Managing Medicare

Medicare offers comprehensive health insurance coverage to people 65 and older. But the decisions and choices you face can be confusing and overwhelming. Here's our step-by-step guide for getting the most out of Medicare.

Navigating Medicare can be confusing, especially for new beneficiaries. Here's what you need to know.

What's covered by parts A, B, and D

Medicare comes in three parts:

• Part A covers hospital inpatient care, some types of home health care, hospice care, and care in skilled nursing facilities. There is no premium for Part A if you or your spouse has earned at least 40 Social Security work credits.
• Part B covers doctor services, outpatient hospital care, preventive care, and some types of home health care. You have to pay a monthly premium for Part B. In 2013, it's $104.90 for individuals with an income of less than $85,000 a year and couples with an income of less than $170,000. Higher-earning beneficiaries pay more on a sliding scale up to $335.70 a month for the wealthiest, with incomes above $214,000 for individuals and $428,000 for couples.
• Part D covers prescription drugs. You have to pay a separate monthly premium for Part D unless you get it as part of a Medicare Advantage plan. In 2013 the average premium for a plan is about $40 a month, but prices can vary considerably. Individuals with an income of more than $85,000 a year and joint tax filers with an income of more than $170,000 pay a premium surcharge of up to $67 a month on a sliding scale related to income and tax filing status.

For details on each plan part, see Medicare's website.

All types of Medicare plans must cover certain preventive services, such as screening tests for breast and colon cancer, without any deductibles or co-pays.

Click on the image at right for rankings of health insurance plans nationwide. Use the tool to:

• Choose a plan category such as private HMO or PPO, or Medicare HMO or PPO.
• Choose a state.
• Customize your search to compare plans' scores and their performance in measures such as consumer satisfaction and providing preventive services.

Signing up for Medicare for the first time

The "initial enrollment period" for Medicare Parts A (hospitals), B (doctors and outpatient care), and D (drugs) consists of the three months before, the month of, and the three months after your 65th birthday.

• If you already receive Social Security, Medicare will contact you in advance. If not, you must enroll on your own either online or at a Social Security office.
• If you do not sign up during this initial period, you must wait until the next annual General Enrollment Period to join Medicare, which runs from January through the end of March. Your coverage will begin the following July 1.
  
• Normally everyone enrolls in Part A immediately because it's free. The only exception: If you are still working at a large employer (20 employees or more) and have a high-deductible plan with a Health Savings Account (HSA), you can't continue contributing to the HSA once you join Medicare. If you want to do so, you can delay Part A enrollment. There's no penalty for late signup. Whether to delay signing up for Parts B and D can be tricky, especially if you're still working or have a retiree plan. If you delay signup under certain conditions, you can be penalized with higher premiums.
  

When to sign up for Part B

If you don't sign up for Part B when you should, you will be hit with a harsh penalty: a permanent increase in your premium of 10 percent for every year that you should have been enrolled but weren't. In 2013 the standard Part B premium is $104.90 a month.

Most people should sign up for Part B either when they turn 65 or when they or their spouse stop working, whichever comes later. Sounds simple, but be aware of these exceptions and gotchas if any of these situations apply to you or your spouse:

• You are still working at a large employer. You can delay enrollment without penalty if you have health insurance through your own or a spouse's current job at a workplace with 20 employees or more. Once the last working spouse leaves his or her job, even if they're getting COBRA or retiree insurance, it's time to sign up for Part B. You have eight months, starting the month after the job ends, to get this done without penalty.
• You are still working at a small employer. If your workplace has fewer than 20 employees, sign up for Part B as soon as you turn 65. Your employee health plan then becomes a secondary plan that kicks in after Medicare has paid its share of the bills. Workplaces this size are allowed to drop you from their employee plan after you reach 65, something that's against the law for larger employers). If you ignore this rule, and your group health plan finds out you're over 65, it may refuse to pay claims that Medicare would have paid.
  
