Making the move from private, employer-provided health insurance to Medicare can be daunting because there are so many plan options on the market today. Seniors just entering the Medicare beneficiary pool often need a clear orientation, and those who are choosing a new plan during open enrollment can also benefit from a refresher on the steps for picking a Medicare plan.
Here, we unpack everything you need to know to pick the best Medicare plan for your needs.
How to Pick a right Medicare Plan
Medicare is federal health insurance that’s designed to support people age 65 and older and some younger people with qualifying disabilities.
Medicare was launched in 1965 to meet the health insurance needs of retirees who could no longer access private health insurance from an employer. Since then, it has grown and changed, and today, it provides coverage to more than 66 million Americans through a variety of plans and options.
Currently, there are two main types of Medicare coverage:
- Original Medicare consists of Part A and Part B and is administered by the Centers for Medicare & Medicaid Services (CMS). Part A covers in-hospital care, while Part B covers outpatient doctor visits.
- Medicare Advantage, sometimes called Medicare Part C, is administered by private health insurance companies. Medicare Advantage plans must be approved by the CMS. These plans include coverage comparable to Part A and Part B coverage. They also typically include prescription drug coverage and may offer vision, dental and other services
Other terms you may come across as you begin diving into Medicare research:
- Medicare Part D. This is the prescription drug component of Medicare that is typically sold alongside original Medicare. Medicare Advantage plans often include this coverage.
- Medigap. Medigap plans are supplemental insurance plans that help pay for out-of-pocket costs that Medicare doesn’t cover.
- Medicaid. Medicaid is sometimes confused with Medicare, but the two are entirely different programs. Medicaid is health insurance designed to support low-income individuals of any age. You must meet strict financial qualifications to access Medicaid.
- With those terms laid out, follow the steps below to help you make the right choice for your health and budget needs.
Step 1: Check Your Timing.
Most people need to enroll in Medicare during the initial enrollment period, which is the seven months surrounding your 65th birthday. That period begins three months before your birthday month and ends three months after you turn 65.
If you don’t sign up within that window and you don’t qualify for a special enrollment period, you may get hit with a late enrollment penalty and potentially experience a lapse in coverage. (Special enrollment periods allow people to enroll outside of their 65th birthday window following unplanned events, such as job loss.)
What to do if you're still employed when you turn 65
If you’re still working when you turn 65 and are receiving health insurance through your employer, you don’t need to enroll in Medicare.
However, there are some nuances you'll want to be aware of. For example, federal law states that an employer group health plan (sponsored by a company with 20 or more employees) can be the primary health care carrier, regardless of age. And if you're still working but your employer doesn’t offer health insurance, you can apply for Medicare coverage when you turn 65.
If you work for a company that employs fewer than 20 people, you can wait until you stop working to enroll in Medicare Part B.
If you don’t have to pay a premium for Part A, there’s no reason to wait to sign up for it. Your insurance through your employer will pay first, and then Medicare Part A will pick up remaining expenses for eligible hospitalization costs while you are enrolled in both plans.
The same applies regarding your spouse's company size if you are insured through them. If you or your spouse is employed and insured by a company with fewer than 20 employees, you’ll enter a special enrollment period when you retire or otherwise cease to be covered by the employer. You have eight months after losing your job-based coverage to enroll in Medicare without having to pay a penalty.
What do you if you're already enrolled in Medicare
For those already enrolled in Medicare, the annual open enrollment period runs from October 15 until December 7 each year.
This open enrollment period is a great time for seniors to review their options and make sure they’ve got the best coverage heading into a new year, according to Chris Orestis, a Maine-based senior care advocate and expert in retirement, long-term care and specialty senior living funding solutions. He also serves as president of retirement consultancy Retirement Genius.
“People should never ignore the open enrollment period, and they should put as much effort into understanding their Medicare options and whether it’s time to make a change as they put into shopping for items on Amazon," he says. "This is one of the most important aspects of an aging person’s life, and they should not take it for granted.”
Any changes you make during the open enrollment period will go into effect on January 1. During open enrollment, you can:
- Switch from original Medicare to a Medicare Advantage plan
- Join, drop or switch to another Medicare Advantage plan (or add or drop prescription drug coverage)
- Join a Medicare prescription drug plan if you are in original Medicare
- Switch from one Medicare prescription drug plan to another if you are in original Medicare
Step 2: Consider Budget and Costs.
