1st Thing to Know – Parts vs. Plans
You are standing behind someone in line at the pharmacy. The pharmacist is asking for his Medicare prescription card and the customer provides it. The pharmacist says the prescription will be $150. The patient is shocked and says he usually only pays $5 for it.
What just happened?
Answer: The patient provided the Plan D (Supplemental insurance) card, not Part D (prescription drug coverage) card!
There are PARTS and there are PLANS. When you hear PART A or PART D, this refers to the type of Medicare coverage that one has. Examples:
- Part A Hospital coverage – paid by taxes and no cost to those over 65
- Part B Doctor visits – covers 80% of costs; paid by everyone 65 or over (who is not on an employer plan); Premium in 2018 = $134*
- Part D Prescriptions – paid out of pocket – average cost is $40 per month
When you hear PLANS, this is referring to different Supplemental Plans. These (ex: Plan A, Plan F) refer to supplemental plans that can be purchased to offset the 20% that Part B does not cover.
Cost: premiums range from $140 – $200 per month.
2nd Thing to Know – There are 2 kinds of Medicare: Original & Advantage
*Part B premiums are tiered and based on income from 2 years prior
So, which one is right for you?
Do you travel much? How is your health?
- If you are a snowbird or travel a lot, you may want to consider the Original Medicare to ensure that you have coverage regardless of the region you are in when a medical event occurs.
- If you are generally healthy and don’t travel much (or have a 2nd home in another state), then perhaps the Medicare Advantage is right for you.
3rd Thing to Know –Penalties for not signing up
- Part B – Mandatory regardless of which type of Medicare chosen
- Must sign up once you turn 65 or when you leave your employer’s healthcare plan, whichever is later.
- Penalty: 10% of current premium for each full 12-month period that you were eligible
- Example: waited 12 months (based on $134 premium); penalty = $13.40
- New premium = $147.40
- Part D – Optional
- Penalty: 1% per month for every month after eligible
- Example: waited 12 months (average Part D cost $40/mo); penalty = $4.80
- New premium $44.80
- Penalty: 1% per month for every month after eligible
Can I switch from Original Medicare to Medicare Advantage (and vice versa)?
Generally, yes barring any major medical conditions
(cancer, heart disease, surgery pending, kidney failure, etc.).
*Something to consider* – you may not qualify for supplemental plans later
If switching to Original down the road, you may no longer be insurable for the Supplemental Plans. Remember these pay the 20% that Part B of Original Medicare does not pay. This can add up to quite a sum if you are hospitalized for any length of time.
Other things to know
- Supplemental Plan F is the plan with the most coverage (some call it the ‘Cadillac plan’). This will no longer be offered after Jan 1, 2020. If you already have this plan, you will be grandfathered in.
- 7-month birthday wrap around – You are eligible to apply for Medicare plans typically only during open enrollment (Oct 15-Dec 7th), except for the first time you are eligible (age 65). You can apply for the 3 months prior and 3 months after your birthday in that first year.
- No medical questions are required the first time you sign up for Medicare nor during your first open enrollment. Every open enrollment thereafter requires you to answer medical questions.
At Allgen we have helped many clients with these plans. We welcome the opportunity to assist. Contact us at firstname.lastname@example.org.
Written by Teresa Talton, CFP® Professional with Allgen Financial Advisors, Inc.
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