Open Enrollment For 2023 Medicare Coverage: Should You Make Changes?
With the Fall season underway, current Medicare beneficiaries are reminded that Open Enrollment is now available. From October 15th – December 7th, Medicare beneficiaries can make changes to their current coverage.
It may help to understand the basic jargon of how basic Traditional Medicare works and the roles that Medicare Advantage and Medigap play in relation to Traditional Medicare.
Medicare
The typical route one takes when signing up for Traditional Medicare is to enroll in Part A (Hospital Insurance) and Part B (Doctor’s Insurance). Part D (Prescription Drug coverage), an added coverage feature with its own separate premiums, is usually included when signing up for Parts A & B. It is common to sign up for Part D as not doing so or delaying it can cause gaps in coverage or enrollment penalties if done later. When signing up for Traditional Medicare many individuals also use a supplemental policy to cover gaps in coverage. These policies are widely known as MediGap coverage. (More on this later in the post.)
Medicare Advantage
In comparison to Traditional Medicare, Medicare Advantage (or Medicare Part C) can help cover some gaps in Traditional Medicare coverage at a lower cost. Gaps such as dental or vision care may be covered, but more importantly, Medicare Advantage plans must have an annual out-of-pocket limit which can protect you as under Traditional Medicare there is no limit. If one were to experience a year with unusually high medical bills, under Traditional Medicare, one could end up paying thousands of dollars out of their own pocket. (Though MediGap policies will help with this.)
It should be noted that Medicare Advantage plans function as either HMO or PPO plans, thus limiting the range of network coverage. Whereas Traditional Medicare can cover you if you go to any doctor that accepts Medicare. The decision to enroll in a Medicare Advantage plan is dependent on the types of plans offered and what coverage you specifically need.
If the move to a different Medicare Advantage policy make sense for you, this current Open Enrollment Period can be the optimal time to make changes. If one is already enrolled in a Medicare Advantage plan, changes in coverage may also be made during this Open Enrollment period. Below is a convenient infographic to help understand how the process of changing coverage works:
Information about finding Medicare Advantage plans can be found here.
Medigap
Under a Medigap policy, an individual would be paying a higher premium, but in doing so, can offset the out-of-pocket costs and copays that are normally experienced with Traditional Medicare. Medigap policies typically have little to no out-of-pocket costs. In addition, Medigap policies are not constrained by a network, unlike a Medicare Advantage policy. Medigap’s coverage works in the same manner as Traditional Medicare in that if a doctor accepts Medicare, you will be covered.
The best time to sign up for a Medigap policy is during a one-time 6-month period, which occurs after you sign up for part B. While Medigap policies can be purchased outside of this period, it will become increasingly difficulty to do as insurance companies offering these plans may place many barriers to qualify for one. (Such as requiring underwriting.)
In certain situations, individuals may want to make the switch from Medicare Advantage to Medigap. While this is certainly an option, one should be aware that underwriting will more than likely be involved. (There is a potential exception to the underwriting process for Medigap if you decide to switch from Medicare Advantage within 12 months of when you first signed up for it at Medicare age.)
If you are approaching age 65 and a Medigap policy is right for you, information on types of plans can be found here.
Conclusion
One should be aware of these dates; however, future circumstances may change. For instance, if Medigap is no longer suitable, switching to a Medicare Advantage plan may be the next best choice. The only way to sign up for a Medicare Advantage plan is through the Open Enrollment period. Research and planning should be done in advance when considering this change. Should unforeseen changes occur within this already complex Medicare system, it is recommended that you consult with a Medicare specialist or fee-only financial advisor as they can help you navigate through this space.
Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.