After working for 30+ years in the health care industry, I retired last October. I’ve had employer-provided health insurance through my entire working life. Well, no problem, I figured. I was over 65, I knew a lot about how Medicare works, so there shouldn’t be any surprises, right? Well, not quite. While I knew the basics about how Medicare is structured, I wasn’t prepared for the sticker shock I experienced signing up for coverage.
The first decision to make is whether to go with traditional Medicare, or a Medicare Advantage plan. One major plus for Medicare Advantage is, all your coverage is in one package – hospital, physician and drug coverage, and sometimes optional additional benefits. The downside is, Medicare Advantage plans work like HMOs, and depending on where you live, the network may not include providers you would want to use. I live a block away from the county line, and that little bit of geographic distance made my choice of Medicare Advantage plans much more narrow. So I opted for traditional Medicare. In traditional Medicare, there is Part A (hospital coverage), Part B (physician visits and certain other services), and Part D (drugs). Parts A and B are provided directly through the Centers for Medicare and Medicaid Services, while for Part D, you need to select a private insurer. Part A is straightforward – everyone is eligible when they turn 65, even if they also have employer-provided insurance, and there is no premium for Part A. I knew there would be a premium for Part B, but what I did not anticipate is that there is an add-on to the standard premium based on your income as reported to the IRS. This is called the “income-related monthly adjustment amount”, or IRMAA, and for me it turned to be over double what the standard Part B premium is. So, I ended up paying over three times the standard Part B premium overall. Now, I have no quarrel with this from the policy standpoint – people with more resources have the ability to pay more, and we do need to worry about the long-term solvency of the Medicare trust fund. But like I said – sticker shock.
Part D (drug coverage) comes with two complications. First, if you do not sign up for a Part D plan when you are first eligible (i.e., when your employer coverage ends), you will pay a late enrollment penalty every month for the rest of your life (unless at some point you switch to Medicare Advantage). I didn’t bother about Part D coverage for the three months left in 2020, so I ended up paying a late enrollment penalty of $1.00. No worries. But, the second complication is, there is also an IRMAA for Part D, and I again found myself paying over three times the regular premium. I was tempted to forego drug coverage altogether, since fortunately I only take one generic prescription – but I’m a pretty risk-averse person. I decided that I was willing to pay over $70 per month for the peace of mind of knowing that if, heaven forbid, I came down with cancer or some other serious ailment that would cost a small fortune for pharmaceuticals, I’d be covered.
Then there is the question of whether or not to get a Medicare supplement policy. This additional coverage is entirely voluntary, and is intended to pay deductibles and copays under regular fee-for-service Medicare. The pro’s and con’s of this decision would probably be a good subject for a future column, but again, I’m pretty risk-averse so decided to purchase the additional policy. So, I thought the annual open enrollment options under my employer plan were complicated, but this was a whole other world of choices and expenses. Welcome to Medicare!