• You or your spouse is on COBRA. Even though the COBRA plan is exactly the same as your former group health plan, once you turn 65 you must switch to Medicare. But COBRA can still function as the main insurance for the younger spouse, and you can keep parts of your COBRA plan that Medicare doesn't cover, such as your dental benefit. Learn more about Medicare and COBRA.
• You have a retiree plan. If you have a retiree plan from your old job, you must sign up for Part B when you turn 65, even if your retiree plan doesn't change at all. After you go on Medicare, the retiree plan becomes a secondary plan (but may still function as the main insurance for your younger spouse). Your plan might not, however, pick up all the costs that Medicare doesn't, so check with your plan administrator. If coverage is meager and premiums high, compare this to what it would cost to drop your retiree plan and get a Medigap or Medicare Advantage plan instead. Also find out if you can rejoin your retiree plan later if circumstances change; sometimes you can and sometimes you can't.
  
• You receive veteran's benefits. The Department of Veterans Affairs and Medicare operate independently of each other for the most part. Medicare won't pay for care you get at a VA facility, and the VA won't help you with your Medicare co-payments and deductibles (except if the VA authorizes you to get care at a non-VA hospital). The VA encourages veterans to sign up for Medicare A and B to have the flexibility to seek care at non-VA facilities if need be. Moreover, if you are not in one of the VA's higher priority groups, you could lose your coverage suddenly if Congress decided to cut back the VA's budget. At that point, you would have to pay a penalty for late enrollment in Medicare Part B. Learn more about VA and Medicare.
• You have TRICARE for Life. If your military service entitles you to TRICARE for Life, you must sign up for Part B when you turn 65, regardless of whether you are working or have other sources of coverage. If you don't, you lose your eligibility for this valuable benefit. Learn more about how TRICARE works with Medicare.
• You are on the Federal Employees Health Benefits Plan (FEHB). FEHB will continue to cover you after retirement, even if you don't take Medicare at all. But if you delay enrollment in Part B after retiring, and then change your mind later, you'll be hit with the Part B late-enrollment penalty. Because FEHB premiums can be substantial, you need to consider your options carefully. Learn more about how FEHB works with Medicare.
  

Part D do's and don'ts

For most people, signing up for Part D at 65 is the best strategy. But be prompt. There's a penalty—1 percent extra on your premium for every month you could have signed up, but didn't—for enrolling more than three months after your 65th birthday month. So if you are a year late enrolling, your premium will be 12 percent higher than it would have been otherwise.

There are exceptions to signing up right at 65, though. See Medicare Part D for more information.

Protecting yourself against high out-of-pocket Medicare costs

Original Medicare is the familiar program that's been around since 1965, in which the government pays Medicare's share of your medical bills directly to providers of Part A and B services. You can go to any provider anywhere in the country that accepts Medicare reimbursement.

The problem is that original Medicare has some substantial deductibles and co-insurance (for example, a $1,184 deductible for every hospital stay and 20 percent of outpatient doctor visits). And unlike the private insurance you're used to from your working years, Medicare does not have an out-of-pocket limit. Those deductibles and coinsurance payments can add up fast, especially if you need costly treatments like outpatient chemotherapy.

You may have a retiree plan (a health plan provided courtesy of your former employer) that helps pick up some or all of this cost sharing.

If not, you have two options for limiting your exposure to excessive out-of-pocket costs.

One is to buy a  Medigap plan, a private supplemental plan that helps cover most or all of those costs. If you select this option, you will continue to be covered by original Medicare. After Medicare has paid your claims, it will automatically forward them to your Medigap plan, which will then pay its portion of the bill. Learn more about Medigap.

Since Medigap plans do not over prescription drugs, you must also purchase a  standalone Part D plan if you want drug coverage.

