Actions to take each October or November
Your parents' Medicare plans will send an Annual Notice of Change describing updates for the next year. They should review it even if the current plan has worked well. Encourage them to check:
- whether their preferred doctors, hospitals, and pharmacies remain in network;
- whether each medication they plan to use next year is still covered and on what tier (cost);
- premiums, deductibles, copayments, coinsurance, and the out-of-pocket limit;
- prior-authorization and referral requirements; and
- whether extra benefits are useful enough to affect the decision.
Medicare.gov's official Plan Compare tool is useful to estimate annual drug and medical costs. If your parents have created a Medicare.gov account and entered their preferred providers and medications, they can easily run the tool with that information. They can also sign up for their new plans through that site. Otherwise, you or they can use the site as a guest and add some or all of that information to search for options. It’s a very good site once you get the hang of it.
If your parents are already enrolled in Medicare, you can skip the rest of this. It will not change the decisions you help your parents make and it gets very confusing.
The parts of Medicare
To understand Medicare, it helps to have a few definitions.
- Part A — Hospital Insurance, part of Original Medicare. Helps cover inpatient hospital care, skilled nursing facility care under specific conditions, hospice care, and some home health care. There is no cost for Part A.
- Part B — Medical Insurance, part of Original Medicare. Helps cover doctor visits, outpatient care, preventive services, medical equipment, and other medically necessary services. Costs are approximately $200/month.
- Part C — Medicare Advantage. A private-plan alternative to Original Medicare that takes over for Parts A and B. Plans may have provider networks, prior-authorization rules, and additional benefits including vision, dental, and drugs, none of which are covered with Parts A and B. Part C costs are capped by annual maximum out-of-pocket payments. Plan costs vary significantly and some plans even pay back some of the $200/month Part B premium.
- Part D — Drug coverage. Offered through private plans to help pay for prescription drugs for those with Original Medicare. Costs and coverage differ by plan and can change from year to year within the same plan. Premiums start as low as $5 per month, and out-of-pocket costs from covered drug costs are capped at $2400 per year.
- Medigap. This supplemental insurance can help with certain out-of-pocket costs when a person has Original Medicare. It cannot be used to pay Medicare Advantage cost sharing. It costs around $300 per month for a 65-year-old who signs up. Those who attempt to get a new Medigap plan more than six months after initial Medicare sign-up may not be able to get a plan, as they’ll have to pass health screenings.
Original Medicare or Medicare Advantage
Another way to look at the different Medicare options is to start by contrasting Original Medicare (Parts A and B), to Medicare Advantage (Part C). If your parents travel much in the US, or have substantial medical conditions, or want to minimize their financial risk, they should choose Original Medicare plus Part C and Medigap. Part B offers more freedom in choosing providers and services than Part C. Part D and Medigap can cap the out-of-pocket costs associated with those offerings. Without Part D and Medigap, Original Medicare is low cost but high risk as your parents will have a 20% co-pay for their medical expenses and no drug coverage.
Medicare Advantage plans already cover Parts A and B and often Part D (drugs), plus they may cover vision, dental, and other benefits. Advantage plans are required to cover all of the same things as A and B, plus they may add more benefits to draw in more customers. The lower premium costs and broader benefits of Medicare Advantage plans make them attractive to individuals with low income and anticipated low medical costs.
The differences between Original Medicare and Medicare Advantage are explained in many places online, particularly the Medicare.gov website. You may be in a position to help your parents choose their Medicare plan, either when they turn 65 or at their annual re-enrollment. If you need help, reach out to your local State Health Insurance Assistance Program (SHIP) volunteer. They are each assigned regions within your state, so try to find someone specific to the county where your parents live. These volunteers offer appointments by phone and are happy to have you on the call, too.
Enrollment timing matters
Most people first become eligible at age 65. The Initial Enrollment Period generally lasts seven months: the three months before the birthday month, the birthday month, and the three months after it. Some people are enrolled automatically, while others must sign up. They should sign up for Part A as soon as they become eligible, as the costs to enroll will go up if they delay. They may choose not to enroll for other parts of Medicare if they are covered by employer health insurance. If they do not have other coverage, they should almost always sign up for health and drug coverage as soon as they are eligible; there are penalties for delaying.
Once your parent is enrolled, they'll have the opportunity each year to change plans during Medicare Open Enrollment from October 15 through December 7. The new plans are published at the beginning of October each year, making that the prime time when your parents may want and benefit from help.
What kind of costs are we talking about
Medicare premiums are typically deducted from Social Security payments, and they can run from no cost up to a thousand dollars each month. In addition to the premiums, most plans have both deductibles and coinsurance your parents will pay for services. Coverage and costs can vary significantly from one plan to another, so if your parents are paying a lot each month, they may benefit from switching to another plan next year. Need-based programs like Extra Help may kick in if your parent has less than $2K per month in income.
What it's like to use Medicare
Original Medicare works anywhere in the US and is accepted by many providers. Medicare Advantage plans are more limited in geography and providers. The Medicare Advantage provider list changes for each plan each year, so it is important to check that your parents’ providers and plans align.
Assuming your parents visit providers within their plan, they are likely to be asked for a coinsurance payment of approximately 20% of the Medicare-approved expenses. Providers outside their plan are rarely covered, but your parents may still be able to work with them while paying their own expenses. If your parents don't switch their plan each year, they are likely to roll over into the same plan and similar coverage. It does change a little each year.
Your parents will get billing statements in the mail unless they opt for electronic delivery. These will look similar to employer-sponsored health insurance, and many of the insurance companies are the same. The main caution I'll give about Medicare is that the Medicare Advantage plans have substantial advertising budgets and are motivated to recruit your parents to join them. They are likely to get flyers, calls, texts, and emails that will rival a political campaign but from the health insurance providers. Original Medicare is generally not worth returning to once your parents have switched to Medicare Advantage.
Penalties
I almost wrote that Original Medicare is hard to return to once your parents are in Medicare Advantage. It’s actually not hard. They can switch back to Original Medicare several times during the year for no reason, and at any time in the year if they have a qualifying reason. But we discourage that switch because of Medigap. It is undesirable to have Original Medicare without Medigap (the insurance that covers the 20% copay that Part B doesn’t cover), and it’s hard to qualify for Medigap if you are coming off of an Advantage plan. This is because Medigap will subject these transfers to underwriting, meaning they’ll assess your parents’ health when deciding if they want to cover them. And they’re strict. It is unlikely that a person who is trying to get back to Original Medicare will qualify for a Medigap plan.
Helping someone with Medicare
Use your ignorance of the topic to ask questions of curiosity about how the program works for your parents. Ask to follow along with their choices as a way to learn more for yourself in the future. You can review annual notices and coverage options as an excuse to ask them about their care during the prior year. Medicare needs permission before discussing personal information with someone else. For ongoing help or an appeal, your parents should submit form CMS 10106 to notify Medicare that they're allowed to talk to you.
Trusted resources
Next step
Get free, objective help from a State Health Insurance Assistance Program (SHIP) volunteer.