MONEY TALK Medicare's annual enrollment period upon us

The Medicare annual enrollment period runs from Oct. 15 through Dec. 7. Starting Oct. 1, insurers can and have started sending marketing materials to Medicare enrollees. What follows discusses what changes can be made during this period, and factors that should be considered.

'ORIGINAL' MEDICARE

What most people refer to as "original Medicare consists of Medicare Parts A and B (please visit Medicare. gov for more detail on the program).

Part A is hospital insurance and covers inpatient hospital care. Medicare Part B is what we typically think of as medical insurance. Part B generally pays for 80 percent of covered health care costs, which may seem adequate.

However, with the exorbitant costs of medical procedures, the remaining 20 percent can be financially debilitating without supplemental coverage. The average cost of heart bypass surgery, of which there are more than 200,000 per year in the United States, is $123,000. If Medicare covers 80 percent of this cost, that leaves $24,600 for the patient.

For this reason, many retirees purchase supplemental coverage or a Medicare Advantage plan.

SUPPLEMENTAL COVERAGE

The most common way to insure the 20 percent not covered by original Medicare is through supplemental coverage, sometimes called Medigap. This supplemental coverage is provided through private insurers. Supplemental coverage will require a premium, in addition to the premium paid for original Medicare.

Medigap policies are standardized and must follow laws regarding what they offer. Individual Medigap plans are denoted with a letter, such as Plan F or Plan G. It is up to the retiree to determine the level of coverage that is right for him or her and find an insurer that offers that plan.

If you're not sure which plan is right for you, there are many resources, such as the insurance companies themselves, Medicare. gov, AARP, the state health insurance program, or the state insurance department. Talking with an expert may be helpful.

MEDICARE ADVANTAGE PLANS

As an alternative to original Medicare with a supplemental policy, some retirees choose a Medicare Advantage plan.

This is distinct from original Medicare because it essentially replaces original Medicare with a comprehensive policy. These plans include traditional Medicare coverage and some supplemental benefits, and, often, prescription drug coverage.

Medicare Advantage plans are generally less expensive than original Medicare plus a Medigap policy. The drawback of these plans is that they sometimes have provider limitations and lack of coverage while traveling.

THE ANNUAL ENROLLMENT PERIOD

Changes can be made to existing coverage during the annual enrollment period that starts in mid-October. For most current beneficiaries, this is the only time of year that changes can be made. Any changes made during this annual enrollment period will take effect on Jan. 1.

During this period, Medicare beneficiaries can make the following changes:

• Switch from Medicare Advantage to original Medicare with a supplement. There is no guarantee that you will qualify for all supplemental plans offered by an insurer, but this could be an opportunity to switch to something more comprehensive if you find Medicare Advantage too limited.

• Switch from original Medicare to a Medicare Advantage plan. This may be useful if you are finding the cost of original Medicare plus Medigap to be stretching your budget too thin.

• You can switch from one Medicare Advantage plan to another, though you may find certain limitations apply.

• You can switch from one Medigap plan to another, though certain limitations may apply. You might consider this option if you want more benefits or are willing to accept fewer benefits for a lower price, or if you want to change insurers.

• You can join or drop a prescription drug plan, with limitations.

• You can change insurers for your existing plan.

• If you're happy with your existing coverage, you can keep it and it will automatically renew.

SHOULD YOU SWITCH?

There are many reasons for considering a switch from one plan to another, or from a Medicare Advantage plan to original Medicare. These reasons might include cost, access to certain doctors, convenience, lifestyle changes, or changes in your health.

It might make sense to start a relatively healthy retirement with an inexpensive Medicare Advantage plan and then switch later in life, during the annual enrollment period, to original Medicare plus a more comprehensive (and expensive) Medigap policy.

However, there is a caveat to this plan. When you first sign up for Medicare, insurers are generally required to provide access to their suite of options. But, if you start with a Medicare Advantage plan and then want to switch later in life, insurers are not required to offer you coverage. In other words, preexisting conditions may prevent you from getting the coverage you really want later in life, or they may charge additional premiums. For this reason, many prefer to adopt the most comprehensive coverage immediately upon retirement, if they can afford it.

Health care decisions in retirement can be among the most difficult decisions and should not be taken casually. It can be prudent to consult your financial adviser or planner, Medicare experts, insurers, and your friends and neighbors to hear about their experience with health care in retirement.

Luke F. Delorme is director of financial planning at American Investment Services in Great Barrington. He can be reached at [email protected].

There are many reasons for considering a switch from one plan to another, or from a Medicare Advantage plan to original Medicare. These reasons might include cost, access to certain doctors, convenience, lifestyle changes, or changes in your health.