Your other option is to purchase a Medicare Advantage plan, a private plan that you can choose in place of original Medicare. These plans now cover about one in four Medicare recipients. Every Medicare Advantage plan substitutes for Part A and Part B (although you continue to pay your Part B premium as usual). You might also pay an extra premium for the plan itself. Most of the plans also include Part D drug coverage. If they don't, you can buy a separate Part D plan.   Medicare Advantage plans typically come with deductibles and copays, but once these hit your annual out-of=pocket limit, the plan will pick up 100% of your bills for the ret of the year.

Medicare Advantage plans are a lot like the managed care plans you may have had during your working years. You will have to receive your care from doctors, hospitals, and other providers within the plan's network or the plan won't pay.

If you have a retiree plan, check with your plan administrator before signing up for a Medicare Advantage plan because it may affect your eligibility for your retiree benefits.

The vast majority of Medicare Advantage plans are HMOs or PPOs that require you to get your care within a local provider network. You will also be responsible for the plan's deductibles and co-pays, and the law that created the Medicare Advantage program prohibits you from buying Medigap coverage to help with these expenses. Read more about Medicare Advantage.

Changing to a different plan

Once you are enrolled in Medicare, you can join, switch, or drop a Medicare Advantage or Part D plan once a year during the annual open-enrollment period. In 2013 the dates are Oct. 15 to Dec. 7 for plans beginning on Jan. 1, 2014.

You may be uncertain whether you have original Medicare or a private Medicare Advantage plan. The name on your insurance card probably doesn't say "Medicare Advantage." Instead, it might list a plan name, like "Secure Horizons." Here's how to find out which Medicare plan you have:
1. Call 800-MEDICARE (800-633-4227).
2. The system will ask you to say your "Medicare number." That's the number on your red, white, and blue Medicare card (see example). Everyone has this card, even those enrolled in Medicare Advantage plans.
3. The system will give you some options. Select 0 for a customer service representative.
4. When the representative comes on the line, you will be asked for your Medicare number again, as well as some other identifying information such as date of birth and full address.
5. Once your identity has been confirmed, ask the rep: "Could you tell me whether I have original Medicare or Medicare Advantage"? You will be told either: "There's no Medicare Advantage plan on file" OR the name of your Medicare Advantage plan.

Caregivers can make this call on behalf of a Medicare enrollee, if they have the identifying information.

Medicare Advantage plans are private plans that you can choose in place of original Medicare. They now cover about one in four Medicare recipients. Medicare's open enrollment period runs from Oct. 15 to Dec. 7 each year.. During this period, you can switch from original Medicare to a Medicare Advantage plan (or vice versa), or from one Medicare Advantage plan to another, with the new coverage to commence on Jan. 1.

Get impartial information

Your mailbox may be overflowing with sales brochures from Medicare Advantage plans, but our advice is to ignore them. Instead, use the government's Medicare plan finder and NCQA's rankings of Medicare HMO and PPO plans. We also recommend checking out MedicareRights.org. That site has an excellent tool that will walk you through a comparison of original Medicare and Medicare Advantage.

Choose carefully

Before you choose a plan, make sure you understand these key points.

• Understand the difference between a PPO and an HMO.  In general, in an HMO it is very difficult to get care out of network. In a PPO, it's allowed but you will have to pay more of the cost yourself.
• Find out which doctors and hospitals are in the plan's provider network. Ask your doctors which Medicare Advantage plans they take part in, and which they would recommend.
• If you regularly take prescription drugs, check the Medicare plan finder to see whether they are on the plan's formulary, its list of preferred drugs. But before you sign up, double-check with the plans themselves to be sure.
• Look at all expenses you'll be paying, not just premiums. Deductibles, co-insurance, co-payments, and out-of-pocket maximums can vary greatly from plan to plan. Because you're not allowed to purchase a Medigap supplement plan alongside Medicare Advantage, you'll be responsible for paying those expenses out of your own pocket.
• If you have retiree coverage from an employer, do not sign up for a Medicare Advantage plan without checking first with your plan administrator. In some cases, it could void your retiree coverage.
• Find out what coverage you will have outside the plan's service area. Many HMOs and PPOs will only pay for emergency care when you are away from home. That is an especially important consideration if you, for example, spend the winters or summers in different locations, or pay extended visits to your adult children.

