Your Guide to Medicare and Medicare Advantage

What you need to know about the federal health insurance plan for those 65 and older.

Do one thing: At least six months before turning 65, seek guidance from a local State Health Insurance Assistance Program (SHIP) counselor or financial planner on which Medicare options are best for you.

What is Medicare?
Medicare is a federal health insurance program for some 70 million retired and disabled Americans that typically becomes available when you turn 65. While the program helps with the cost of health care, it doesn’t cover all medical expenses or the cost of most long-term care.

Unfortunately, Medicare is not a one-size-fits-all deal. There are several moving parts when it comes to making selections for different facets of health care coverage. For example, if you choose what’s known as Original Medicare (Part A and Part B) coverage, you can buy a Medicare supplement insurance policy (known as Medigap) from a private insurance company. Medigap plans cover some of the costs that Medicare doesn’t, including things like deductibles, coinsurance, and copays. The other option is to go with a Medicare Advantage program. (More on that below.)

Because many older adults spend thousands more a year on healthcare costs as they age, understanding how Medicare works is important for your physical and financial health.

When to Apply for Medicare?
If you’re approaching age 65 and not yet receiving benefits, you should contact the agency about three months before your 65th birthday to sign up for Medicare. Open enrollment for Medicare — which is the time each year that you can make a change in your plan — typically runs from Oct. 15 until Dec. 7.

Preparing for Medicare
Often, the idea of leaving behind a pricey private insurance plan for a more affordable government-sponsored program is a relief for many people. Kevin Lam, a certified financial planner and founder of Age Wisely Financial, specializes in helping clients navigate such decisions. “Medicare eligibility is one of the most important milestones in your 60s,” he says, “but it can be awfully confusing.”

Here’s how Lam suggests best preparing for the Medicare years:

Review your budget. To figure out which plan best suits your needs, Lam suggests taking a hard look at your finances – knowing your expenses, income, and savings – to see how much you can comfortably spend on Medicare premiums.
Study your family health history. Take a look at the health histories of your parents and grandparents (and any siblings) for potential clues to health conditions that could impact you in the coming years.
Talk to your doctor. Set up an appointment with your primary care physician and ask for their honest opinion on which serious health issues might affect you in your 60s, 70s, and beyond.
Identify your true priorities. Constantly remind yourself what is most important in your life, Lam says, adding that your values, goals, and purpose can give you a “north star while making difficult health and financial decisions.”
Seek unbiased guidance. As mentioned previously, speak with a local State Health Insurance Assistance Program counselor. They don’t sell policies and are trained to give unbiased information. If you need more guidance, look for a fee-for-service financial planner who also doesn’t sell products.

Comparing Medicare Plans
Paulo Lopes, an attorney and certified financial planner at Woodmont Financial Partners, cautions new Medicare recipients to carefully review their options before selecting a plan.

“If you want freedom and have the financial resources, then you’re likely looking at Original Medicare [plus a supplement],” Lopes says. “You can see any doctor that takes Medicare, which is a big plus for those who travel a lot or want to see a specific doctor when they get sick.”

He also warns buyers to beware: “Original Medicare Part B is full of gaps—think of it like Swiss cheese,” Lopes explains. “While it covers a lot, there are plenty of holes where you’re left paying out of pocket for things like deductibles, coinsurance, and copays. That’s why signing up for Medigap, also known as supplement insurance, is so important. It can help fill in many of those holes, so you’re not blindsided by unexpected medical bills.”

Medicare Advantage
At first glance, Medicare Advantage can look good on paper, Lopes says, since it bundles prescriptions, dental, and vision often at a lower price. But, he notes, it’s not a solution for everyone. “You’re stuck with a limited network of doctors, and it puts a private insurance company in charge of approving and denying coverage and procedures,” according to Lopes. “Sadly, I’ve seen more and more reports of people on Medicare Advantage being denied services that should have been approved—claims and procedures that would have been automatically covered under Original Medicare.”

If you can afford it, Original Medicare with a Medigap policy is usually the smarter choice, he says, and really pays off when you get older and start needing more care.

More Medicare Resources
For the most up-to-date information about Medicare, here are additional resources:

The official U.S. government website at Medicare.gov
The Centers for Medicare and Medicaid website
The State Health Insurance Assistance (SHIPs) Website
“Medicare For Dummies” Fifth Edition, Sept. 24, 2024, by Patricia Barry

Jean Chatzky/SavvyMoney 

October 2024