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How to Choose a Medicare Plan

Enrollment starts Oct. 15, so now is the time to take charge of your choices

Make the Most of Medicare

Josh Dickinson

Health care needs and preferences often evolve as you age and your coverage may need to change as well.

En español | The countdown begins on Oct. 15.

That’s day one of the 54 days when Americans 65 and older have to make their Medicare choices for 2018. These choices could save you hundreds, perhaps thousands of dollars a year and could well determine the quality of your health care, and your health, for years to come.

In other words, it’s important. It’s also complicated. Though the government has worked hard to simplify the bureaucracy around the 52-year-old program, Medicare enrollees face lots of choices. And particularly for Medicare Advantage (MA) and Part D drug plans, coverage options can be a moving target. 

“These plans change a lot from year to year,” says Leigh Purvis, director of health services research with the AARP Public Policy Institute. “You can leave hundreds of dollars on the table if you’re not in the right plan for you.”

But the decision isn’t just financial; your health care needs and preferences often evolve as you age. As your needs change, you might be better off with different coverage.

People do change each year, and more probably should. For example, nearly 1 in 5 Medicare Advantage members switched policies during open enrollment in a recent year, according to a 2016 Kaiser Foundation analysis. And roughly 12 percent of people changed their Part D coverage.

The Centers for Medicare and Medicaid Services (CMS) says the average Medicare Advantage premium is expected to be about $30 a month for 2018, a slight dip from 2017. CMS also is predicting that enrollment in MA plans will reach an all-time high next year of 20.4 million people.

But time is short: You’ve only got until Dec. 7 to do the research, make decisions and file the forms. To help you get started, here are the three main steps in shopping for the Medicare coverage that serves you best. 

1. Choose original or Advantage

For new enrollees, this is the big first decision. Original Medicare comprises two parts: Medicare Part A, which provides coverage for most costs related to hospital stays, and Medicare Part B, which covers doctor visits, lab work, outpatient services and preventive care. 

Part A is free to most people who qualify for Medicare. You need to pay for Part B — the standard premium this year is about $134 a month, or $109 a month for most people who have their premium deducted from their Social Security checks. However, the premium rate is higher if your income is above a certain threshold. There are deductibles and copays involved with both parts.

Over the years, as private insurers started to offer health maintenance organizations (HMOs) and preferred provider organizations (PPOs), Congress decided that Medicare recipients should have this option as well. So in 1997 it created Medicare Part C, or what is known today as Medicare Advantage plans. In these plans, you get Part A and Part B coverage from private insurance companies approved by Medicare. Unlike original Medicare, the plans use a network of health care providers; you may be able to see a doctor out of network, but at a higher cost. Some plans charge a monthly premium above the usual Part B premium, and there are potential copays and deductibles, too. These vary according to the plan you choose. 

Which leads to that big first choice: Go with original Medicare or enroll in an Advantage plan? See “Pros and Cons” to help you make your decision. 

2. Fill the gaps

In 2003, Congress addressed one of the key gaps in Medicare coverage: the costs of prescription medicine. It approved the creation of Medicare Part D, which provides low-cost plans that cover prescription drugs. If you choose not to enroll in Part D when you're first eligible, you likely will pay a penalty when you do sign up, unless you’ve had creditable drug coverage from another source.  

One challenge: Part D plans vary widely. For example, two plans may have very different copays for the same drug. It’s financially smart to reconsider your coverage each year, particularly if your medicine needs have changed.

CMS estimates that Part D premiums will average $33.50 per month in 2018, the first average decline since 2012.

There are many other costs you need to cover under Medicare. For example, Medicare Part A covers 100 percent of the first 60 days of a hospital stay. But for original Medicare enrollees, you must cover a deductible for each hospital stay. In 2017 that deductible was $1,316. Another big expense for Part B under original Medicare: the 20 percent copay for doctor visits and other related medical expenses.

There are a few solutions. Some people have insurance from the military or a current or past employer that will help defray these costs. And there are government assistance programs such as Medicaid and Medicare Savings Programs, which help Americans who qualify to pay for these costs. 

If you don’t fall under such plans and are in original Medicare, you can consider purchasing supplemental insurance, or Medigap.

3. Do the shopping

If you are a new enrollee who is considering original Medicare coverage, start by asking your current doctors if they accept Medicare patients. That will let you know if you’ll be able to stay with them. 

There are several ways to shop for an Advantage or Part D drug plan, but consider starting with the government’s Medicare Plan Finder. Once you insert your information and preferences, it will give you a list of plans available in your area. These plans can vary in cost and coverage by region. You can also get one-on-one advice for free.

From there, you can compare the offerings to see what’s right for your needs, and also look at the monthly premiums and other costs you would face. Then on to the final step: Fill out the forms and submit them.