Medicare Parts A and B do not cover all of your health-care expenses. For example, you'll still pay a $1,184 deductible for the first 60 days of a hospital stay, and 20 percent of the cost of Part B services such as doctor visits, outpatient treatments, and laboratory tests.

If you don't have retiree coverage from a former employer to fill in those gaps, you might consider buying a private Medicare supplement (Medigap) policy.

Here's what you need to know about Medigap.

Medigap plans come in standardized varieties

In most states, Medigap plans are available in 10 standardized benefits packages, which vary according to how much of your expenses they will pick up. The more generous the plan, the higher the premium.

The most popular plan is F, which pays for pretty much everything Medicare doesn't, including the 15 percent excess charge that you can be billed by doctors who don't accept Medicare as payment in full. Here's a chart of the various Medigap plans.

You can find a complete list of Medigap carriers in your area on Medicare.gov.

The search engine will give you a range of prices for each category of plan, and the names and contact information for companies that sell them. But it's up to you to contact the carriers directly to get their specific pricing information.

The type of premium pricing method you choose will affect your future costs

A policy that looks inexpensive when you first buy it at age 65 could end up being the most expensive when you hit 80.

Carriers use three pricing models (though in some states you may have a choice of only one or two):

• Community-rated (also called no-age rated). The same premium is charged to everyone, regardless of age. Medigap experts say these plans are the least expensive over time, though not necessarily when you first purchase them.
• Issue-age-rated. The premium is based on your age when you buy the policy. It won't go up as you age, but will increase due to cost inflation.
• Attained-age rated. The premium starts low but goes up as you get older. Over time, this type of policy is the most expensive.

Learn more about policy pricing.

Medigap plans can turn you down or charge you more for pre-existing conditions at certain times

In every state, you have a guaranteed right to buy a Medigap policy for six months starting the first day of the month you are at least 65 and enrolled in Part B.

After that, you're only entitled to guaranteed issue Medigap in specific situations, such as:

• Your Medicare Advantage plan shuts down or you move out of its service area.
• Your retiree plan shuts down.
• You joined Medicare Advantage at 65 but decide to switch back to original Medicare within a year.
• Your Medigap plan shuts down.

The minimum rules for when Medigap must sell you a plan are explained in this publication from Medicare. But some states have chosen to go beyond these minimums, for example, by requiring insurers to sell Medigap plans to applicants at any time. Your State Health Insurance Assistance (SHIP) program or state insurance department can give you information on your state's rules.

Signing up

You can sign up for Medicare Part D, which helps cover prescription drug costs, along with other components of Medicare starting three months before your 65th birthday. It's important to be prompt because there's a penalty for enrolling more than three months after your 65th birthday.

There are exceptions to signing up right at 65, though. If you have access to drug coverage through your job (either as an active employee or a retiree) that is at least as good as a Part D plan, you can defer signing up for Part D without penalty. Your plan administrator can tell you whether your plan qualifies.

If you are already enrolled in a Part D "standalone" plan or a Medicare Advantage plan that incorporates drug coverage, you can switch plans during the annual open-enrollment period, which runs from Oct. 15 to Dec. 7, 2012.

Making Part D work

In 2013 the average deductible is $325 (your actual deductible can vary depending on the plan).

During your initial coverage period, you will pay an average of 25 percent of the costs of your medications until you and Medicare together have spent $2,970. At that point, you will enter the "doughnut hole" and will have to pay a larger share of your drug costs.

Inside the doughnut hole, you will pay 47.5 percent of the cost of brand-name drugs and 79 percent of the cost of generics until the TOTAL cost of your brand-name drugs and YOUR share of the cost of generic drugs together add up to $4,750. At that point, you will exit the doughnut hole and enter the "catastrophic coverage" period, which lasts until the end of the year, when you will pay only 5 percent of the cost of your drugs.

For more information on the closing of the doughnut hole, download this guide from Medicare.

