Navigating Senior Health Care with Medicare

Nearly 70 Million of the more than 330 Million Americans are enrolled in Medicare, the government’s health care insurance program for seniors. That enrollment has been growing by around 2 Million per year in recent years as our population continues to undergo its shift to an older nation. These demographics continue to put financial strain on this government program, creating cause for concern among so many Americans who rely on it for covering their health care needs. Despite being the pre-eminent health insurance for seniors, there are still many aspects about Medicare that are not as well understood as they could be. Many of those enrolled in Medicare just know that it is something that they are expected to do once they turn age 65, but to take full advantage of the benefit, it is helpful to understand more about how the program works, what your options are, and what requirements you need to adhere to. As we embark upon the open enrollment season for plans that begin in 2025, this is a good time to highlight important facts about the program and make note of some expected changes that will occur in 2025.

Original Medicare vs. Medicare Advantage
One of the key decisions you have to make when enrolling in Medicare is whether to choose what is known as Original Medicare, which involves having Medicare Part B as your primary insurance and adding a Medicare Supplement Plan. Under this approach, Medicare Part B tends to cover about 80% of the cost of care, and the Supplement, which is private insurance that plays a secondary role, tends to cover most of the remaining 20% of cost. Using this coverage strategy, you will tend to have more premium cost because you must pay the Medicare Part B premium ($174.90 for most people in 2024) as well as the cost of the private insurance that serves as the supplement. However, in exchange for the higher premium, you generally are not subject to some of the out of pocket costs, like doctor visit copays, that typically accompany HMO/PPO type plans. While much of the out-of-pocket cost is covered with Original Medicare, it only covers medical expenses, so if you want coverage for other services like dental, vision, etc. you will have to obtain those coverages separately. In addition, with Original Medicare, it is also important to enroll in Medicare Part D for any prescription drug coverage that you may need, which has its own premium payment required. The other plan option that has gained significant popularity in recent years is Medicare Advantage (also known as Medicare Part C), which is private health insurance that incorporates Medicare Part B into one package. The premiums for Medicare Advantage plans tend to be lower than those of Original Medicare, often with the insured person only having to pay the cost of the Medicare Part B premium. One of the reasons Medicare Advantage is gaining popularity is that in addition to the typically lower premiums, these plans can include additional features, such as prescription drug coverage, dental, vision, and hearing benefits, that are not available with Original Medicare. While the premium cost tends to be lower with Medicare Advantage plans, because these are private insurance plans, they tend to be of the HMO/PPO variety and thus can require doctor visit copays and some out-of-pocket expenses that may not be passed on to the customer who has Original Medicare. If you are unsure of which option makes more sense for you, you essentially can take the first year as a trial period because you can switch types of plans within the first year you are enrolled without having to go through underwriting for a new plan. What that means is that you can make a change without being subject to denial or the potential of being assessed a higher premium due to health conditions.  

Enrollment Periods and Timing
There are a few key times to understand for enrollment in Medicare. First is the initial enrollment period. You have 7 months around your 65th birthday to initially enroll in Medicare, from 3 months before your 65th birthday month to 3 months after it. If you are still working and covered under an employer’s health plan, you don’t necessarily have to switch your coverage, but you should still contact Medicare during that time window to coordinate your Medicare benefits, which usually involves enrolling you in Medicare Part A, the hospital insurance coverage as opposed to your regular health insurance. The reason why it is important to enroll during this time window is that if you fail to do so, upon your initial enrollment at a later date, you will be assessed a permanent penalty that is added to your Medicare premiums for the rest of your life. The penalty is 10% annually for each year you should have been enrolled but were not. Besides the initial enrollment period, every year there is an Open Enrollment period that begins on October 15th and ends on December 7th that is for plans starting January 1st of the next year. If you are already enrolled in a Medicare plan and would like to keep it as-is, you usually don’t have do anything during the Open Enrollment period; however, plans can change from year to year, so it may be worthwhile to look at the upcoming year’s plan offerings to see if you want to remain in the plan you had or if it might benefit you to switch to a different plan.

What’s New with Medicare in 2025
In addition to the normal changes to plan features and benefits, there are some other changes coming to Medicare in 2025. A list of some of those changes is as follows:

1. For enrollees in Part D plans, there will be a $2,000 out of pocket spending limit on prescription medications.

2. The proverbial Medicare “Donut Hole” goes away. Up until now, enrollees in Part D plans paid the full cost of prescription medications up to the annual deductible ($545 in 2024), and once the deductible was met, they paid a copayment amount until they reached a higher limit ($5,030 in 2024). Once they reached the higher limit, the amount the enrollee had to spend increased. With the elimination of the Donut Hole starting in 2025, going back to the first change, after the enrollee has reached the $2,000 limit, they no longer are required to pay additional cost.

3. Medicare Advantage Plans that include Part D may increase their costs or reduce coverage as a direct result of the $2,000 out of pocket maximum.

4. You will have the option of spreading out the cost of paying for prescription medications over a period of months rather than having to pay at the time of pickup.

5. The GUIDE program (Guiding an Improved Dementia Experience) will be expanding its resources by 4 times the number of organizations to provide a better experience for those contacting the program for support.

Medicare can be a very helpful benefit to help seniors navigate their health care situation, but contrary to what seems logical, it can be significantly more complicated to understand than the insurance you often obtain during your work years. Whether you do your own due diligence to figure out what works best for you or engage a Medicare expert, it is worth your while once you get to this stage of life to make sure you are on top of things to make sure you maintain good health and don’t pay more for it than you need to.

Stewardship Emphasis

You only get one body, so making sure you take good care of it and stay healthy could mean more to you than any amount of money you can make.

The Empowerment Channel    |   Volume CCXXX   |    Dedicated to Promoting Financial Education through Stewardship