While Medicare is designed to support older adults, many of whom are on a fixed income, there are still some costs associated with it that you need to know about, including premiums, deductibles and copayments.
With original Medicare, costs can include:
- Premium for Part B coverage
- Premium for Part D prescription drug coverage. This cost is based on your income.
- Part A deductible and coinsurance fees, which can vary depending on the service
- Part B co-insurance. For Part B-covered services, you’ll typically pay 20% of the Medicare-approved amount after you’ve met your deductible.
With Medicare Advantage, you will have a different range of premiums, deductibles and coinsurance amounts that vary by plan and provider. Some plans charge no premium, while others may charge something similar to what you’d pay for original Medicare – it all depends on the company and plan you select.
Medigap costs
As mentioned, a supplemental Medigap policy can help offset your out-of-pocket costs in original Medicare and can be applied to copayments, deductibles and other out-of-pocket expenses. These policies are available only to people who are enrolled in original Medicare – you cannot buy a Medigap plan if you have Medicare Advantage.
Medigap policies do not help to pay for any costs not covered by original Medicare, such as dental or vision care. There are 10 options on the market, and not all of them are available in every state.
Step 3: Look Closely At Prescription Drug Coverage.
Every year, plans change the payment tiers of prescription drugs and the list of pharmacies they work with in order to offer the most affordable prices. Check your plan's formulary (list of covered medications) carefully each year to see what may have changed, especially this year, says Meagan Dow, a senior strategist within the client needs research team at Edward Jones, a financial services firm headquartered in St. Louis, Missouri.
That’s because the recent passage of the Inflation Reduction Act has changed how some medications are priced and has capped out-of-pocket maximums for prescription drug coverage at $2,000, she says. This means that the prescription drug plan you have currently may be changing, and you’ll need to confirm that any medications you know you’ll take in 2025 are still on the covered medications list.
You can use Medicare’s plan comparison tool to see which options work best for you.
One common fallacy is that Part D plans with the highest premiums will cover the most prescription medications – this isn’t necessarily true. So, check the fine print.
Step 4: Pick Your Plan.
"If you are new to Medicare, your first decision is a simple fork in the road," says Andrew Shea, executive adviser at Walter Alan & Associates, a boutique consultancy. "Do you want original Medicare or an Advantage plan? They are very different plans. Each has pros and cons."
Of course, the monthly premium is one important factor when choosing a plan. But there is much more to it than that, so consider the following questions:
- What are the out-of-pocket costs, including copays and deductibles?
- Is there coverage for all your physicians, medications and required services?
- How does the plan rate in terms of patient experience, safety of care and other important factors?
You can find out how Medicare Advantage plans, Medicare prescription drug plans and Medigap policies are rated on Medicare.gov.
Another primary consideration is future possibilities. What if you have a major illness next year – would the plan you are considering still work well for you?
Step 5: Enroll in Medicare.
So, how do you apply for Medicare? You first need to enroll by taking one of the following actions:
- Going to the Medicare sign-up site
- Calling Social Security at 1-800-772-1213 (TTY 1-800-325-0778)
- Visiting a local Social Security office
- Calling the Railroad Retirement Board at 1-877-772-5772 or (TTY) 312-751-4701
Who Can Help Me Choose a Medicare Plan?
If this process feels bewildering or overwhelming, please know you’re not alone. The good news is help is available, and Orestis urges you to not hesitate to reach out to a professional.
"In every community there are local agents that specialize in Medicare who can answer your questions,” he says.
Some of the top resources you can tap:
- SHIP. For free personalized counseling services, contact your State Health Insurance Assistance Program, which assists and advises Medicare-eligible individuals and their families or caregivers.
- CMS. The Medicare Rights Center also has a national helpline: 1-800-333-4114.
- Local resources. Community resources – such as senior centers – are potential sources of information and assistance when choosing the health care plan that best suits you.
- A broker or agent. A licensed insurance agent can help you wade through the options.
You should make sure to "work with someone who understands senior insurance really well and can help you weigh the pros and cons," Shea says. "You don't want a jack-of-all-trades who sells you home and auto insurance and, oh, by the way, also has medical insurance if you want it."
Disclaimers
The Medicare plans represented are PDP, HMO, PPO or PFFS plans with a Medicare contract. Enrollment in plans depends on contract renewal.
Availability of benefits and plans varies by carrier and location.
Not affiliated with or endorsed by any government agency.
Every year, Medicare evaluates plans based on a 5-star rating system.
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