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Investigate Medicare Before You Need It

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Most people are at least somewhat familiar with Medicare, since it's likely that they or a family member already rely on the government-provided health insurance program. Millions more will soon join the ranks as an avalanche of Baby Boomers begins retiring over the next several years.

With its alphabet soup of plans, hundreds of options and complex rules, Medicare can be plenty daunting to those who already depend on it -- not to mention to the uninitiated who haven't yet navigated the enrollment process. So, if you're approaching 65, here are some Medicare basics you might want to become familiar with now, rather than waiting until the last minute:

Medicare provides benefits to people age 65 and older and those under 65 with certain disabilities or end-stage renal disease. For most people, the initial enrollment period is the seven-month period that begins three months before the month in which they turn 65. If you miss that window, you may enroll between January 1 and March 31 each year, although your coverage won't begin until July 1.

Medicare offers numerous plans and coverage options, including:

Medicare Part A provides coverage for in-patient hospital, skilled nursing facility and hospice services, as well as home health care. Most people pay no monthly premium for Part A, provided they or their spouse have paid FICA taxes for at least 40 calendar quarters. Generally, people are automatically enrolled upon turning 65, or after they have received Social Security disability benefits for 24 months.

Medicare Part B provides coverage for doctor's services, outpatient care and some preventive services. It's optional and has a monthly premium -- currently $96.40 for most people. Most people are automatically enrolled at the same time as they begin Part A coverage. To opt out, follow the instructions that accompanied your Medicare card, which should be mailed to you about three months before your 65th birthday. Before you opt out, however, weigh that decision carefully because there's often a sizeable penalty if you decide to enroll later on -- that is, unless you're currently covered by an employer's plan, in which case you can later enroll without penalty.

Medicare Part C (a.k.a. Medicare Advantage) plans provide an alternative to traditional Part A and B coverage. These privately run Medicare plans, which are often structured like typical HMO or PPO plans, provide coverage similar to Parts A and B, but may also include additional benefits such as prescription drugs, dental, vision and wellness programs. Monthly premiums may be higher than normal Part B coverage, but they usually have lower out-of-pocket costs (such as lower deductibles and copayments). However, you're usually required to use the plan's provider network, which may be more restrictive than the network of doctors, hospitals and other providers you could access through regular Parts A and B.

Medicare Part D helps cover prescription drugs. It's optional and carries a monthly premium. These privately run plans vary widely in terms of cost, copayments, deductibles and medications covered. There may be several dozen plans available to you, depending on where you live. As with Part B, you may be charged a late-enrollment penalty if you don't sign up when first eligible and later decide to enroll. Also, if you're in a Part C plan that includes drug coverage, you don't need to buy Part D.

Medigap Insurance. Many people opt to purchase additional Medigap (or Medicare Supplemental) insurance, which is offered by private insurers and follows strict government coverage guidelines. Medigap helps pay for many items not covered by Medicare, including deductibles, copayments, coinsurance and sometimes, coverage when traveling abroad.

Some employers and unions offer Medigap coverage to their retirees. Medigap plans can vary widely in terms of cost, covered benefits and states participating so compare your options carefully. Note that Medigap policies do not pay for Medicare Advantage plan deductibles and copayments, so if you want to join an Advantage plan, you may want to cancel your Medigap coverage. Also, if you already have a Medicare Advantage plan, it's illegal for anyone to sell you Medigap insurance unless you are switching back to original Medicare Part A and B coverage.

Understanding and choosing the right Medicare options for your individual situation can be a complicated and time-consuming process. For assistance, call 1-800-633-4227 or visit www.medicare.gov, where you'll find:
  • Helpful publications, including "Medicare & You 2010," a highly detailed guide that explains Medicare in easy-to-understand language.
  • Tools to compare prescription drug plans, hospitals, nursing homes, home health agencies and Medigap plans in your area
  • A resource to find local doctors and other health practitioners who participate in Medicare
  • Services covered by various Medicare plans
  • Enrollment instructions
This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.

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