Choosing a good plan

Depending on where you live, you might have dozens of private plans to choose from, with different premiums, co-payments, and levels of coverage, including which drugs are covered. Choosing a plan that is right for you can save you thousands of dollars per year in premiums and out-of-pocket drug expenses. It pays to review your Part D coverage every year, especially if you have started taking new drugs.

• Start at Medicare.gov. You can find the basics about the benefit and Part D plans at Medicare's website. There's a link to the Medicare Part D Plan Finder, which allows you to compare offerings and coverage options in your area and includes a helpful formulary finder that allows you to compare plans based on their coverage of your personalized list of drugs. It will even show you your monthly out-of-pocket drug cost for the year.
• Ignore sales pitches. Print, TV, and radio ads and plan brochures are unlikely to offer enough information for you to make a wise choice. Avoid selecting a plan just because it has a familiar name or brand. If possible, consult a trusted broker.  But watch out for brokers pushing plans from just one carrier.
• Learn more. We recommend consulting the website of the nonprofit Medicare Rights Center. There you can find in-depth information on Medicare Part D.

Getting financial help

Individuals with annual incomes of less than $16,755 and resources of less than $13,070  in 2012, or married couples with incomes of less than $22,695 and resources of less than $26,120, might qualify for extra financial help from Medicare to pay their Part D premiums and out-of-pocket drug costs. (Those numbers may change for 2013.)  Download Medicare's instructions on applying for the Extra Help program.

For information and free counseling about Medicare, Medigap, Medicare Advantage, and long-term care, contact your State Health Insurance Assistance Program (SHIP). These federally funded programs are not connected to any insurance company or health plan. SHIPs were established to help beneficiaries with plan choices, billing problems, complaints about medical care or treatment, and Medicare rights.

Alabama 800-243-5463

Alaska 800-478-6065 or 907-269-3680

Arizona 800-432-4040 or 602-542-4446

Arkansas 800-224-6330 or 501-371-2782

California 800-434-0222

Colorado 888-696-7213

Connecticut 800-994-9422

Delaware 800-336-9500 or 302-674-7364

District of Columbia 202-739-0668

Florida 800-963-5337

Georgia 866-552-4464

Hawaii 888-875-9229 or 866-810-4379 (TTY)

Idaho 800-247-4422

Illinois 800-548-9034 or 217-524-4872 (TDD)

Indiana 800-452-4800 or 866-846-0139 (TDD)

Iowa 800-351-4664

Kansas 800-860-5260

Kentucky 877-293-7447

Louisiana 800-259-5301

Maine 800-262-2232 or 800-606-0215 (TTY)

Maryland 800-243-3425 or 410-767-1100

Massachusetts 800-243-4636, 617-727-7750, or 800-872-0166 (TDD/TTY)

Michigan 800-803-7174

Minnesota 800-333-2433

Mississippi 800-345-6347 or 601-359-4929

Missouri 800-390-3330

Montana 800-551-3191

Nebraska 800-234-7119, 402-471-2201, or  800-833-7352 (TDD)

Nevada 800-307-4444 or 702-486-3478

New Hampshire 866-634-9412

New Jersey 800-792-8820

New Mexico 800-432-2080 or 505-476-4846

New York 800-701-0501

North Carolina 800-443-9354 or 919-807-6900

North Dakota 888-575-6611, 701-328-2440, 800-366-6888 (TTY)

Ohio 800-686-1578

Oklahoma 800-763-2828

Oregon 800-722-4134

Pennsylvania 800-783-7067

Rhode Island 401-462-4000

South Carolina 800-868-9095

South Dakota 800-536-8197

Tennessee 877-801-0044

Texas 800-252-9240

Utah 800-541-7735

Vermont 800-642-5119

Virginia 800-552-3402 or 804-662-9333

Washington 800-562-6900

West Virginia 877-987-4463 or 304-558-3317

Wisconsin 800-242-1060

Wyoming 800-856-4398

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