional Medicare typically pay a monthly premium for medical coverage, Part B, and for any prescription drug plan they choose. Some people also pay a monthly premium for inpatient hospital coverage, Part A.
Each year, the Part B premium, deductible, and coinsurance rates are reset. For 2024, the standard monthly premium for Medicare Part B is $174.70. Part B premiums are typically deducted from monthly Social Security benefits. The annual deductible for all Medicare Part B beneficiaries is $240 this year.
If your income is above a certain amount — $103,000 for individuals and $206,000 for couples — you may owe extra premiums for Part B and Part D.
Medicare Advantage is typically cheaper because you won’t pay for separate Medigap supplemental coverage and may not need a separate prescription drug plan. But you’ll face managed care networks that limit your choice of providers and make it difficult for you to get prior authorization for some procedures and treatments, and possibly be denied care.
“What confuses our clients is that they opted for a Medicare Advantage plan with a gym membership, dental care, vision and who knows what else at age 65,” Melinda Caughill, co-founder of the Medicare advice site 65 Incorporated, told Yahoo Finance. “Now, at 75, they have cancer and want to be able to choose their doctors.”
Changing plans after initial enrollment
If you join a Medicare Advantage plan during your initial enrollment period, you can switch to another Medicare Advantage plan or transition to traditional Medicare within the first three months.
The federal government also offers two enrollment periods each year for switching plans. Medicare Advantage enrollees can switch plans or transfer to traditional Medicare during the open enrollment period from January 1 to March 31. To switch from original Medicare to a Medicare Advantage plan, the enrollment period runs from October 15 to December 7.
About half of Medicare Advantage beneficiaries dropped the plan they initially enrolled in after five years, according to a study published in JAMA Health Forum.
This is likely due to independent access to healthcare providers, especially specialists not included in the initial network.
The problem for people who want to switch from Medicare Advantage to traditional Medicare is that in most states, the time to buy a Medigap policy is when you first enroll in Medicare Part B.
“This is because Medicare does not allow Medigap plans to reject you or charge a higher premium because of a preexisting condition,” Miller said.
After the initial enrollment period, however, Medigap plans in most states can reject you outright if you have a pre-existing condition, such as diabetes. The exceptions are New York, Connecticut, Maine, and Massachusetts.
Getting help
The sheer number of Medicare and Medicare Advantage plan options can be overwhelming. The average Medicare beneficiary has a choice of nearly 60 Medicare plans with Part D drug coverage in 2024, including 21 stand-alone Medicare drug plans and 36 Medicare Advantage drug plans, according to KFF.
State Health Insurance Assistance Program network (SHIP) provides individual counseling in every state. You can find your local SHIP here.
The Medicare Rights Center Medicare, Inc. offers a toll-free customer service line: (800-333-4114). You can also contact Medicare directly at 800-633-4227 to find Medicare Advantage and Part D plans in your area and enroll directly.
Medicare Online Search Plan Finder on the Medicare.gov website allows you to review Medicare plan options.
“Health care is one of the most significant expenses in retirement,” Miller said, “and making smart choices about your Medicare enrollment can help you avoid the penalties and costs that arise from misunderstandings about when to enroll if you don’t have active employer coverage.”
Kerry Hannon is a senior columnist for Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “In Control at 50+: How to Succeed in the New World of Work” and “You’re never too old to get rich.” Follow her on X @kerryhannon.
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